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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 13, 1999
RACING CHAMPIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction or incorporation)
0-22635 36-4088307
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(Commission File Number) (I.R.S. Employer I.D. Number)
800 Roosevelt Road
Building C, Suite 320
Glen Ellyn, Illinois 60137
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(Address of Principal Executive Offices) (Zip Code)
630-790-3507
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(Registrant's telephone number; including area code)
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Item 2. Acquisition or Disposition of Assets.
On April 13, 1999, Racing Champions Corporation completed its
acquisition (the "Ertl Acquisition") of The Ertl Company, Inc. ("Ertl") and
certain of Ertl's foreign affiliates from certain subsidiaries of U.S.
Industries, Inc. Ertl manufactures, markets and distributes agricultural,
imprint die-cast collectibles and hobby model kits. The Ertl Acquisition was
consummated through the purchase by certain of Racing Champions' subsidiaries of
the stock of Ertl and the stock of Ertl's affiliates in the United Kingdom,
Mexico, Hong Kong and Italy and the purchase of certain assets and assumption of
certain liabilities of Ertl's affiliate in Canada. The purchase price for the
Ertl Acquisition was $104.5 million in cash, which is subject to post-closing
adjustment based upon the net worth of the acquired business immediately prior
to closing.
In connection with the Ertl Acquisition, Racing Champions and certain
of its subsidiaries entered into a Credit Agreement with First Union National
Bank, as lender and agent, and certain other lenders named therein (the "Credit
Agreement"). The Credit Agreement provides Racing Champions with a revolving
credit facility of up to $60,000,000 and a term loan of $115,000,000. On June
13, 1999, the Company borrowed approximately $139.3 million pursuant to the
Credit Agreement, of which approximately $104.5 million was used to fund the
Ertl Acquisition.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired.
It is not practical to provide financial statements of the
business acquired at this time. Such unaudited financial statements are expected
to be filed in an amendment to this Form 8-K no later than June 27, 1999.
(b) Pro forma financial information.
It is not practical to provide unaudited pro forma financial
information at this time. Such pro forma financial information is expected to be
filed in an amendment to this Form 8-K no later than June 27, 1999.
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(c) Exhibits
2.1--Stock and Asset Purchase Agreement, dated as of April 13,
1999, among U.S. Industries, Inc., JUSI Holdings,
Inc., USI Overseas Holdings Limited, USI Canada,
Inc., Racing Champions Corporation, Racing Champions,
Inc., RCNA Holdings, Inc., Racing Champions Worldwide
Limited and Racing Champions Limited.
99.1--Credit Agreement, dated as of April 13, 1999, by and
among Racing Champions Corporation, Racing Champions,
Inc., Racing Champions South, Inc., Racing Champions
Worldwide Limited, First Union National Bank, as
lender and agent, certain other corporations party
thereto and the other lenders party thereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Racing Champions Corporation has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
RACING CHAMPIONS CORPORATION
Date: April 28, 1999
BY /s/ Robert E. Dods
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Robert E. Dods, Chief Executive
Officer
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EXHIBIT 2.1
STOCK AND ASSET PURCHASE AGREEMENT
AMONG
U.S. INDUSTRIES, INC., JUSI HOLDINGS, INC., USI OVERSEAS HOLDINGS LIMITED,
AND
USI CANADA, INC.
AND
RACING CHAMPIONS CORPORATION,
RACING CHAMPIONS, INC., RCNA HOLDINGS, INC.,
RACING CHAMPIONS WORLDWIDE LIMITED,
AND
RACING CHAMPIONS LIMITED
DATED
APRIL 13, 1999
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SCHEDULES
2.1 Purchase Price Allocation
2.2 Accounting Principles
4.3 Consents of Third Parties
4.4 Capitalization of the Subsidiaries
4.6 Financial Statements
4.7 Absence of Certain Liabilities and Changes
4.8 Taxes
4.9 Material Contracts
4.10 Labor Matters
4.11 Employee Benefit Plans and Benefit Arrangements
4.12 Litigation
4.13 Real Property
4.14 Intellectual Property
4.15 Environmental Matters
4.16 Permits and Licenses
4.17 Insurance
4.20 Year 2000 Compliance
4.21 Title to Tangible Assets
6.2 Conduct of the Business Pending the Closing
6.3 Employee and Employee Benefit Matters
6.13 Treasury Matters
7.1(f) Consents and Waivers
8.1(a) Transfer of Certificates for Certain Foreign Shares
9.6 Foreign Subsidiaries Tax Schedule
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EXHIBITS
Exhibit A Form of Bill of Sale
Exhibit B Form of Assumption Agreement
Exhibit C Form of Tax Affidavit
Exhibit D Tax Sharing Agreement
Exhibit E Registration Rights Agreement
Exhibit F Form of Opinion of General Counsel of USI
Exhibit G Legend for Parent Common Stock
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STOCK AND ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. SALE AND PURCHASE OF SHARES AND
ASSETS; ASSUMPTION OF LIABILITIES............................... 2
SECTION 2. PURCHASE PRICE.................................................. 3
2.1 Purchase Price.................................................. 3
2.2 Adjustment of Purchase Price.................................... 4
2.3 Payment of Purchase Price....................................... 5
SECTION 3. CLOSING......................................................... 7
3.1 Date of Closing................................................. 7
3.2 Termination..................................................... 7
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES............ 9
4.1 Organization, Standing and Authority of the Sellers
and the Subsidiaries............................................ 9
4.2 Authorization of Agreement...................................... 9
4.3 Consents of Third Parties.......................................10
4.4 Capitalization of the Subsidiaries..............................10
4.5 Ownership of Shares and Certain Assets..........................11
4.6 Financial Statements............................................12
4.7 Absence of Certain Liabilities and Changes......................12
4.8 Taxes...........................................................14
4.9 Material Contracts..............................................16
4.10 Labor Matters...................................................18
4.11 Employee Benefit Plans and Benefit Arrangements.................19
4.12 Litigation; Compliance with Laws................................23
4.13 Real Property...................................................24
4.14 Intellectual Property...........................................25
4.15 Environmental Matters...........................................28
4.16 Permits and Licenses............................................31
4.17 Insurance.......................................................31
4.18 Investment......................................................31
4.19 Brokers.........................................................32
4.20 Year 2000 Compliance............................................32
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
4.21 Title to Assets.................................................33
4.22 Accounts Receivable.............................................33
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES.............33
5.1 Buyers' Organization............................................33
5.2 Authorization of the Agreement..................................33
5.3 Consents of Third Parties.......................................34
5.4 Litigation......................................................34
5.5 Financing.......................................................34
5.6 Investment......................................................35
5.7 Capitalization of Parent and Its Subsidiaries...................35
5.8 Due Authorization and Validity of Shares........................36
5.9 List of Parent Common Stock.....................................36
5.10 Private Offering................................................36
5.11 SEC Reports; Financial Statements...............................36
5.12 Brokers.........................................................37
SECTION 6. FURTHER AGREEMENTS OF THE PARTIES...............................37
6.1 Access to Information...........................................37
6.2 Conduct of the Business Pending the Closing.....................37
6.3 Employee Benefit Matters........................................38
6.4 Other Action....................................................39
6.5 Notices.........................................................40
6.6 HSR Act.........................................................40
6.7 Expenses........................................................40
6.8 Publicity.......................................................40
6.9 Transfer Taxes..................................................41
6.10 Preservation of Records.........................................41
6.11 Certain Post-Closing Assistance.................................41
6.12 Treasury Matters; Intercompany Debt.............................42
6.13 No Shopping.....................................................43
6.14 Consents........................................................43
6.15 Further Assurances..............................................43
6.16 Resignations....................................................44
SECTION 7. CONDITIONS OF CLOSING...........................................44
7.1 Conditions Precedent to Obligations of Buyers...................44
7.2 Conditions Precedent to Obligations of Sellers..................45
SECTION 8. DOCUMENTS TO BE DELIVERED AT THE CLOSING........................46
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
8.1 Documents to be Delivered by Sellers............................46
8.2 Documents to be Delivered by Buyers.............................47
SECTION 9. INDEMNIFICATION AND RELATED MATTERS.............................48
9.1 Indemnification.................................................48
9.2 Determination of Damages and Related Matters....................55
9.3 Time and Manner of Certain Claims...............................58
9.4 Procedure for Indemnification...................................58
9.5 Environmental Indemnification...................................60
9.6 Additional Provisions regarding Foreign Taxes...................64
SECTION 10. MISCELLANEOUS...................................................64
10.1 Entire Agreement................................................64
10.2 Governing Law...................................................64
10.3 Table of Contents and Headings..................................64
10.4 Notices.........................................................65
10.5 Severability....................................................66
10.6 Amendment; Waiver...............................................66
10.7 Binding Effect; Assignment......................................67
10.8 Best Knowledge..................................................67
10.9 Counterparts....................................................67
10.10 Bulk Sales Laws.................................................67
</TABLE>
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STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement, dated as of April 13,
1999, is among U.S. Industries, Inc., a Delaware corporation ("USI"), JUSI
Holdings, Inc., a Delaware corporation (the "Domestic Seller"), USI Overseas
Holdings Limited, an English company (the "Foreign Seller") and USI Canada,
Inc., a Canadian corporation (the "Canadian Seller") (Domestic Seller, Foreign
Seller and Canadian Seller are individually referred to herein as a "Seller" and
collectively referred to herein as the "Sellers"; and USI and the Sellers are
individually referred to herein as a "Seller Party" and collectively referred to
herein as the "Seller Parties"), and Racing Champions Corporation, a Delaware
corporation ("Parent"), Racing Champions, Inc., an Illinois corporation (the
"Domestic Buyer"), Racing Champions Worldwide Limited, an English company (the
"Foreign Buyer"), RCNA Holdings, Inc., a Delaware corporation (the "North
American Buyer"), and Racing Champions Limited, a Hong Kong company (the "Hong
Kong Buyer") (Domestic Buyer, Foreign Buyer, North American Buyer and Hong Kong
Buyer are individually referred to herein as the "Buyer" and collectively
referred to herein as the "Buyers", and the Buyers and the Parent are
individually referred to herein as a "Buyer Party" and collectively referred to
herein as the "Buyer Parties").
RECITALS
A. Domestic Seller owns all of the issued and outstanding
shares of common stock, no par value, as set forth on Schedule 4.4 (the
"Domestic Shares") of The Ertl Company, Inc., a Delaware corporation (the
"Domestic Subsidiary"). The Domestic Subsidiary owns all of the issued and
outstanding shares of capital stock of Ertl Direct, Inc., a Delaware corporation
(the "Ertl Subsidiary"). Foreign Seller owns all of the issued and outstanding
shares of capital stock as set forth on Schedule 4.4 (the "Foreign Shares") of
Britains Petite Limited, an English company ("Britains"), Ertl de Mexico S.A. de
C.V., a Mexican corporation ("Ertl Mexico"), Ertl (Europe) Limited, an English
company ("Ertl Europe"), Ertl (Hong Kong) Limited, a Hong Kong company ("Ertl
Hong Kong") and Ertl Italia S.r.L., an Italian corporation ("Ertl Italy"). The
Canadian Seller owns, among other things, certain assets utilized in Canada to
conduct operations there which are being sold hereunder (such operations being
referred to as "Ertl Canada"). Britains, Ertl Mexico, Ertl Europe, Ertl Hong
Kong, Ertl Italy and, except where the context otherwise requires, Ertl Canada,
shall be referred to herein individually as a "Foreign Subsidiary", and
collectively as the "Foreign Subsidiaries". The
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Domestic Subsidiary, the Ertl Subsidiary and the Foreign Subsidiaries shall be
collectively referred to herein as the "Subsidiaries". The Domestic Shares and
the Foreign Shares shall be collectively referred to herein as the "Shares".
B. Subject to the terms and conditions stated herein, (i) the
Domestic Seller wishes to sell and the Domestic Buyer wishes to purchase all of
the Domestic Shares owned by the Domestic Seller which constitute 100% of the
issued and outstanding shares of the capital stock of the Domestic Subsidiary;
(ii) the Foreign Seller wishes to sell and the Foreign Buyer wishes to purchase
from the Foreign Seller all of the Foreign Shares of Britains, Ertl Europe and
Ertl Italy owned by the Foreign Seller which constitute 100% of the issued and
outstanding shares of the capital stock of Britains, Ertl Europe and Ertl Italy;
(iii) the Foreign Seller wishes to sell and the North American Buyer wishes to
purchase from the Foreign Seller all of the Foreign Shares of Ertl Mexico owned
by the Foreign Seller which constitute 100% of the issued and outstanding shares
of the capital stock of Ertl Mexico; (iv) the Foreign Seller wishes to sell and
the Hong Kong Buyer wishes to purchase from the Foreign Seller all of the
Foreign Shares of Ertl Hong Kong owned by the Foreign Seller which constitute
100% of the issued and outstanding shares of the capital stock of Ertl Hong
Kong; and (v) the Canadian Seller wishes to sell and the North American Buyer
wishes to purchase from the Canadian Seller the assets of Ertl Canada subject to
the assumption by the Foreign Buyer of certain of the liabilities of Ertl
Canada.
C. The term "Domestic Business" shall mean the business and
operations conducted by the Domestic Subsidiary taken as a whole. The term
"Foreign Business" shall mean the business and operations conducted by the
Foreign Subsidiaries (including Ertl Canada) taken as a whole. The term
"Business" shall mean the Domestic Business and the Foreign Business taken as a
whole.
AGREEMENTS
The parties hereby agree as follows:
SECTION 1.1. SALE AND PURCHASE OF SHARES AND ASSETS; ASSUMPTION OF LIABILITIES.
Subject to the terms and conditions of this Agreement, at the closing
referred to in Section 3 (the "Closing"):
(a) the Domestic Seller shall sell, assign, transfer, convey
and deliver to the Domestic Buyer free and clear of all claims, liens, title
defects, adverse claims, mortgages, easements, pledges, charges, transfer
restrictions, rights
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of first refusal, preemptive rights, options, security interests or other
encumbrances (collectively, "Liens"), and the Domestic Buyer shall purchase,
acquire and accept from the Domestic Seller, the Domestic Shares;
(b) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the Foreign Buyer, free and clear of all Liens, and the Foreign
Buyer shall purchase, acquire and accept from the Foreign Seller, the Foreign
Shares of Britains, Ertl Europe and Ertl Italy;
(c) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the North American Buyer, free and clear of all Liens, and the
North American Buyer shall purchase, acquire and accept from the Foreign Seller,
the Foreign Shares of Ertl Mexico;
(d) the Foreign Seller shall sell, assign, transfer, convey
and deliver to the Hong Kong Buyer, free and clear of all Liens, and the Hong
Kong Buyer shall purchase, acquire and accept from the Foreign Seller, the
Foreign Shares of Ertl Hong Kong; and
(e) the Canadian Seller shall sell, assign, transfer, convey
and deliver to the North American Buyer the assets of Ertl Canada as more fully
described in the Form of Bill of Sale attached hereto as Exhibit A and the North
American Buyer shall assume certain of the liabilities of Ertl Canada as more
fully described in the Form of Assumption Agreement attached hereto as Exhibit
B.
SECTION 2. PURCHASE PRICE.
2.1 Purchase Price.
(a) The purchase price for the Shares and the assets of Ertl
Canada shall be $104,500,000 (the "Initial Price"), subject to post-closing
adjustment pursuant to Section 2.2 (as adjusted, the "Purchase Price"). The
Purchase Price shall be payable as provided in Section 2.3. All amounts set
forth in this Agreement shall be U.S. Dollars unless otherwise stated.
(b) The Purchase Price shall be allocated in accordance with
Schedule 2.1, to which allocation Buyers and Sellers agree to be bound. Buyers
and Sellers agree to file all returns and reports including, without limitation,
all federal, state, local and foreign income and franchise tax returns, on the
basis of such allocation.
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2.2 Adjustment of Purchase Price.
(a) The Purchase Price shall be adjusted as follows:
(i) For purposes hereof, "Final Net Worth" shall
mean the assets of the Business less the liabilities of the Business, as
reflected in the Final Balance Sheet referred to in Section 2.2(b). "Target Net
Worth" shall mean $81,483,000.
(ii) If the amount of the Final Net Worth
determined in accordance with this Section is less than the Target Net Worth,
the Purchase Price shall equal the Initial Price minus the amount by which the
Target Net Worth exceeds the Final Net Worth.
(iii) If the amount of the Final Net Worth is greater
than the Target Net Worth, the Purchase Price shall equal the Initial Price plus
the amount by which the Final Net Worth exceeds the Target Net Worth.
(b) The Final Net Worth shall be determined as of the
commencement of business on the day immediately preceding the day of the Closing
with respect to all items other than the cash transactions of the Business and
shall be determined as of the close of business on the day of the Closing with
respect to the cash transactions of the Business (such determination times are
referred to herein as the "Determination Time") on the basis of the balance
sheet of the Business as of the Determination Time (the "Final Balance Sheet");
provided, however, that cash transactions for this two-day period will be
debited or credited to the related balance sheet account (e.g., accounts
receivable, accounts payable or net worth) as of the commencement of business
on the day immediately preceding the day of Closing. The Final Balance Sheet
shall be prepared by Buyers in accordance with U.S. generally accepted
accounting principles ("GAAP") as supplemented by the principles set forth in
Schedule 2.2 (GAAP as so supplemented, the "Accounting Principles").
(c) Buyers shall use their best efforts to deliver to Sellers
the Final Balance Sheet within forty-five (45) days after the Closing. During
the period from the Closing Date (as defined in Section 3.1) until the date of
delivery of the Final Balance Sheet, Sellers shall give Buyers and other
appropriate personnel such assistance as Buyers shall reasonably request during
normal business hours in order to enable them to prepare the Final Balance
Sheet. Ernst & Young LLP or such other independent accounting firm engaged by
Sellers at Sellers' sole expense (which shall not be the Unrelated Accounting
Firm referred
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to below) ("Sellers' Auditor") shall have the opportunity to
observe the taking of the inventory of the Business in connection with the
preparation of the Final Balance Sheet, and to examine the work papers,
schedules and other documents prepared by Buyers in connection with their
preparation of the Final Balance Sheet.
(d) Within thirty (30) days following the delivery of the
Final Balance Sheet, Sellers shall deliver to Buyers a notice of objection (an
"Objection Notice") or a notice of acceptance (an "Acceptance Notice") with
respect to the Final Balance Sheet. Such Final Balance Sheet shall be final and
binding on the parties if an Acceptance Notice is delivered to Buyers or if no
Objection Notice is delivered to Buyers within such thirty (30) day period. Any
Objection Notice shall specify in reasonable detail the items on the Final
Balance Sheet which are disputed and shall describe in reasonable detail the
basis for the objection, as well as the amount in dispute. If an Objection
Notice is given, the parties shall consult with each other with respect to the
objection. If the parties are unable to reach agreement within fifteen (15) days
after an Objection Notice has been given, any unresolved disputed items shall be
promptly referred to KPMG Peat Marwick LLP or another firm of independent public
accountants mutually acceptable to Buyers and Sellers (the "Unrelated Accounting
Firm"). The Unrelated Accounting Firm shall be directed to render a written
report on the unresolved disputed issues with respect to the Final Balance Sheet
within 30 days after the dispute is submitted to them and to resolve only those
issues of dispute set forth in the Objection Notice. The resolution of the
dispute by the Unrelated Accounting Firm shall be final and binding on the
parties. The fees and expenses of the Unrelated Accounting Firm shall be borne
equally by Sellers and Buyers.
2.3 Payment of Purchase Price.
(a) Initial Price. At the Closing, Buyers shall pay to
Sellers an amount equal to the Initial Price by:
(i) wire transfer of $83,500,000 in immediately
available funds to an account or accounts designated by USI in writing at least
three (3) business days prior to the Closing Date;
(ii) delivery to USI of a certificate or
certificates representing 1,500,000 shares of Common Stock, par value $0.01 per
share, of Parent ("Parent Common Stock"); and
(iii) if the average of the daily closing trading
prices of a share of Parent Common Stock as reported by Nasdaq for the 20
trading days
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ending on and including the last trading day prior to the Closing Date (the
"ATP") is less than $14.00, an additional payment equal to $21,000,000 minus the
product of (A) 1,500,000 multiplied by (B) the ATP. If the ATP is equal to or
greater than $12.00 and less than $14.00, the Domestic Buyer will make the
payment required by this clause (iii) in immediately available funds to the
account designated in clause (i) above. If the ATP is less than $12.00, Domestic
Buyer may elect to make any part of the payment required by this clause (iii)
either (x) in immediately available funds to the account designated in clause
(i) above, or (y) by delivery to USI of a certificate or certificates
representing the number of shares Parent Common Stock equal to the amount of the
payment required by this clause (iii) which the Domestic Buyer elects to make in
shares of Parent Common Stock divided by the ATP. If the ATP is less than
$12.00, the Domestic Buyer may also elect, in lieu of the issuance of all or any
part of the shares of Parent Common Stock issuable pursuant to clause (ii)
above, to make a payment in immediately available funds to the account
designated in clause (i) equal to the product of [a] number of shares of Parent
Common Stock issuable pursuant to clause (ii) which Domestic Buyer elects not to
issue multiplied by [b] the ATP. Notwithstanding the foregoing, the Buyers will
not pay more than $104,500,000 in the aggregate in cash and/or shares of Parent
Common Stock (valued based on the ATP) for the Initial Price pursuant to this
Section 2.3(a).
(b) Adjustment. If Sellers deliver to Buyers the Acceptance
Notice referred to in Section 2.2(d) or fail to deliver an Objection Notice
within the thirty (30) day period required by Section 2.2(d), then (i) in the
event the Final Net Worth is less than the Target Net Worth, Sellers shall
within two (2) business days after the delivery of such Acceptance Notice or the
expiration of such thirty (30) day period, as the case may be, pay to Buyers,
the amount, if any, by which the Target Net Worth exceeds the Final Net Worth,
or (ii) in the event the Final Net Worth exceeds the Target Net Worth, Buyers
shall within two (2) business days after the delivery of such Acceptance Notice
or the expiration of such thirty (30) day period, as the case may be, pay to
Sellers the amount, if any, by which the Final Net Worth is greater than the
Target Net Worth. Alternatively, if Sellers deliver to Buyers the Objection
Notice referred to in Section 2.2(c), within two (2) business days after such
delivery, (y) Sellers shall pay to Buyers the amount, if any, by which the
undisputed portion of the Final Net Worth is less than the Target Net Worth, or
(z) Buyers shall pay to Sellers the amount, if any, by which the undisputed
portion of the Final Net Worth is greater than the Target Net Worth. Within two
(2) business days after the resolution of any dispute by the parties or the
Unrelated Accounting Firm relating to the Objection Notice, Sellers shall pay to
Buyers, or Buyers shall pay to Sellers, as the case may be, the amount of any
further adjustment required.
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Any payment pursuant to this Section 2.3(b) shall be
made by a single certified or bank cashier's check to an entity designated by
USI or the Domestic Buyer, as the case may be, or, at the recipient's option, by
wire transfer of immediately available funds to a single account designated by
USI or the Domestic Buyer, as the case may be, and shall be accompanied by
payment of an amount determined by computing simple interest on the amount of
that payment at the rate of interest announced publicly by Bank of America in
San Francisco from time to time as its "reference rate" (on the basis of a
365-day year) from the Closing Date to the date of payment.
SECTION 3. CLOSING.
3.1 Date of Closing. The Closing shall take place at the offices of
Weil, Gotshal & Manges LLP at 767 Fifth Avenue, New York, NY (or at such other
place as the parties may agree in writing) at 10:00 a.m. on a date to be
mutually designated by Sellers and Buyers, which shall be no later than five (5)
business days after the date when each of the conditions specified in Article 7
has been fulfilled (or waived by the party entitled to waive that condition).
The date on which the Closing is held is referred to in this Agreement as the
"Closing Date". At the Closing, the parties shall execute and deliver the
documents referred to in Section 8.
3.2 Termination.
(a) This Agreement may be terminated at any time prior to
the Closing:
(i) by mutual written agreement executed by the
Seller Parties and the Buyer Parties;
(ii) by either Buyers, on the one hand, or
Sellers, on the other hand, by giving written notice of such termination to the
other, if the Closing shall not have occurred on or prior to April 16, 1999,
unless the failure to consummate the Closing by such date has been caused by the
action or failure to act of the party seeking to terminate this Agreement, which
action or failure to act constitutes a breach of this Agreement;
(iii) by Buyers, so long as Buyers are not then in
breach in any material respect of their obligations under this Agreement, upon a
breach of any covenant or agreement on the part of Sellers set forth in this
Agreement, or if any representation or warranty of Sellers shall have been or
become untrue, in each case such that the conditions set forth in Section 7.1(a)
or (b) would not be
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satisfied and such breach or untruth (A) cannot be cured by the Closing Date or
(B) has not been cured within 30 days of the date on which USI receives written
notice thereof from Buyers; or
(iv) by Sellers, so long as Sellers are not then
in breach in any material respect of their obligations under this Agreement,
upon a breach of any covenant or agreement on the part of Buyers set forth in
this Agreement, or if any representation or warranty of Buyer shall have been or
become untrue, in each case such that the conditions set forth in Section 7.2(a)
or (b) would not be satisfied and such breach or untruth (A) cannot be cured by
the Closing Date or (B) has not been cured within 30 days of the date on which
the Domestic Buyer receives written notice thereof from Sellers.
(b) In the event of termination of this Agreement by any
or all of the parties pursuant to this Section 3.2, written notice thereof shall
forthwith be given to the other party or parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein;
(i) upon written request therefor, each party will
redeliver all documents, work papers and other material of any other party or
the Subsidiaries relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same;
(ii) all information received by the Buyers, by the
Sellers or by any of their respective counsel, accountants, and other agents and
representatives which is governed by the letter agreement, dated August 31, 1998
(the "Confidentiality Agreement"), from Patricoff & Co. Capital Corp. to Parent
shall continue to be governed by the provisions of the Confidentiality
Agreement;
(iii) all filings, applications and other submissions
made with respect to the transactions contemplated by this Agreement shall, to
the extent practicable, be withdrawn from the agency or other person to which
made; and
(iv) none of the parties shall have any liability or
further obligation arising out of this Agreement except (A) for any liability
resulting from its breach of this Agreement prior to termination, (B) as
provided in paragraphs (i), (ii) and (iii) above, and (C) Sellers' and Buyers'
obligations under Section 6.1(b) shall survive the termination of this
Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES. The Seller
Parties jointly and severally represent and warrant to Buyers that:
4.1 Organization, Standing and Authority of the Sellers and the
Subsidiaries. USI, the Domestic Seller, the Domestic Subsidiary and the Ertl
Subsidiary each is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation, and USI and the
Domestic Seller each has full corporate power and authority to enter into and
perform this Agreement and the applicable agreements and instruments to be
delivered at the Closing pursuant to Section 8.1 (the "Seller Ancillary
Documents"), and to own and operate its properties and to conduct its business
as currently conducted. The Foreign Seller, the Canadian Seller and each Foreign
Subsidiary each is a corporation duly organized under the laws of the country of
its incorporation and the Foreign Seller and the Canadian Seller each has full
corporate power and authority to enter into and perform this Agreement, and the
applicable Seller Ancillary Documents, and to own and operate its properties and
to conduct its business as currently conducted. Each Subsidiary is qualified to
do business and is in good standing in each jurisdiction in which the nature of
its business or the properties owned, operated or leased by it requires
qualification, except where the failure to be so qualified or in good standing
would not have a material adverse effect upon the businesses, operations,
assets, results of operations, properties, or condition (financial or otherwise)
of the Business or the Subsidiaries, taken as a whole ("Material Adverse
Effect"). Sellers have delivered to Buyers complete and correct copies of the
articles or certificate of incorporation, by-laws and any charter or similar
document adopted or filed in connection with the creation, formation or
organization of any Subsidiary or any Seller (collectively, the "Charter
Documents").
4.2 Authorization of Agreement. Each Seller Party has all requisite
corporate power and authority to execute and deliver this Agreement and the
applicable Seller Ancillary Documents and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement, and the applicable Seller Ancillary Documents by each Seller Party
have been duly authorized by all necessary corporate action of each Seller Party
and this Agreement constitutes, and when executed, the Seller Ancillary
Documents to which such Seller Party is a party will constitute, the legal,
valid and binding obligation of each Seller Party enforceable against it in
accordance with their respective terms, except to the extent enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of
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equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
4.3 Consents of Third Parties. Subject to receipt of the consents,
waivers and approvals, and delivery of the notices, referred to in Schedule 4.3,
the execution, delivery and performance of this Agreement and the Seller
Ancillary Document and the consummation of the transactions contemplated hereby
and thereby by each Seller Party will not (i) violate or conflict with the
Charter Documents of any Seller or any Subsidiary or the certificate of
incorporation or by-laws of USI, (ii) conflict with, or result in the breach of,
or termination of, or constitute a default under (whether with notice or lapse
of time or both), or accelerate, terminate or cancel or permit the acceleration,
termination or cancellation of the performance required by, or require the
giving of any notice to or obtaining of any consent from any person pursuant to,
any material indenture, mortgage, lien, lease, agreement, commitment or other
instrument, or any material order, judgment or decree, to which any Seller
Party, any Subsidiary or any of their respective affiliates is a party or by
which any Seller Party, any Subsidiary or any of their respective affiliates or
any of their properties are bound, (iii) constitute a violation of any law,
regulation, order, writ, judgment, injunction, statute, code, ordinance, rule or
decree (collectively, "Laws") applicable to any Seller Party, any Subsidiary or
any of their respective affiliates, or (iv) result in the creation of any
material Lien upon the capital stock, properties or assets of any Subsidiary. No
consent, permit, approval or authorization of any government or political
subdivision thereof, whether federal, state, local or foreign, or any regulatory
or administrative agency or authority, or any court, agency or tribunal
(collectively, "Governmental Authority") is required on the part of any Seller
Party, any Subsidiary or any of their respective affiliates in connection with
the execution, delivery and performance of this Agreement, except for:
(a) filings with the Federal Trade Commission and the
Department of Justice, pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act");
(b) filings with the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor and any other governmental
entity with respect to the transfer of assets and liabilities of Employee
Benefit Plans (defined below) pursuant to this Agreement; and
(c) change of control notifications described on Schedule 4.3.
4.4 Capitalization of the Subsidiaries. The capitalization of each
Subsidiary is set forth on Schedule 4.4. None of the Shares were issued in
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violation of any Laws or any Contracts (as defined below). All of the
outstanding shares of capital stock of each Subsidiary were duly authorized for
issuance and are validly issued, fully paid and non-assessable and none of such
shares is held in treasury. Except for this Agreement and as set forth on
Schedule 4.4, there are no outstanding options, warrants, subscriptions, calls,
agreements, commitments or rights of any kind to acquire, issue, deliver,
transfer or redeem any shares of any class of securities or any securities or
other instruments convertible or exchangeable into or for any shares of any
class of securities of any Subsidiary, nor are there any obligations to issue
any such options, warrants, subscriptions, calls, agreements, commitments,
rights or securities. Except as set forth on Schedule 4.4, there are no
restrictions of any kind on the transfer of the Shares or the assets of Ertl
Canada. Except for the ownership of the Ertl Subsidiary by the Domestic
Subsidiary, none of the Subsidiaries, directly or indirectly, owns or controls
any capital stock or other interest or participation in any other corporation or
business entity, nor is any Subsidiary subject to any obligations or
requirements to make any investment or provide any funds in or to any
individual, partnership, joint venture, corporation, trust, unincorporated
organization, association or limited liability company ("Person").
4.5 Ownership of Shares and Certain Assets. The Domestic Seller is, and
at the Closing will be, the record and beneficial owner of all of the Domestic
Shares, free and clear of any Lien, and the Foreign Seller is, and at the
Closing will be, the record and beneficial owner of all of the Foreign Shares
free and clear of any Lien. All of the issued and outstanding Shares are duly
authorized and validly issued, fully paid, nonassessable and free of preemptive
rights. None of the Shares is, or will be at the Closing, subject to any
agreement or understanding with respect to voting or transfer thereof. At the
Closing, (a) the Domestic Seller will transfer and deliver to the Domestic Buyer
good and valid title to all the Domestic Shares, free and clear of any Lien, (b)
the Foreign Seller will transfer and deliver to the Foreign Buyer good and valid
title to all the Foreign Shares of Ertl Europe, Britains and Ertl Italy, free
and clear of any Lien, (c) the Foreign Seller will transfer and deliver to the
North American Buyer good and valid title to all the Foreign Shares of Ertl
Mexico, free and clear of any Lien, other than one share which is held by a
nominee of the Foreign Seller, good and valid title to which will be transferred
to a nominee of the North American Buyer, free and clear of any Lien, and (d)
the Foreign Seller will transfer and deliver to the Hong Kong Buyer good and
valid title to all the Foreign Shares of Ertl Hong Kong, free and clear of any
Lien, other than one share which is held by a nominee of the Foreign Seller,
good and valid title to which will be transferred to a nominee of the Hong Kong
Buyer, free and clear of any Lien. The Canadian Seller has, and at the Closing
will have, good and valid title to the assets of Ertl Canada and at the Closing
will transfer and deliver to the Foreign Buyer good and valid title to the
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assets of Ertl Canada free and clear of any Lien subject to the assumption by
the Foreign Buyer of the liabilities of Ertl Canada.
4.6 Financial Statements.
(a) The unaudited pro forma balance sheet of the Business,
dated as of January 2, 1999 (the "Preliminary Balance Sheet"), and the related
pro forma statements of operations and cash flows for the three months then
ended, set forth in Schedule 4.6, have been prepared in accordance with the
Domestic Subsidiary's past practice, consistently applied, for inclusion in
USI's consolidated financial statements.
(b) The combined balance sheets of the Subsidiaries as of
September 30, 1998, 1997 and 1996, and the related combined statements of
operations, changes in invested capital, and cash flows for the years then
ended, set forth in Schedule 4.6, present fairly the combined financial
position, assets and liabilities of the Subsidiaries at September 30, 1998 1997
and 1996 and the combined results of their operations, changes in financial
condition and cash flows for the years then ended, in conformity with GAAP
applied on a consistent basis.
4.7 Absence of Certain Liabilities and Changes. Except to the
extent reflected or reserved for in the Preliminary Balance Sheet, the
Subsidiaries do not have any liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise) except
(i) liabilities or obligations incurred in the ordinary course of business
consistent with past practice since the date of the Preliminary Balance Sheet
pursuant to contracts listed on Schedule 4.9, (ii) other liabilities or
obligations not required to be shown on a balance sheet prepared in accordance
with the Accounting Principles incurred in the ordinary course of business
consistent with past practice and which are not material in nature or amount
individually or in the aggregate, and (iii) liabilities and obligations
disclosed on Schedule 4.7. Since the date of the Preliminary Balance Sheet, the
Subsidiaries have operated the Business in the ordinary course and, except as
set forth on Schedule 4.7, there has not been:
(a) any Material Adverse Effect;
(b) any material change in the accounting methods,
practices or principles of the Subsidiaries;
(c) (i) any grant or payment of, or commitment to pay, any
severance or termination pay by the Subsidiaries to any officer, director,
employee, consultant, agent or other representative of the Subsidiaries or any
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increase in compensation or benefits payable by the Subsidiaries under existing
employment agreements or severance or termination pay policies to any of their
employees other than (x) in the ordinary course of business consistent with past
practices, including without limitation normal merit increases for salaried
employees, provided that such increases do not exceed $225,000 in the aggregate,
or (y) increases or grants required by contracts disclosed in the Schedules
hereto,; or (ii) any entering into, amendment or termination of any employment
agreement with respect to any employee of any Subsidiary or any contract with
any labor union or association representing any employee of any Subsidiary;
(d) any entering into, amendment or termination of any
Material Contract (as defined in Section 4.9), or any entering into, amendment
or termination of any other Contract (as defined in Section 4.9) outside of the
ordinary course of business consistent with past practice or that has had or
could reasonably be expected to have a Material Adverse Effect;
(e) any amendments to the Charter Documents or merger with or
into or consolidation with any other Person, subdivision or reclassification, in
any manner, of the Shares or any other form of equity of the Subsidiaries or
changes or agreements to change in any manner the rights of any Shares or any
other form of equity of the Subsidiaries;
(f) any issuance, sale, purchase or redemption, or agreements
to issue, sell, purchase or redeem, any Shares or any options, warrants,
convertible or exchangeable securities, subscriptions, rights (including
preemptive rights), stock appreciation rights, calls or commitments of any
character whatsoever relating to the Shares or any other form of equity;
(g) any adoption of a plan of liquidation or resolutions
providing for the liquidation, dissolution, merger, consolidation or other
reorganization of any of the Subsidiaries;
(h) any sale, lease, transfer or assignment of any assets,
tangible or intangible, of any Subsidiary other than for a fair consideration in
the ordinary course of business consistent with past practice;
(i) any Lien imposed upon any assets, tangible or intangible,
of any Subsidiary;
(j) any capital expenditure, or delay or failure to make any
capital expenditure (or series of related capital expenditures) by any
Subsidiary outside the ordinary course of business consistent with past
practice;
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(k) any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related capital
investments, loans and acquisitions) by any Subsidiary;
(l) any issuance of any note, bond or other debt security by
any Subsidiary or creation, incurrence, assumption or guaranty by any Subsidiary
of any indebtedness for borrowed money or capitalized lease obligation either
involving more than $100,000 singly or $500,000 in the aggregate;
(m) any delay or postponement by any Subsidiary of the payment
of material accounts payable or other material liabilities outside the ordinary
course of business consistent with past practice;
(n) any direct or indirect acceleration or taking of any steps
to accelerate receipt (or actual receipt) of payment of any material accounts
receivable or other material current assets by any Subsidiary outside the
ordinary course of business consistent with past practice;
(o) any cancellation, compromise, waiver or release by any
Subsidiary of any material right or claim (or series of related material rights
and claims) outside the ordinary course of business consistent with past
practice;
(p) any declaration, setting aside or payment by any
Subsidiary of any dividend or making by any Subsidiary of any distribution with
respect to its capital stock (whether in cash or in kind) or redemption,
purchase or other acquisition by any Subsidiary of any of its capital stock;
(q) any adoption, amendment, modification or termination by
any Subsidiary of any bonus, profit sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers and
employees (or taking by any Subsidiary of any such action with respect to any
other Employee Benefit Plan or Benefit Arrangement (as defined in Section
4.11)); and
(r) any existing or new agreement or arrangement made by a
Subsidiary to take any action that would cause any representations or warranties
in this Agreement to be untrue or incorrect.
4.8 Taxes. Except as set forth on Schedule 4.8, (i) each Subsidiary has
filed (or caused to be filed) in a timely manner, and each consolidated,
combined, affiliated or unitary group of which any Subsidiary is or has been a
member (each
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such group, an "Affiliated Group") has filed (or caused to be filed) in a timely
manner all Federal, state, local and foreign returns, reports, statements and
forms required to be filed under the Internal Revenue Code of 1986, as amended
(the "Code") or applicable state, local or foreign Tax laws (the "Tax Returns")
and such Tax Returns are true, complete and correct in all material respects;
(ii) each Subsidiary has paid (or the Affiliated Group of which the Subsidiary
is or was a member has paid) all Taxes (whether or not shown on any Tax
Returns); (iii) there is no outstanding agreement, waiver or consent providing
for an extension of the statutory period of limitations with respect to any
Taxes or Tax Returns of any Subsidiary and no power of attorney granted by any
Subsidiary or any Affiliated Group with respect to any tax matter is currently
in force; (iv) no tax liens (except for liens for Taxes not yet due) have been
filed and there is no action, suit, proceeding, investigation, audit or claim
now pending against any Subsidiary with respect to any Tax, or with respect to
which any Subsidiary could be jointly or severally liable under Treasury
Regulation Section 1.1502-6 or any comparable state, local or foreign tax
provisions, nor is there any assessment asserted by any taxing authority; (v)
each Subsidiary has complied with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and is not liable for any Taxes
for failure to comply with such laws, rules and regulations, (vi) no Subsidiary
is a party to or is otherwise bound by any agreement or understanding providing
for the allocation or sharing of Taxes or has any obligation or liability under
any such agreement or understanding to which it was once a party or otherwise
bound; (vii) no Subsidiary is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by such Subsidiary and no Subsidiary has knowledge
that the Internal Revenue Service has proposed any such adjustment or change in
accounting method; (viii) no Subsidiary has filed with respect to any item a
disclosure statement pursuant to Section 6662 of the Code or any comparable
disclosure with respect to foreign, state and/or local tax statutes for any tax
year ended after December 31, 1995; (ix) no Subsidiary has filed any agreement
or consent under Section 341(f) of the Code; and (x) no property of any Domestic
Subsidiary is "tax-exempt use property" within the meaning of Section 168(h) of
the Code nor property that Domestic Buyer will be required to treat as being
owned by another person pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986. Schedule 4.8 contains a list of all pending or
threatened federal income tax audits conducted by the Internal Revenue Service
or any state, local or foreign governmental authority with respect to Taxes of
any Subsidiary that ended within three years of the date of this Agreement. The
Domestic Seller is not a "foreign person" within the meaning of Section
1445(b)(2) of the Code and will furnish an affidavit of this status
substantially in the form of Exhibit C. For purposes of this Agreement, "Tax" or
"Taxes" means any tax, duty,
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fee, assessment or charge of any nature whatsoever imposed by any government or
taxing authority, domestic or foreign, including, without limitation, any gross
or net income, gross or net receipts, minimum, sales, use, ad valorem, value
added, customs, import, duty, stamp, transfer, franchise, withholding, payroll,
employment, excise, occupation, premium or property tax or fee, together with
any interest, penalty, addition to tax or additional amount imposed with respect
thereto.
4.9 Material Contracts. Schedule 4.9 includes lists of all agreements,
contracts, promises, undertakings, or understandings (whether written or oral
and whether express or implied) to which any Subsidiary is a party, under which
any Subsidiary has or may acquire any rights or has or may become subject to any
liability or obligation, or by which any Subsidiary or its assets may be
affected (collectively "Contracts") of the following types (such Contracts are
collectively, the "Material Contracts"):
(a) all patent, trademark, servicemark, trade-name, copyright,
royalty, license, inventor and other intellectual property Contracts that
involve an annual payment by a Subsidiary to another party of more than $30,000
for any one Contract;
(b) all Contracts for the purchase or lease of any materials,
supplies, equipment, merchandise or services that involve an annual expenditure
by a Subsidiary of more than $50,000 for any one Contract or series of related
Contracts;
(c) all leases with respect to any personal property under
which a Subsidiary is either lessor or lessee that involve annual payments or
receipts of $50,000 or more;
(d) all Contracts, mortgages, indentures, notes, installment
obligations, letters of credit, and other instruments relating to any
indebtedness, including, without limitation, any indebtedness for borrowed
money, any indebtedness evidenced by notes, debentures or similar instruments,
any capitalized lease obligations, any mandatory redemption or dividend rights
on capital stock required to be paid in cash, any reimbursement obligations, and
any obligations secured by Liens, that may require payments by one or more
Subsidiaries of more than $50,000 for any one Contract or series of related
Contracts;
(e) all distributor, representative, management, marketing,
printing, advertising and agency Contracts that involve an annual payment by a
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Subsidiary of more than $30,000 for any one Contract or series of related
Contracts;
(f) all government Contracts and all other agreements with
customers that involve an annual payment to or by a Subsidiary of more than
$50,000 for any one Contract or series of related Contracts.
(g) all Contracts with any current or former officer,
director, employee, shareholder, option holder, or warrant holder of any
Subsidiary;
(h) all Contracts under which any Subsidiary has agreed to
indemnify or guarantee the obligations of any Person or to share tax liability
with any Person, with a potential liability of more than $50,000;
(i) all Contracts limiting the freedom of any Subsidiary to
engage in any line of business or in any geographic area;
(j) all Contracts relating to the acquisition by any
Subsidiary of any operating business or the shares or other interests of any
Person;
(k) except as disclosed in Schedule 4.11, employment,
consulting or severance agreements, collective bargaining agreements, or
pension, profit-sharing, incentive compensation, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, or retirement plans or agreements; and
(l) any other Contract outside the ordinary course of business
consistent with past practice which requires payments to or from any Subsidiary
of more than $50,000 in the aggregate or which may have a Material Adverse
Effect.
Sellers have made available to Buyers complete and correct
copies of all items listed or required to be listed on Schedule 4.9 that are in
writing, and the descriptions contained in Schedule 4.9 of all items listed or
required to be listed therein that are not in writing are complete and correct.
Except as disclosed in Schedule 4.9, no Subsidiary and, to the best knowledge of
Sellers, no other party to a Material Contract, is in material default under the
terms of any Material Contract, and, to the best knowledge of Sellers, no
condition or state of facts exists (or would exist upon giving of notice or
lapse of time or both) which may result in a material breach of or default under
any Material Contract. Each of the Material Contracts is valid and in full force
and effect, and no party has notified any Seller or any Subsidiary in writing of
its intention to cease to
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perform any material services required to be performed by it or withhold any
material payment required to be made by it thereunder.
4.10 Labor Matters.
(a) Except as set forth on Schedule 4.10(a), there are no
collective bargaining agreements in effect relating to the employees of any
Subsidiary, or any other contract or commitment to any labor union or
association representing any employee of any Subsidiary, nor does any labor
union or collective bargaining agent represent any employee of any Subsidiary.
To the best of Seller's' knowledge, except as set forth on Schedule 4.10(a),
there is no organizational effort currently being made or threatened to organize
employees of any Subsidiary for the purpose of forming or joining any labor
union. Except as set forth on Schedule 4.10(a), within the past two years, (i)
there has been no strike, slow-down, work stoppage, arbitration or other
material work-related dispute involving any Subsidiary, and no such action is
now pending or, to the best of Sellers' knowledge, threatened, and (ii) no
proceeding against any Subsidiary or controversy or dispute between any
Subsidiary and any Employee is pending or, to the best of Sellers' knowledge,
threatened relating to the alleged violation of any legal requirement pertaining
to labor relations or employment matters, including any charge, complaint or
petition filed by any Employee or labor organization with the National Labor
Relations Board, the Equal Employment Opportunity Commission, the U.S.
Department of Labor or any comparable Governmental Authority, any of which could
reasonably be expected to result in a material liability. Each Subsidiary is in
compliance in all material respects with the terms of, and is not currently in
default in any material respect under, any collective bargaining agreement or
other labor union contract covering any Employees.
(b) Except as set forth on Schedule 4.10(b), no Subsidiary has
incurred or will incur any liability or obligation under the Worker Adjustment
and Retraining Notification Act ("WARN") or similar state or foreign Laws,
including with respect to the provision of any notice of any plant closing or
mass layoff taking place up to and including the Closing Date solely
attributable to terminations of employment prior to the Closing, which remains
unpaid or unsatisfied or which has not been accrued for. Except as set forth on
Schedule 4.10(b), no Subsidiary or Seller has laid off more than 10% of its
Employees at any single site of employment in any 90-day period during the last
12 months. As of the Closing, the Domestic Subsidiary has 256 full-time, active
employees at plants #1 and #2 in Dyersville, Iowa. During the 90 days
immediately prior to Closing, the Domestic Subsidiary has terminated the
employment of not more than two employees.
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4.11 Employee Benefit Plans and Benefit Arrangements.
(a) Definitions.
(i) The term "Employees" shall mean all current and
former employees of the Subsidiaries, including employees on approved leaves of
absence (whether family leave, workers' compensation, medical leave or
otherwise) and the term "Employee" shall mean any of the Employees.
(ii) The term "Employee Benefit Plans" shall mean
each and all "employee benefit plans" as defined in Section 3(3) of ERISA,
including any Foreign Benefit Plans (as defined below) maintained or contributed
to by a Subsidiary or Seller or any trade or business under common control with
a Subsidiary or Seller, within the meaning of Section 414 of the Code (an "ERISA
Affiliate"), or any predecessor or in which a Subsidiary or Seller on ERISA
Affiliate or any predecessor participates or participated and which provides
benefits to Employees which shall include (a) any such plans that are "employee
welfare benefit plans", as defined in Section 3(1) of ERISA, including, but not
limited to, retiree medical and life insurance plans ("Welfare Plans") and (b)
any such plans that are "employee pension benefit plans" as defined in Section
3(2) of ERISA or to which any of the Subsidiaries contribute or may become
liable to contribute that is a "retirement benefits scheme" ("Retirement
Benefits Scheme") as defined in Section 611 of the UK Income and Corporation
Taxes Act 1988 ("ICTA") ("Pension Plans") except for any Welfare Plan or Pension
Plan not sponsored by, and not contributed to by, the Domestic Subsidiary, and
which does not cover any Employees.
(iii) The term "Benefit Arrangements" shall mean any
life and health insurance, cafeteria plans, dependent care assistance programs,
adoption assistance programs, hospitalization, savings, bonus, stock option,
stock purchase, stock appreciation right, deferred compensation, incentive
compensation, holiday, vacation, termination, severance pay, sick pay, sick
leave, disability, tuition refund, service award, company car, scholarship,
relocation, patent award, fringe benefit, contracts, collective bargaining
agreements, individual employment, consultancy, termination contracts or
severance contracts, plans and other policies or practices of the Subsidiaries
or Sellers providing employee or executive compensation or benefits to
Employees, other than Employee Benefit Plans. Benefit Arrangements shall also
include all employee programs for Employees of any Foreign Subsidiary.
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(b) Schedule 4.11 lists all Employee Benefit Plans and all
Benefit Arrangements. Such Schedule also indicates whether any Pension Plans
listed thereon participate in trusts sponsored by entities other than the
Subsidiaries for investment of plan assets (the "Master Trusts"). With respect
to each of the Employee Benefit Plans and Benefit Arrangements, Sellers have
delivered or made available to Buyers, as applicable, true, correct and complete
copies of any: (i) plans or programs and related trust documents and amendments
thereto; (ii) the most recent summary plan descriptions and the most recent
annual report (Form 5500 Series); (iii) the most recent actuarial valuation; and
(iv) the most recent determination letter received from the Internal Revenue
Service (or in the case of any Retirement Benefits Scheme, the Inland Revenue
approval letter). All such reports (Form 5500 Series) with respect to each
Employee Benefit Plans have been properly filed in all material respects
including the payment in full of any late fees, interest and penalties, if, and
to the extent applicable.
(c) Except as shown on Schedule 4.11, (i) each Subsidiary is
in compliance in all material respects with the terms of each Employee Benefit
Plan or Benefit Arrangement and each Employee Benefit Plan or Benefit
Arrangement has been maintained in all material respects in accordance with the
requirements prescribed by all applicable statutes, orders or governmental rules
or regulations including, without limitation, ERISA and the Code (and in the
case of any Retirement Benefits Scheme, ICTA); (ii) each Pension Plan intended
to qualify under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to such
qualification, or would receive a favorable determination letter if submitted to
the Internal Revenue Service; its related trust has been determined to be exempt
from taxation under Section 501(a) of the Code or in the case of any Retirement
Benefits Scheme is exempt approved under Chapter I of Part XIV of ICTA or is
awaiting such approval; and, to the best of Sellers' knowledge, nothing has
occurred since the date of such letter (or in the case of any Retirement
Benefits Scheme, such approval) that would adversely affect such qualification
or exemption; (iii) there are no actions or proceedings (other than routine
claims for benefits) pending or, to the best of the Subsidiaries' or Sellers'
knowledge, threatened, and no past or current proceedings under the Employee
Plans Compliance Resolution System, with respect to any such Employee Benefit
Plan or Benefit Arrangement or against the assets of any such Employee Benefit
Plan or any fiduciary to any such Employee Benefit Plan or Benefit Arrangement
with respect to such plans or arrangements; and (iv) pursuant to the terms of
each Employee Benefit Plan or Benefit Arrangement for which Buyers or the
Subsidiaries shall have liability following the Closing (other than such
Employee Benefit Plans or Employee Benefit Arrangements which cover employees
subject to a collective bargaining agreement as such Employee Benefit Plans and
Employee Benefit Arrangements
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may not be unilaterally terminated), each can be terminated within 31 days,
without payment of any additional contribution or amount other than liabilities
for benefits accrued in the ordinary course through the date of termination and
without the vesting or acceleration of any benefits promised by such Employee
Benefit Plan or Benefit Arrangement.
(d) With respect to any Employee Benefit Plan or Benefit
Arrangement, where applicable, (i) there has been no non-exempt "prohibited
transaction" (including without limitation as a result of any of the
transactions contemplated hereby) within the meaning of Section 4975(c) of the
Code or Section 406 of ERISA involving the assets of any Employee Benefit Plan
or Benefit Arrangement; and (ii) except as shown on Schedule 4.11, neither a
Subsidiary nor Seller is or was during the preceding six years obligated to
contribute to any multi-employer plan covering Employees which would give rise
to any obligation by a Subsidiary or Seller and neither a Subsidiary nor Seller
has assumed any obligation of any predecessor of a Subsidiary or Seller with
respect to any multi-employer plan covering Employees.
(e) Except as shown on Schedule 4.11 or as required by Section
4980B of the Code, no Employee Benefit Plan or Benefit Arrangement provides
medical or death benefits with respect to Employees beyond their retirement or
other termination of employment. Any continuation coverage provided under any
Welfare Plans is in good-faith compliance with Section 4980B of the Code and is
at the expense of the participant or beneficiary. True and correct copies of the
most recent reports (the "FASB Reports") regarding post-retirement benefits
under Employee Benefit Plans, other than pension benefits, prepared in
accordance with Financial Accounting Standards Board Statement No. 106 as
amended, have been delivered to the Buyer. There has been no adverse change in
the benefit formulas in the Employee Benefit Plans covered by any such FASB
Report since the date of such report with respect to the Employees.
(f) No accumulated funding deficiency or unpaid required
installments within the meaning of Section 412 of the Code exists with respect
to any Employee Benefit Plan that is subject to Title IV of ERISA (a "Title IV
Plan"). With respect to each Title IV Plan, there has not occurred any
reportable event within the meaning of Section 4043 of ERISA or the regulations
thereunder. The Pension Benefit Guaranty Corporation has not instituted or, to
the knowledge of a Subsidiary or Seller, threatened a proceeding to terminate
any Title IV Plan.
(g) With respect to the merger or spin-off of any Employee
Benefit Plans or any assets thereunder occurring prior to the Closing Date, all
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applicable IRS Forms have been timely filed by the Subsidiary or Seller and any
and all rules set forth in ERISA or the Code or the regulations thereunder
providing for the protection of participants in such Employee Benefit Plans have
been followed in all material respects, including, but not limited to, the rule
providing that each participant of any such plan will be entitled to a benefit
after the merger or spin-off equal to or exceeding the benefit before such
merger or spin-off and, in the case of a merger or spin-off between two defined
contribution Employee Benefit Plans, the rule providing that each participant
shall have an account balance after the merger at least equal to their account
balance before such merger or spin-off.
(h) No Employee Benefit Plan or Benefit Arrangement or any
other agreement, program, policy or other arrangement by or to which any
Subsidiary or any Seller is a party, is bound or is otherwise liable, by its
terms or in effect could reasonably be expected to require any payment or
transfer of money, property or other consideration on account of or in
connection with the transactions contemplated by this Agreement which payment
would constitute an "excess parachute payment" within the meaning of Section
280G of the Code. The consummation of the transactions contemplated by this
Agreement will not result in the payment, vesting or acceleration of any benefit
which would constitute a liability of Buyers or any Subsidiary.
(i) Each Foreign Employee Benefit Plan (as defined below) has
been maintained in all material respects in compliance with its terms and with
the requirements of any and all applicable laws and has been maintained, where
required, in good standing with applicable regulatory entities. Neither the
Subsidiaries nor the Sellers have incurred any obligations in connection with
the termination of or withdrawal from any Foreign Employee Benefit Plan, or have
any unfunded liability with respect to benefits under any such Foreign Employee
Benefit Plan. "Foreign Employee Benefit Plan" means (i) any plan, fund or other
similar program established or maintained outside the United States of America
by a Subsidiary or Seller primarily for the benefit of Employees residing
outside of the United States of America which plan, fund or other similar
program provides retirement income for such Employees, results in a deferral of
income for such Employees in contemplation of retirement or provides payments to
be made to such Employees upon termination of employment, and which plan is not
subject to ERISA or the Code, and (ii) any plan, fund or other similar program
established or maintained outside the United States of America by a Subsidiary
or Seller primarily for the benefit of Employees residing outside of the United
States of America which plan, fund or similar program is not described in (i)
above including, but not limited to, any plan, fund or other similar program
established or
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maintained outside the United States of America by a Subsidiary or Seller
providing benefits comparable to those provided under Welfare Plans.
(j) Each individual who receives continuation coverage under
Section 4980B of the Code and part 6 of Subtitle B of Title I of ERISA ("COBRA")
with respect to any Subsidiary makes payments for such coverage that are not
less than the cost to the Subsidiaries of such coverage, and, if Buyers or the
Subsidiaries do not change any plan pursuant to which COBRA coverage is made,
each individual who receives COBRA coverage after the Closing Date because such
individual is a qualified beneficiary whose qualifying event occurred prior to
the Closing Date or whose qualifying event occurred in connection with a covered
employee whose last employment was prior to the Closing Date will be required to
make payments for such coverage that are not less than the cost to the
Subsidiaries of such coverage. Notwithstanding the foregoing, the vision care
portion of the cost of COBRA coverage is intended to cover the total cost of
such self-insured benefit, and such employee-paid cost, together with any
accrual on the Final Balance Sheet specifically relating to COBRA costs for
employees who terminated employment prior to the Closing Date, will not be less
than the cost to the Subsidiaries for such coverage.
4.12 Litigation; Compliance with Laws.
(a) There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of the Sellers' knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by the Sellers in connection with this Agreement. There is no
litigation, proceeding or governmental investigation pending or, to the best of
Sellers' knowledge, threatened, or any order, injunction or decree outstanding,
against Sellers that, if adversely determined, would individually or in the
aggregate, have an adverse effect on the Sellers' ability to perform their
obligations under this Agreement.
(b) (i) No Subsidiary is in material violation of any
applicable Law, or any other applicable requirement of any Governmental
Authority, and (ii) no written notice has been received by any Seller, any
Subsidiary or any of their respective affiliates alleging any such material
violations.
(c) Except as disclosed in Schedule 4.12, there are no
judicial, legal, regulatory, arbitration or administrative actions, proceedings
or governmental investigations (a "Suit") pending against any Subsidiary or, to
the best of Sellers' knowledge, threatened against any Subsidiary, and no
Subsidiary is subject to any outstanding injunction, order, decree, ruling or
charge.
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4.13 Real Property.
(a) Schedule 4.13(a) sets forth a true and complete list of
all of the real property of the Business owned by the Subsidiaries (the "Owned
Property"). Except as set forth on Schedule 4.13, the Subsidiaries have good,
valid and marketable fee simple title to each parcel of Owned Property free and
clear of all Liens, other than (i) those reflected or reserved against in the
Preliminary Balance Sheet, (ii) those reflected in any title abstracts with
respect to the Owned Property that are listed on Schedule 4.13, copies of which
have been previously provided to Buyers, (iii) imperfections of title,
easements, encroachments, rights-of-way, pledges, charges, restrictions and
encumbrances, including, without limitation, survey matters, landlord's liens,
mechanics' liens, repairmen's liens and other similar liens, if any, that do not
materially detract from the value of the property subject thereto or materially
interfere with the manner in which it is currently being used in the Business or
materially impair the operations of the Business, and (iv) taxes and general and
special assessments not yet due and payable without penalty or interest (Liens
of the type referred to in clauses (i) through (iv) above being hereinafter
referred to as "Permitted Liens"). Sellers have previously delivered to Buyers
surveys of the Owned Property dated October 23, 1998 and April 7, 1999, and such
surveys are accurate, correct and complete.
(b) Schedule 4.13(b) sets forth a true and complete list of
all of the real property leases in effect as of the date hereof with respect to
the Business under which any Subsidiary is a lessee (collectively, the "Leased
Property"). Sellers have made available to Buyers true, correct and complete
copies of all such Leases, including all amendments, modifications and renewals
thereof. All such Leases are valid, binding and enforceable in accordance with
their terms, and are in full force and effect as of the date hereof. There are
no existing material defaults by any Subsidiary beyond any applicable grace
periods under such Leases, and no Subsidiary has received any notice of any
material default. Except as set forth in Schedule 4.13, the consummation of the
transactions contemplated by this Agreement will not constitute a default, or
give rise to a right of termination, cancellation or acceleration of any right
under, any of the Leases. The Owned Property and the Leased Property shall be
collectively referred to herein as the "Real Property".
(c) The Real Property set forth on Schedule 4.13(a) and
4.13(b) constitutes all real property owned, used or occupied by any of the
Subsidiaries. Except as set forth on Schedule 4.13, there are no leases,
contracts, options, agreements or enforceable rights or obligations relating to
or affecting the Real Property to which any Subsidiary is a party or by which
the Real Property is
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otherwise bound or affected. To the best of Sellers' knowledge, except as set
forth on Schedule 4.7(j), there are no material structural or nonstructural
defects (including, without limitation, inadequacy for normal use of mechanical
systems and fixtures) in any building or its systems or fixtures (including,
without limitation, the HVAC system, plumbing system, electrical system,
sprinkler system and sewer and water systems) or other improvements situated on
the Real Property and all building systems, fixtures, structures, fixtures and
improvements, owned, leased or used any of the Subsidiaries, are in all material
respects in good condition and working order (reasonable wear and tear excepted)
and are adequate in quality and quantity for the normal operation of the
Business and the Real Property. To the best of Sellers' knowledge, except as set
forth on Schedule 4.7(j), none of the Real Property is located in a recognized
wetland, flood prone area, flood risk area, flood plain or similarly restricted
area or is subject to any shoreland regulations. To the best of Sellers'
knowledge, none of the Seller Parties or the Subsidiaries has any notice or
knowledge of capital expenditures on the Real Property (excluding only normal
repairs made consistently with past practice) that would be necessary to conduct
the Business as presently conducted. The Subsidiaries have all easements and
rights, including without limitation, easements for all utilities, services,
roadways, and other ways of ingress and egress, adequate and sufficient to
conduct the Business. Neither the whole nor any portion of the Real Property has
been condemned, requisitioned or otherwise taken by any public authority, and no
notice of such condemnation, requisition or taking has been served upon any of
the Subsidiaries or any of the Seller Parties. None of the Seller Parties' have
received notice of the commencement of any public improvements and, to the best
of Seller's knowledge, there are no public improvements planned which may
reasonably be expected to result in special assessments against or otherwise
materially and adversely affect any of the Real Property. To the best of
Sellers' knowledge, no governmental agency has issued any work order, and there
have been no court orders requiring repairs, alterations or corrections of any
condition on the Real Property.
4.14 Intellectual Property.
(a) The term "Intellectual Property" as used herein includes
all foreign and domestic (i) patents, industrial design registrations,
inventions (whether or not patentable and whether or not reduced to practice)
and applications therefor, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof
(collectively, "Patents"); (ii) trademarks, service marks, trade names,
fictitious names, Internet domain names, d/b/a's, collective marks,
certification marks, logos, symbols, trade dress, other indicia of source, and
registrations and applications for registration therefor (collectively,
"Trademarks"); (iii) trade secrets, know-how,
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and confidential and proprietary information (including processes, schematics,
databases, formulae, drawings, prototypes, models, designs and customer lists)
(collectively, "Trade Secrets"); (iv) published and unpublished works of
authorship, copyrights therein and thereto, and registrations and applications
for registration therefor (collectively, "Copyrights"); and (v) all other
proprietary rights ("Other Proprietary Rights").
(b) Schedule 4.14(b) contains a complete and accurate list of
all registered Intellectual Property owned by each Subsidiary, each license,
agreement or permission any third party has granted to any Subsidiary for
Intellectual Property and each license, agreement or other permission which any
Subsidiary has granted to any third party with respect to any of its
Intellectual Property. Except as otherwise indicated in Schedule 4.14(b), (i)
each Subsidiary exclusively owns all right, title and interest in and to, and
exclusively holds full legal, equitable and beneficial ownership of, the
Intellectual Property owned by such Subsidiary (including without limitation the
exclusive right to use, sell, transfer, assign and license same without payment
to any third parties), free and clear of all Liens, and (ii) each Subsidiary has
the right to use the Intellectual Property licensed or currently used by such
Subsidiary.
(i) All of the issued Patents owned or, to the best of
Sellers' knowledge, used by each Subsidiary are currently in compliance with
formal legal requirements (including without limitation payment of filing,
examination and maintenance fees and proofs of working or use) and are not
subject to any maintenance fees or Taxes or actions falling due within ninety
(90) days after the date of the Closing. In each case where an issued Patent is
held by the Subsidiaries by assignment, the assignment has been duly recorded
with the U.S. Patent and Trademark Office and all other jurisdictions of
registration. All products made, used or sold under the issued Patents have been
marked with the proper patent notice.
(ii) All Trademarks owned or, to the best of Sellers'
knowledge, used by each Subsidiary that have been registered with the United
States Patent and Trademark Office and/or any other jurisdiction are currently
in compliance with formal legal requirements (including without limitation the
timely post-registration filing of affidavits of use and incontestability and
renewal applications) and are not subject to any maintenance fees or taxes or
taxes or actions falling due within ninety (90) days after the date of the
Closing. In each case where a Trademark is held by the Subsidiaries by
assignment, the assignment has been duly recorded with the United States Patent
and Trademark Office and all other jurisdictions of registration. All products
and materials containing a Trademark bear the proper notice where permitted by
law.
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(iii) Schedule 4.14(b)(iii) sets forth a description of
all measures (including, without limitation, entering into confidentiality and
non-disclosure agreements with officers, directors, employees, and consultants
of the Subsidiaries and other persons with access to the Trade Secrets) taken by
the Subsidiaries to protect the secrecy, confidentiality and value of the Trade
Secrets of the Subsidiaries.
(iv) All of the Copyrights owned or used by each
Subsidiary that have been registered with the United States Copyright Office are
currently in compliance with formal legal requirements and are not subject to
any fees or taxes or actions falling due within ninety (90) days after the date
of the Closing. In each case where a Copyright is held by the Subsidiaries by
assignment, the assignment has been duly recorded with the United States
Copyright Office and all other jurisdictions of registration. All copies of
works encompassed by the Copyrights have been marked with the proper copyright
notice.
(c) Any Intellectual Property owned by any third party and
used in the operation of the business of any Subsidiary prior to the Closing was
obtained by the Subsidiaries under a license to the Subsidiaries from the owner
or agent of the owner of such Intellectual Property, which license is binding
and enforceable and the use of all such Intellectual Property prior to the
Closing by the Subsidiaries has not violated the terms of any such license in
any material respect.
(d) Except as disclosed on Schedule 4.14(d) attached hereto,
within the past three years, no claim or position has ever been asserted in
writing or, to the knowledge of Sellers, threatened that any Patents, Trademarks
or Copyrights are invalid, unenforceable, unpatentable, unregisterable or
cancelable, and, to the knowledge of Sellers, no valid basis for any such claim
or position exists.
(e) Except as disclosed on Schedule 4.14(e), no claim or
position has ever been asserted in writing or, to the knowledge of Sellers,
threatened that any Subsidiary has violated any Intellectual Property rights or
breached any agreement granting any Subsidiary Intellectual Property rights,
and, to the knowledge of Sellers, no valid basis for such claim or position
exists.
(f) Except as disclosed on Schedule 4.14(f), no Suit is
currently pending or, the best of Seller's knowledge, threatened concerning any
claim or position that any Subsidiary has violated any Intellectual Property
rights or
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breached any agreement granting any Subsidiary Intellectual Property rights,
and, to the knowledge of Sellers, no valid basis for any such Suit exists.
(g) Except as disclosed on Schedule 4.14(g), no Person has
violated or been alleged to have violated, in any material respects, any
Subsidiary's rights in or to any Intellectual Property, nor is any Suit pending
concerning any such violation or alleged violation, nor, to the knowledge of
Sellers, does any valid basis exist for such Suit.
(h) The Intellectual Property identified on Schedule 4.14(b)
comprises all of the Intellectual Property rights necessary for the operation of
the Business as currently conducted. Except as set forth on Schedule 4.14(h),
all Intellectual Property owned or used by the Subsidiaries or in connection
with the Business immediately prior to the Closing and which is material
individually or in the aggregate to the Subsidiaries or the Business will be
owned or available for use by the Subsidiaries or in connection with the
Business on substantially similar terms and conditions following the Closing.
4.15 Environmental Matters. Except as disclosed on Schedule 4.15
and its enumerated sections,
(a) the operations of the Subsidiaries, the Business and the
Real Property, are in material compliance with all applicable Environmental
Laws;
(b) no Hazardous Materials are present in, or have been
Released to, the soils, surface water, groundwater or air on, in, at, upon or
beneath the Real Property, nor have any Hazardous Materials migrated from the
Real Property, in a manner or concentration not in compliance with any
applicable Environmental Law or Environmental Permits;
(c) the Subsidiaries have obtained and currently maintain all
Environmental Permits necessary for their operations and are in material
compliance with such Environmental Permits, and there are no oral or written
notices or proceedings pending nor, to the Sellers' knowledge, threatened
alleging a violation of any Environmental Permit or seeking to revoke any
Environmental Permit;
(d) except for costs and obligations incurred in order to
maintain compliance with Environmental Laws and Environmental Permits in the
ordinary course of its business, none of the Subsidiaries or the Real Property
are in receipt of or subject to any Environmental Claim or Order arising out of,
or relating in any
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way to, any (w) Environmental Laws, (x) Remedial Action, (y) Environmental
Claim, or (z) Release or threatened Release of any Hazardous Material;
(e) there are no legal proceedings pending or, to the Sellers'
knowledge, threatened against the Subsidiaries or involving the Real Property
alleging the violation of or making a claim under any Environmental Law or
Environmental Permit; and
(f) none of the Subsidiaries nor, to the Sellers' knowledge,
any owner or occupant of the Real Property, has filed any notice with any
Environmental Authority under any Law reporting the presence of a Hazardous
Material at, in, on, beneath or from, or the Release of a Hazardous Material
into the environment at, the Owned Property or the Leased Property except as
required pursuant to applicable Environmental Law or Environmental Permits.
The following definitions shall be applicable to
Sections 4.15 and 9.5:
"Environmental Authority" means any governmental or
regulatory body, or political subdivision thereof, whether federal, state, local
or foreign, or any agency, instrumentality or authority thereof, or any court or
arbitrator (public or private) having jurisdiction over or in any way regulating
or enforcing any Environmental Law.
"Environmental Claim" means any claim, third party
information request, summons, petition, decree, appeal, suit, consent, decree or
order, demand, notice or administrative ruling with respect to any Environmental
Law, Environmental Permit or Order or which may result in any Environmental
Costs and Liabilities.
"Environmental Costs and Liabilities" means any and
all losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and the costs of investigation and feasibility studies and Remedial Action)
together with all deed, well or use restrictions or notices which materially
diminish the market value of any Real Property, arising from or relating to any
Hazardous Material, Release, Remedial Action, Environmental Law, Environmental
Permit or Order.
"Environmental Law" means any applicable federal,
state, local, or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the environment or natural
resources,
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and includes, but is not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq.,
the Hazardous Material Transportation Act, 49 U.S.C. ss. 1801 et seq., the
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq., the
Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 33 U.S.C. ss.
2601 et seq., the Toxic Substance Control Act, 15 U.S.C. ss. 2601 et seq., the
Federal Insecticide Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq.,
and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., as such laws have
been amended or supplemented, and the regulations promulgated pursuant thereto,
and all analogous state, local or foreign statutes, codes, regulations and
policies.
"Environmental Permit" means any permit, approval,
authorization, license, variance, registration, or permission required under any
applicable Environmental Law or order of or from any Environmental Authority.
"Hazardous Material" mean any substance, material or
waste which is regulated by any Environmental Authority or pursuant to any
Environmental Law including, without limitation, any material, substance or
waste which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, which includes, but is not limited to, petroleum, petroleum
products, asbestos, urea formaldehyde and polychlorinated biphenyls.
"Order" means any notice, notice of violation,
information request, order, consent, consent order, injunction, judgment,
decree, consent decree, ruling, writ, assessment or arbitration award.
"Release" means any release, spill, emission,
leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, emission, dispersal, leaching, or migration of any Hazardous Material
into any media, whether air, soil, water or groundwater.
"Remedial Action" means all actions, including,
without limitation, any capital expenditures, required by any applicable
Environmental Authority, Environmental Law or Environmental Permits, to (i)
clean up, remove, treat, or in any other way address any Hazardous Material;
(ii) prevent the Release or threat of Release, or minimize the further Release
of any Hazardous Material; (iii) perform pre-remedial studies and investigations
or post-remedial monitoring; or (iv) bring facilities on any property owned,
operated or leased by the Sellers and the facilities located and operations
conducted thereon into compliance with all Environmental Laws. Remedial Action
shall not be pursued to a standard which is
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unrelated to the operation of the Business as of the Closing Date or use of the
Real Property for industrial, manufacturing or warehousing purposes.
4.16 Permits and Licenses. Except as set forth in Section 4.15(c), the
Subsidiaries have all material permits, licenses, franchises and other
authorizations (collectively, the "Permits") necessary or required for the
conduct of the Business as currently conducted. All such Permits, licenses,
franchises and authorizations are listed on Schedule 4.16 and are valid and in
full force and effect and the Business is in compliance with the terms and
conditions of such Permits except to the extent that any such non-compliance,
individually or in the aggregate, will not or could not reasonably be expected
to have a Material Adverse Effect or to adversely affect the ability of any
Seller to perform its obligations under this Agreement, and no proceeding is
pending, or, to the knowledge of the Sellers, threatened, to revoke, suspend,
modify, cancel or limit any Permit in a manner that will or could reasonably be
expected to have a Material Adverse Effect or to adversely affect the ability of
any Seller to perform its obligations under this Agreement.
4.17 Insurance. Schedule 4.17 lists all insurance policies pursuant to
which the Subsidiaries are insured as of the date of this Agreement. Such
policies are in full force and effect and, to the knowledge of the Sellers,
sufficiently insure against risks and liabilities customary for the Business.
The Subsidiaries are not in material default with respect to any provision
contained in any such policy and have not failed to give any notice or present
any pending material claim under any such policy or binder in due and timely
fashion. The Subsidiaries have not received a notice of cancellation or
nonrenewal of any such policy. The Sellers have no knowledge of any material
inaccuracy in any application for such policies, any failure to pay premiums
when due or any similar state of facts which might form the basis for
termination or material adverse modification of any such insurance. The Sellers
have no knowledge of any act, event or occurrence that could give rise to a
claim under any director and officer insurance policy held on behalf of the
Subsidiaries.
4.18 Investment. Each Seller (a) understands that the shares of Parent
Common Stock issuable pursuant to this Agreement have not been, and except as
provided in the Registration Rights Agreement attached hereto as Exhibit E will
not be, registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not involving any
public offering; (b) is acquiring the shares of Parent Common Stock solely for
its own account for investment purposes, and not with a view to the distribution
thereof; (c) is a sophisticated investor with knowledge and experience in
business and
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financial matters; (d) has received certain information concerning the shares of
Parent Common Stock and has had the opportunity to obtain additional information
as desired in order to evaluate the merits and the risks inherent in holding the
shares of Parent Common Stock; (e) is able to bear the economic risk and lack of
liquidity inherent in holding the shares of Parent Common Stock; and (f) is an
"accredited investor" (as defined in Rule 501(a) of Regulation D under the
Securities Act).
4.19 Brokers. No broker, finder or investment banker (other than
Patricoff & Co. Capital Corp., a true and correct copy of whose engagement
agreement has been provided to Buyers) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of any of the Sellers,
and Sellers will pay all fees and expenses of Patricoff & Co. Capital Corp.
4.20 Year 2000 Compliance.
(a) Definitions.
(i) The term "Year 2000 Compliant" means, with
respect to a Person's Information Technology, that the Information Technology is
designed to be used prior to, during and after the calendar Year 2000 A.D., and
the Information Technology used during each such time period will accurately
receive, provide and process date/time data (including, but not limited to,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000, and leap-year calculations and
will not malfunction, cease to function or provide invalid or incorrect results
as a result of date/time data to the extent other Information Technology, used
in combination with such Information Technology, properly exchanges date/time
data with it.
(ii) "Information Technology" with respect to a
Person means all computer software, computer firmware, computer hardware
(whether general or specific purpose), terminal devices and related
communications networks, and other similar or related items of automated,
computerized or software systems that are used by such Person in the conduct of
its business, whether leased, licensed or owned.
(b) The Sellers and the Subsidiaries have made
commercially reasonable efforts to evaluate whether the Information Technology
of each of the Subsidiaries is Year 2000 Compliant. The Sellers and the
Subsidiaries have evaluated whether critical Information Technology of the
Subsidiaries is Year 2000 Compliant. As of March 26, 1999, all critical
Information Technology of the
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Subsidiaries has either been replaced or brought to compliance, except as set
forth in Schedule 4.20. Major critical dates have been tested successfully on
the Domestic Subsidiary's Information Technology.
4.21 Title to Assets. Except as set forth on Schedule 4.21, each of the
Subsidiaries has good and valid title to all of the assets it owns or purports
to own and a valid leasehold interest in all of the assets it leases or purports
to lease, free and clear of any Liens (other than Permitted Liens with respect
to the Owned Property). The assets of the Subsidiaries (including the assets of
Ertl Canada), as of immediately following the Closing, will be adequate, in
quality and quantity, for the Buyers and the Subsidiaries to conduct the
Business as currently conducted. Each tangible asset of the Subsidiaries has
been maintained in accordance with normal industry practice and is in good
operating condition and repair (reasonable wear and tear excepted), and none of
such assets is in need of maintenance or repairs except for ordinary, routine
repairs that are not material in nature or cost.
4.22 Accounts Receivable. The accounts receivable of the Business as
reflected on the Preliminary Balance Sheet have arisen from bona fide
transactions in the ordinary course of business consistent with past practice.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES.
The Buyer Parties jointly and severally represent and warrant to
Sellers as follows:
5.1 Buyers' Organization. Each Buyer Party is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the full corporate power and authority
to enter into and to perform this Agreement and the agreements and instruments
to be delivered by such Buyer Party at the Closing pursuant to Section 8.2 (the
"Buyer Ancillary Documents").
5.2 Authorization of Agreement. Each Buyer Party has all requisite
corporate power and authority to execute and deliver this Agreement and the
applicable Buyer Ancillary Documents and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Buyer Ancillary Documents, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action of the Buyer Parties and this Agreement constitutes,
and when executed, the Buyer Ancillary Documents to which such Buyer Party is
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a party will constitute, the legal, valid and binding obligation of each Buyer
Party, enforceable against it in accordance with their respective terms, except
to the extent enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 Consents of Third Parties. The execution, delivery and performance
of this Agreement and the Buyer Ancillary Documents and the consummation of the
transactions contemplated hereby and thereby by each Buyer Party will not (i)
violate or conflict with the certificate of incorporation, by-laws or other
constitutional documents of the Buyer Parties; (ii) conflict with, or result in
the breach or termination of, or constitute a default under (whether with notice
or lapse of time or both), or accelerate or permit the acceleration of the
performance required by, or require the giving of any notice to or obtaining any
consent from any person pursuant to, any material indenture, mortgage, lien,
lease, agreement, commitment or other instrument or any material order, judgment
or decree, to which any Buyer Party is a party or by which it or its properties
are bound; or (iii) constitute a violation of any Law applicable to any Buyer
Party, other than violations, conflicts, breaches, terminations, accelerations
and defaults specified in the foregoing clauses (ii) and (iii) which could not
reasonably be expected to adversely affect any Buyer Party's ability to perform
its obligations under this Agreement. No consent, permit, approval or
authorization of any Governmental Authority is required on the part of Buyers in
connection with the execution, delivery and performance of this Agreement and
the Buyer Ancillary Documents, except for filings with the Federal Trade
Commission and the Department of Justice pursuant to the HSR Act.
5.4 Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of Buyers' knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by the Buyer Parties in connection with this Agreement. There is no
litigation, proceeding or governmental investigation pending or, to the best of
Buyers' knowledge, threatened, or any order, injunction or decree outstanding,
against the Buyer Parties that, if adversely determined, would have a material
adverse effect upon the Buyer Parties' ability to perform its obligations under
this Agreement or the Buyer Ancillary Documents.
5.5 Financing. Buyers have all funds, or have delivered copies of
commitments from financial institutions as to the provision of funds, as
necessary to pay the Initial Price and related fees and expenses, and (assuming
the availability of any such funding from financial institutions) Buyers have
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the financial capacity to perform all of their other obligations under this
Agreement and the closing documents to be executed hereunder.
5.6 Investment. Buyers are purchasing the Shares for investment
purposes and not with a present view to resell or distribute the Shares, and
will not sell the Shares in violation of applicable federal, state or foreign
securities laws.
5.7 Capitalization of Parent and Its Subsidiaries.
(a) The authorized capital stock of Parent consists of 28,000,000
shares of Parent Common Stock, of which, as of April 9, 1999, 16,085,997 shares
were issued and outstanding and no shares were held in treasury. All of the
issued and outstanding shares of Parent Common Stock have been validly issued,
and are fully paid, nonassessable and free of preemptive rights. As of April 9,
1999, 1,771,459 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options or warrants to purchase shares of Parent Common Stock (the
"Parent Stock Options"). Since April 9, 1999, no shares of the Parent's capital
stock have been issued other than pursuant to the exercise of Parent Stock
Options. Except as set forth above in this Section 5.7, as of the date hereof,
there are outstanding (i) no shares of capital stock or other voting securities
of Parent, (ii) no securities of Parent or its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Parent,
(iii) no options or other rights to acquire from Parent or its subsidiaries, and
no obligations of Parent or its subsidiaries to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Parent, and (iv) no equity equivalents, or interests in the
ownership or earnings, of the Parent or its subsidiaries or other similar rights
(including stock appreciation rights) (collectively, "Parent Securities"). There
are no outstanding obligations of the Parent or its subsidiaries to repurchase,
redeem or otherwise acquire any Parent Securities.
(b) All of the outstanding capital stock of the Parent's
subsidiaries is owned by the Parent, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same, except as may be provided as a matter of
law). There are no securities of the Parent or its subsidiaries convertible into
or exchangeable for, no options or other rights to acquire from the Parent or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly of, any capital stock or other ownership interests in, or
any other securities of, any subsidiary of the Parent. There are no outstanding
contractual obligations of the Parent or its subsidiaries to repurchase,
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redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Parent.
5.8 Due Authorization and Validity of Shares. The shares of Parent
Common Stock to be issued pursuant to this Agreement have been duly authorized
and, when delivered as contemplated hereby, will be validly issued, fully paid
and non-assessable and will not be subject to any preemptive or similar rights.
5.9 Listing of Parent Common Stock. The outstanding Parent Common Stock
is listed on NASDAQ, and the listing agreement with respect thereto is in full
force and effect. No action has been taken or, to the best of Buyers' knowledge,
threatened by NASDAQ with respect to the delisting or permanent suspension from
trading of the Parent Common Stock.
5.10 Private Offering. Assuming the representations of the Sellers are
true and complete, the issuance and delivery of the shares of Parent Common
Stock to Sellers pursuant to this Agreement is exempt from the registration and
prospectus delivery requirements of the Securities Act.
5.11 SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents with
the Securities and Exchange Commission (the "SEC") since June 13, 1997 (the
"Parent SEC Reports"), each of which complied in all material respects with all
applicable requirements of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each as in effect on the dates such
forms, reports and documents were filed. None of the Parent SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Parent included in the
Parent SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of Parent and its consolidated subsidiaries as
of the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments).
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(b) The Buyers have heretofore made available to USI a complete
and correct copy of any material amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously had been filed by Parent with the SEC pursuant to the Exchange Act.
5.12 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of any of the Buyers.
SECTION 6. FURTHER AGREEMENTS OF THE PARTIES.
6.1 Access to Information.
(a) Prior to the Closing, Buyers may make such investigation of the
business and properties of the Subsidiaries as Buyers may desire, and USI may
make such investigation of the Buyer as USI may desire, and upon reasonable
notice, each party shall give to the other party and their counsel, accountants
and other representatives reasonable access, during normal business hours
throughout the period prior to the Closing, to the property, books, commitments,
agreements, records, files and personnel of the Subsidiaries and Buyer
respectively, and, if pertinent, the Sellers, and each party shall furnish to
the other party during that period all copies of documents and information
concerning the Business and Buyer respectively, as such party may reasonably
request subject to applicable law.
(b) Each party shall hold, and shall cause its counsel, accountants
and other agents and representatives to hold, all such information and documents
in accordance with, and subject to the terms of, the Confidentiality Agreement.
6.2 Conduct of the Business Pending the Closing. Until the Closing,
except as otherwise set forth in Schedules 2.2, 4.7 and 6.2 or contemplated by
this Agreement, Sellers shall cause the Subsidiaries to conduct their respective
businesses and operations in their ordinary course consistent with past practice
and to comply with the provisions set forth below:
(a) none of USI, the Sellers or the Subsidiaries shall take any
actions, or fail to take any reasonable action within their control, which would
cause any of the representations or warranties in Article 4 to be or become
untrue in any material respect;
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(b) Sellers shall promptly notify Buyers of, and furnish to Buyers
any information that Buyers may reasonably request with respect to the
occurrence of, any event or the existence of any state of facts that would
result in any of Sellers' representations and warranties not being true if they
were made at any time prior to or as of the date of the Closing or materially
impair the ability of the Sellers to perform any of the transactions
contemplated hereby; and
(c) the Subsidiaries shall use commercially reasonable efforts to
maintain and preserve the Business intact, to retain their present Employees so
that they will be available to Buyers after the Closing and to maintain and
preserve their relationships with customers, licensors, suppliers and others so
that those relationships will be preserved after the Closing.
6.3 Employee Benefit Matters.
(a) For a period of six months following the Closing Date, Buyers
shall, or shall cause the Subsidiaries to, continue in effect the health and
medical plans referenced on Schedule 4.11 (the "Ertl Company Medical Plans") and
the severance plans and policies referenced on Schedule 4.11 (the "Subsidiary
Severance Plans") for employees employed by the Subsidiaries, and Buyers shall
not, and shall not allow the Subsidiaries to, amend or modify any Ertl Company
Medical Plan or Subsidiary Severance Plan to reduce the benefits provided
thereunder. Buyers or the Subsidiaries shall be solely responsible for any
liability arising as a result of (i) the termination of employment, including a
constructive termination, by Buyer or any of the Subsidiaries of any Employee
after the Closing and (ii) Buyer's or the Subsidiaries' failure to offer
employment to Employees of Ertl Canada. The Subsidiaries shall continue to make
continuation coverage under COBRA available to each individual who is a
qualified beneficiary whose qualifying event occurred prior to the Closing Date
or whose qualifying event occurred in connection with a covered employee whose
last employment was prior to the Closing Date.
(b) Transfer of Assets of the Pension Plans. After the Closing
Date, Sellers shall cause the assets related to the Ertl Company Retirement
Income Plan for Hourly Employees (the "Hourly Plan") held in a Master Trust (the
"Master Trust"), to be transferred to a successor trust established by Domestic
Buyer (the "New Pension Trust"). Such transfer shall occur as soon as reasonably
practicable following receipt by Domestic Buyer of an opinion of counsel to
Domestic Seller that the Master Trust meets the requirements of Sections 401(a)
and 501(a) of the Code and the receipt by Domestic Seller of notification from
Domestic Buyer that the New Pension Trust has been established. The amount of
assets transferred from the Master Trust to the New Pension Trust for the Hourly
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Plan shall be equal to the fair market value of the assets related to the Hourly
Plan on the date of transfer. Domestic Seller shall use its best efforts to
transfer amounts pursuant to this Section 6.3 in cash.
(c) Interim Administration of Pension Plans. Prior to the transfer
of the assets of the Hourly Plan to the New Pension Trust pursuant to Section
6.3(b), Domestic Seller shall continue the administration of the Hourly Plan.
For purposes of the preceding sentence, "administration of the Hourly Plan"
shall include all actions required on a routine basis for the proper maintenance
of the Hourly Plan including, but not limited to, transfer to the Master Trust
of any employer, previously funded by Buyers' funds, and the payment of all
benefits or other distributions to participants required by the provisions of
the Hourly Plan. As consideration for the Domestic Seller's obligation to
continue the administration of the Hourly Plan, Domestic Buyer agrees to
reimburse Domestic Seller, within 15 days of the delivery of proper invoices
identifying the charges associated with the Hourly Plan and services provided,
for reasonable pro rata out-of-pocket expenses incurred by Domestic Seller in
administration of the Hourly Plan including, but not limited to, the routine
fees charged by the Hourly Plan's trustee, actuary or other third-parties as set
forth on Schedule 6.3(c). If the transfer to the New Pension Trust has still not
occurred by September 30, 1999, Domestic Buyer shall continue to reimburse
Domestic Seller for the applicable portion of all fees incurred by the Domestic
Seller in the administration of the Hourly Plan and the Domestic Buyer shall in
addition pay the Domestic Seller $5,000 for each month after September 30, 1999,
pro rata by calendar days, unless the transfer has not occurred by September 30,
1999 through the failure of Domestic Seller to satisfy its responsibilities
under Section 6.3(b) of this Agreement.
(d) Sellers and Buyers agree to provide each other with such
records and information as they may reasonably request in order to carry out
their respective obligations under this Section 6.3. During the period following
the Closing and prior to the transfer of assets of the Hourly Plan to the New
Pension Trust pursuant to Section 6.3(b), Domestic Seller shall promptly forward
to Domestic Buyer any correspondence or written communications received from the
IRS or the Department of Labor with respect to any Transfer Plan.
6.4 Other Action. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all commercially reasonable efforts to
take or cause to be taken all action and to do or cause to be done all things
reasonably necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement.
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6.5 Notices. Each party shall promptly notify the other party in
writing of, and furnish to such party any information that such party may
reasonably request with respect to, the occurrence of any event or the existence
of any state of facts that would (a) result in the party's representations and
warranties not being true if they were made at any time prior to or as of the
Closing Date, or (b) impair the party's ability to perform its obligations under
this Agreement, provided, however, that the delivery of any notice pursuant to
this Section 6.5 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement, shall
not have any effect for the purpose of determining the satisfaction of the
conditions set forth in Article 7 of this Agreement and shall not otherwise
limit or affect the remedies available to the party receiving such notice,
including, without limitation, the remedies under Article 9 of this Agreement.
6.6 HSR Act. As promptly as practicable after the execution of this
Agreement, each party shall, in cooperation with the other, file any reports or
notifications and pay any fees that may be required to be paid by it under
applicable law including filings under the HSR Act with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, and shall
furnish to the other all such information in its possession as may be necessary
for the completion of the reports or notifications to be filed by the other.
Each party will use its commercially reasonable efforts to obtain any early
termination of the applicable waiting period, and shall promptly make any
further filings pursuant thereto that may be necessary, proper or advisable.
6.7 Expenses. Except as otherwise specifically provided in this
Agreement, Buyers and Sellers shall bear their own respective expenses incurred
in connection with this Agreement and in connection with all obligations
required to be performed by each of them under this Agreement.
6.8 Publicity. Buyers and Sellers shall consult with each other before
issuing any press release or otherwise making any public statements concerning
this Agreement or the transactions contemplated by this Agreement and, except as
may be required by applicable law or any listing agreement with or regulation or
rule of any stock exchange or The Nasdaq Stock Market, Inc. on which the
securities of the parent or other affiliated entity of either any Seller or any
Buyer are listed or traded, will not issue a press release or otherwise make
such public statement prior to such consultation. If Buyers or Sellers, or
parent or other affiliated entity of such parties, are so required to issue a
press release or otherwise make a public statement they shall inform and provide
draft copies to the other party hereto for review and comment prior to issuing
it.
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6.9 Transfer Taxes. Any sales taxes, real property transfer taxes,
stamp duty, stamp duty reserve tax, recording fees or any other taxes (other
than income taxes which shall be paid by each party) payable as a result of the
sale of the Shares or the assets of Ertl Canada or any other action contemplated
by this Agreement shall be paid (a) 50% by the Sellers, and (b) 50% by the
Buyers (up to a maximum of $30,000 payable by the Buyers, and the Sellers shall
pay any amount of Buyers' portion of such taxes in excess of $30,000), with the
first $20,000 of Buyers' portion to be paid by Sellers. If Buyers or Sellers
make any payment in excess of their respective apportionment of such taxes, such
party shall be promptly reimbursed by the other party.
6.10 Preservation of Records. Buyers agree, at their own expense that
they (a) shall preserve and keep the records of the Subsidiaries which were in
existence at the time of the Closing for a period of seven years from the
Closing, or for any longer periods as may be required by any government agency
or ongoing litigation, and (b) shall make such records available to the Sellers
as may be reasonably required. In the event Buyers wish to destroy such records
after the time specified above, it shall first give sixty (60) days' prior
written notice to the Sellers and Sellers shall have the right at their option
and expense, upon prior written notice given to the Buyers within that sixty
(60) day period, to take possession of the records within ninety (90) days after
the date of the notice to the Sellers.
6.11 Certain Post-Closing Assistance.
(a) Buyers shall, at no cost or expense to Sellers, prepare all
customary accounting, tax, employment, benefits-related and similar reports for
the Subsidiaries for periods up to the Closing Date which are reasonably
requested by Sellers, provided that such requests by Sellers shall not
unreasonably interfere with the operation of the business of the Subsidiaries or
the Buyers or take an unreasonable amount of time of the personnel of the
Subsidiaries or the Buyers, and the Buyers shall, at no cost or expense to
Sellers, prepare the final USI Financial Reporting and Tax packages
substantially in the format previously provided to Buyers. Sellers agree to
provide Buyers, at no cost or expense to Buyers, with information in the
possession and control of Sellers in respect of accounting, employment,
benefits-related and similar reports for the Buyers after the Closing Date to
the extent reasonably requested by Buyers.
(b) Buyers agree to cause the appropriate personnel of the
Subsidiaries to assist Sellers in the prosecution or defense of any claims and
litigation (including counterclaims and tax refund claims filed by the Sellers)
for which Sellers have indemnified Buyers hereunder or which Buyers have not
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assumed, provided that such assistance does not unreasonably disrupt the
business operations of the Subsidiaries. In addition to Seller's indemnification
obligations pursuant to Article 9, Sellers shall reimburse the Buyers for any
reasonable out-of-pocket travel and similar out-of-pocket expenses incurred by
Buyers' or the Subsidiaries' personnel in performing these functions.
6.12 Treasury Matters; Intercompany Debt.
(a) Sellers shall continue to cause the funding of the
Subsidiaries' checks, in accordance with past practices, which are presented for
payment through the day prior to the Closing Date. Sellers shall have no
obligation to fund checks which are presented for payment on and after the
Closing Date, provided that there is an accrual equal to such amounts on the
Final Balance Sheet therefor. Buyers shall assume all of the bank accounts of
the Business on the Closing Date and be prepared to fund the above-mentioned
checks which are presented for payment on and after the Closing Date. Amounts
received in the lockbox and depository accounts of the Business through the
close of business on the Closing Date shall be retained by Sellers
notwithstanding that, consistent with past practices, such collections may not
be credited to Sellers or their affiliates until after the Closing Date.
(b) Certain of the Subsidiaries are party to or financially
supported by certain letters of credit and guarantees, related to the Business,
in respect of which the Sellers or their affiliates are subject to continuing
obligations (the "Credit Support Documents"), each of which is set forth on
Schedule 6.12. The parties shall use their commercially reasonable efforts to
terminate the Credit Support Documents as soon as practicable after the Closing.
Buyers shall use their commercially reasonable efforts to cause the obligations
which are secured by the Credit Support Documents to be secured or discharged in
such a manner that the Sellers or their affiliates will not be required to make
any payments relating to the periods after the Closing under the Credit Support
Documents in relation thereto. Should any such payments be required of and paid
by Sellers, Buyers shall reimburse such Seller making payment upon demand. It is
understood that the Subsidiaries shall not have any right to incur any new
obligations secured or supported by the Credit Support Documents after the
Closing and Buyers shall cause the Subsidiaries not to incur any such
obligations.
(c) The Seller Parties shall cause any and all liabilities and
obligations owed by any of the Subsidiaries to any of the Seller Parties or any
of the Seller Parties' affiliates (including, without limitation, the Promissory
Note dated June 1, 1995 from the Domestic Subsidiary to U.S.I American Holdings,
Inc. in the principal amount of $62,992,000, and Promissory Note dated May 31,
1995
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from the Domestic Subsidiary to U.S.I American Holdings, Inc. in the principal
amount of $69,008,000) to be terminated or canceled prior to the Closing Date
without any adverse tax consequences or other costs to any of the Subsidiaries
on or after the Closing Date.
6.13 No Shopping. The Sellers will not, and will cause the Subsidiaries
and their respective affiliates, representatives and agents not to, directly or
indirectly, (a) solicit, initiate or encourage, discuss or respond to
(including, without limitation, by way of furnishing any nonpublic information
concerning the business, properties or assets of the Subsidiaries) any proposal
or offer from a Person other than the Buyers, or enter into any agreement with
or accept any offer from any person other than the Buyers, for a merger, tender
offer, exchange offer, reorganization, liquidation, dissolution, purchase or
sale of assets outside the ordinary course of business consistent with past
practice, sale of shares of capital stock or debt securities, any other business
combination or similar transactions involving the Subsidiaries or for the
acquisition of an equity interest in, or a substantial portion of the assets of,
the Subsidiaries, or any division, operating or principal business unit of the
Subsidiaries or (b) furnish any information with respect to, assist or
participate in or in any other manner facilitate any effort or attempt by any
person to do or seek to do any of the foregoing.
6.14 Consents. Each of the parties hereto will use its commercially
reasonable efforts to obtain consents of all Persons and Governmental
Authorities necessary to the consummation by such party of the transactions
contemplated by this Agreement (including, without limitation, commercially
reasonable efforts by the Seller Parties to obtain all consents and to make all
pre-closing notices (and cooperate with all post-closing notices) disclosed on
Schedule 4.3) and will use its commercially reasonable efforts to cooperate with
each of the other parties hereto in obtaining such consents. Notwithstanding the
foregoing, the Buyer Parties hereby waive and release any and all claims they
may have based on any failure by the Seller Parties to obtain, or to use
reasonable efforts to obtain, the consents set forth on Schedule 4.14(h).
6.15 Further Assurances. From time to time, without further
consideration, the Sellers and the Subsidiaries will, at their own expense,
execute and deliver, or, to the extent not within their discretion, shall use
their commercially reasonable efforts to cause to be executed and delivered,
such documents to the Buyers as the Buyers may reasonably request in order to
consummate the transactions contemplated hereby more effectively and to vest in
the Buyers good title to the Shares and the assets of Ertl Canada. From time to
time, without further consideration, the Buyers will, at their own expense,
execute and deliver, or, to the extent not within their discretion, shall use
their
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commercially reasonable efforts to cause to be delivered, such documents as the
Sellers may reasonably request in order to consummate the transactions
contemplated hereby more effectively. In case at any time after the Closing Date
any further action is necessary or desirable to carry out the purposes of this
Agreement, each party to this Agreement will take or cause its proper officers
and directors to take all such necessary action.
6.16 Resignations. Sellers shall cause the delivery of resignations
effective as of the Closing Date of all officers and directors of the
Subsidiaries.
SECTION 7. CONDITIONS OF CLOSING.
7.1 Conditions Precedent to Obligations of Buyers. The obligation of
Buyers to consummate the purchase under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Buyers):
(a) all representations and warranties of Sellers contained in this
Agreement that are expressly qualified by a reference to materiality or Material
Adverse Effect shall be true and correct in all respects as so qualified and all
of the representations and warranties of Sellers that are not so qualified shall
be true and correct in all material respects, at and as of the date of this
Agreement and at and as of the time of the Closing with the same effect as
though made again at, and as of, that time (except that representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date);
(b) Sellers shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Sellers prior to or at the Closing;
(c) Buyers shall have been furnished with the documents referred to
in Section 8.1;
(d) the waiting period under the HSR Act with respect to the
filings (including any extension thereof) made as contemplated under Section 6.6
shall have expired or been terminated;
(e) no provision of any applicable law or regulation shall prohibit
Sellers, and there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
Sellers regarding the consummation of the sale and purchase of the Shares
pursuant to this Agreement;
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(f) Each of the consents identified on Schedule 7.1(f) must have
been obtained and must be in full force and effect and each of the notices
identified on Schedule 7.1(f) must have been delivered; and
(g) from the date of this Agreement through the Closing Date, there
shall not have occurred any Material Adverse Effect.
7.2 Conditions Precedent to Obligations of Sellers. The obligation of
Sellers to consummate the sale under this Agreement is subject to the
fulfillment, prior to or at the Closing, of each of the following conditions
(any or all of which may be waived by Sellers):
(a) all representations and warranties of Buyers contained in this
Agreement that are expressly qualified by a reference to materiality or material
adverse effect shall be true and correct in all respects as so qualified and all
of the representations and warranties of Buyers that are not so qualified shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the time of the Closing with the same effect as
though made again at, and as of, that time (except that representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date);
(b) Buyers shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Buyers prior to or at the Closing;
(c) Sellers shall have been furnished with the documents referred
to in Section 8.2;
(d) the waiting period under the HSR Act with respect to the
filings (including any extension thereof) made as contemplated under Section 6.6
shall have expired or been terminated;
(e) no provision of any applicable law or regulation shall prohibit
Buyers, and there shall not be in effect any injunction or restraining order
issued by a court of competent jurisdiction in any action or proceeding against
Buyers regarding the consummation of the sale and purchase of the Shares
pursuant to this Agreement; and
(f) The shares of Parent Common Stock issuable to Sellers pursuant
to this Agreement shall have been duly approved for listing on
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the NASDAQ (subject to notice of issuance) and such approval shall be in full
force and effect at the time of Closing.
SECTION 8. DOCUMENTS TO BE DELIVERED AT THE CLOSING.
8.1 Documents to Be Delivered by Sellers. At the Closing, Sellers shall
deliver, or cause to be delivered, to Buyers the following:
(a) (i) the stock certificates evidencing the Shares and (ii) one
or more executed stock powers duly endorsed in blank or other instruments of
transfer, dated the Closing Date, transferring to Buyers all of each Seller's
right, title and interest in and to the respective Shares, provided, however,
that the Shares specified on Schedule 8.1(a) may be delivered in accordance with
the procedures described on Schedule 8.1(a);
(b) the Bill of Sale, substantially in the form of Exhibit A,
executed by the Canadian Seller, transferring to the North American Buyer all
the Canadian Seller's right, title and interest in and to the assets of Ertl
Canada together with possession of such assets;
(c) the Assumption Agreement, substantially in the form of Exhibit
B hereto (the "Assumption Agreement"), executed by Canadian Seller;
(d) a copy of resolutions of the board of directors of each Seller
authorizing the execution, delivery and performance of this Agreement by each
Seller and a certificate of the secretary or assistant secretary of each Seller,
dated the Closing Date, that such resolutions were duly adopted and are in full
force and effect;
(e) a certificate, dated the Closing Date, executed by an officer
of Sellers certifying to the fulfillment of the conditions specified in Sections
7.1(a), 7.1(b) and 7.1(g);
(f) the tax sharing and indemnification agreement in the form of
Exhibit D (the "Tax Sharing Agreement") executed by the Sellers;
(g) a registration rights agreement in the form of Exhibit E (the
"Registration Rights Agreement") executed by the Sellers;
(h) opinion of the general counsel of USI, dated as of the Closing
Date, in substantially the form of Exhibit F;
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(i) a cross-receipt acknowledging payment and receipt of the
Initial Price;
(j) a tax affidavit, substantially in the form of Exhibit C
attached hereto;
(k) An opinion, in form and substance reasonably acceptable to
Buyers, from legal counsel reasonably satisfactory to Buyers as to the good and
valid title of the Subsidiaries to the Owned Property, subject only to the
Permitted Liens; and
(l) such other documents as Buyers may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in
Section 7.1, or (ii) otherwise facilitating the consummation or performance of
any of the transactions contemplated by this Agreement.
8.2 Documents to Be Delivered by Buyers. At the Closing, Buyers shall
deliver, or cause to be delivered, to Sellers the following:
(a) payment and evidence of the wire transfer referred to in
Section 2.3(a);
(b) a certificate or certificates representing the shares of Parent
Common Stock to be issued hereunder, registered in the name of a holder
designated by USI, such certificates to bear a restrictive legend in
substantially the form set forth on Exhibit G;
(c) the Assumption Agreement, substantially in the form of Exhibit
B hereto, executed by the North American Buyer, evidencing the assumption of the
liabilities of Ertl Canada by the North American Buyer;
(d) a copy of the resolutions of the board of directors of each
Buyer authorizing the execution, delivery and performance of this Agreement by
each Buyer, and a certificate of its secretary or assistant secretary, dated the
Closing Date, that such resolutions were duly adopted and are in full force and
effect;
(e) a certificate, dated the Closing Date executed by an officer of
Buyers certifying to the fulfillment of the conditions specified in Sections
7.2(a) and 7.2(b);
(f) the Tax Sharing Agreement, executed by the Buyers;
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(g) the Registration Rights Agreement, executed by Parent; and
(h) such other documents as Sellers may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in
Section 7.2, or (ii) otherwise facilitating the consummation or performance of
any of the transactions contemplated by this Agreement.
SECTION 9. INDEMNIFICATION AND RELATED MATTERS.
9.1 Indemnification.
(a) Subject to the provisions of this Article 9, and excluding
liability for Taxes which has been resolved by agreement of the parties or by
the final determination of a court of competent jurisdiction, with all
opportunities for appeal having been exhausted, pursuant to the Tax Sharing
Agreement which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(a), the Seller Parties will jointly and
severally indemnify, defend and hold the Buyer Parties and their affiliates,
predecessors, successors and assigns and their respective officers, directors,
partners, consultants, employees and agents (collectively, the "Buyer
Indemnified Parties") harmless from and against all actions, suits, proceedings,
claims, obligations, deficiencies, demands, assessments, judgments, damages,
costs and expenses (including, without limitation, any diminution in value),
whether known or unknown, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, subordinated or unsubordinated, matured or
unmatured, accrued, absolute, contingent or otherwise, including, without
limitation, reasonable attorneys' fees, interest, penalties and all reasonable
amounts paid in investigation, defense or settlement of any of the foregoing
arising or resulting from the following:
(i) a breach or inaccuracy of any representation or warranty on
the part of any of the Seller Parties under the terms of this Agreement or any
other document executed or delivered by any of the Seller Parties pursuant
hereto (excluding the representations and warranties in Section 4.15 which are
covered by Section 9.5);
(ii) non-fulfillment of or failure to perform or comply with
any agreement or covenant on the part of any of the Seller Parties under the
terms of this Agreement or any other document executed or delivered by any of
the Seller Parties pursuant hereto, including, without limitation, the Tax
Sharing Agreement;
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(iii) the Excluded Liabilities (as defined in the Assumption
Agreement);
(iv) any terminations of Employees or other events, conditions,
circumstances, facts, activities, practices, actions or omissions relating to
Employees which occur prior to the Closing to the extent not accrued on the
Final Balance Sheet, including, without limitation, any liability related to or
arising out of WARN (except to the extent that such liability relates to any
termination prior to the Closing which results in liability because it is
aggregated with terminations after the Closing) and any liability or obligation
pursuant to any Employee Benefit Plan or Benefit Arrangements, excluding,
however, any liabilities for COBRA coverage for which the Subsidiaries are
responsible pursuant to Section 6.3(a) and further excluding any liabilities for
which the Seller Parties shall indemnify the Buyer Indemnified Parties pursuant
to Section 9.1(a)(vii);
(v) any claim by any Person asserted under the bulk sales or
similar law applicable with respect to the transfer of the assets of Ertl Canada
to the Foreign Buyer pursuant hereto;
(vi) any claim by any Person for brokers' commissions or
finders' fees or similar payments based upon any agreement alleged to have been
made by, through or under any of the Seller Parties or the Subsidiaries (or any
Person acting on their behalf) in connection with this Agreement and the
transactions contemplated hereunder;
(vii) any claim made within four years following the Closing
Date relating to any general liability, liability associated with the ownership
or use of any vehicle, product liability for products shipped or manufactured
by, or any services provided by, any Subsidiary prior to the Closing Date, or
any self-insurance programs for vision or dental care for employees of any of
the Subsidiaries, if such claim relates to facts or circumstances which occurred
prior to the Closing;
(viii) any claim made within two years following the Closing
Date based upon any warranty or guaranty, express or implied, written or oral,
relating to any product shipped or manufactured by, or any services provided by,
any Subsidiary prior to the Closing Date;
(ix) any claim raised by or relating to Alpha International
Inc. ("Alpha") with respect to any of the Subsidiaries or the Business for
matters which occurred prior to the Closing Date, including, without limitation,
claims by
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Alpha for breach of contract, misappropriation of trade secrets or
other torts, and any failure by the Subsidiaries to collect pre-closing accounts
receivable from Alpha in an aggregate amount not less than the amount reflected
on the Final Balance Sheet with respect to such accounts receivable, provided,
however, that the Seller Parties shall only be required to pay the first $3
million of the losses, damages, costs and expenses of the Buyer Indemnified
Parties pursuant to this clause, subject to the Basket (as defined in Section
9.2(c)), plus 50% of the losses, damages, costs and expenses of the Buyer
Indemnified Parties pursuant to this clause in excess of $3 million up to $4
million;
(x) any and all liabilities or obligations relating to customs
or import taxes or duties relating to any events, conditions, circumstances,
facts, activities, practices, actions or omissions which occur on or prior to
the Closing Date (excluding any liability for Taxes which has been resolved by
agreement of the parties or by the final determination of a court of competent
jurisdiction, with all opportunities for appeal having been exhausted, pursuant
to the Tax Sharing Agreement which specifically relates to the facts giving rise
to a claim for indemnification under this Section 9.1(a)(x));
(xi) any and all liabilities or obligations relating to Taxes
of any of the Subsidiaries attributable to any periods on or before the Closing
Date, excluding such liabilities solely to the extent they are reflected on the
Final Balance Sheet and excluding any liability for Taxes which has been
resolved by agreement of the parties or by the final determination of a court of
competent jurisdiction, with all opportunities for appeal having been exhausted,
pursuant to the Tax Sharing Agreement, or Section 9.1(xii) and Schedule 9.6,
which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(a)(xi)); and
(xii) any and all Foreign Subsidiary Tax Liabilities
attributable to any periods commencing on or before the Closing Date, except
that this indemnity shall not cover any Foreign Subsidiary Tax Liability (as
defined below):
(A) to the extent that, in relation only to a period
which has not ended on or before the Closing Date, it is reduced by the Closing
Apportionment (as defined below);
(B) to the extent that it arises or is increased as a
result only of any increase in rates of Tax or any change in law or practice or
any withdrawal of any extra-statutory concession by a tax authority or any
change in
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accountancy practice or principles, being an increase, withdrawal or change
made, in any such case, after the Closing Date with retrospective effect;
(C) to the extent that it would not have arisen but for a
voluntary transaction, action or omission carried out or effected by any of the
Foreign Subsidiaries at any time after the Closing Date, other than any such
transaction, action or omission: (x) carried out or effected under a legally
binding commitment created on or before the Closing Date; (y) carried out or
effected in the ordinary course of the trade carried on by the relevant Foreign
Subsidiary as at the Closing Date; or (z) consisting of any of the Foreign
Subsidiaries ceasing, or being deemed to cease, to be a member of any group of
companies or associated with any other company for the purposes of any Tax;
(D) to the extent that it arises by reason of any
voluntary disclaimer by any of the Foreign Subsidiaries after the Closing Date
of the whole or part of any allowance to which any of them is entitled or by
reason of the revocation by any of the Foreign Subsidiaries after the Closing
Date of any claim for relief made by any of them prior to the Closing Date;
(E) to the extent that it arises as a result of any
changes after the Closing Date in the bases, methods or policies of accounting
of the Foreign Buyer and/or any of the Foreign Subsidiaries provided that the
bases, methods or policies of accounting previously adopted by the Foreign
Subsidiaries are in accordance with generally accepted accounting practice; or
(F) to the extent that it is attributable to any of the
Foreign Subsidiaries ceasing to be entitled after the Closing Date to any rate
of tax which applies to different companies dependent on their size or the level
of their profits; or
(G) to the extent that it would not have arisen but for a
cessation of, or any change in the nature or conduct of, any trade carried on by
any of the Foreign Subsidiaries, being a cessation or change occurring on or
after the Closing Date.
For the purposes of this Section 9.1(a)(xii):
"Closing Apportionment" shall mean (y) in the case of any
Foreign Subsidiary Tax Liability relating to real, personal and intangible
property, such amount of that Foreign Subsidiary Tax Liability multiplied by a
fraction, the numerator of which is the number of days in the period in question
after the Closing Date and the denominator is the number of days in that period;
and (z) in
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the case of any Foreign Subsidiary Tax Liability (other than a Foreign
Subsidiary Tax Liability relating to real, personal or intangible property),
such amount of that Foreign Subsidiary Tax Liability as is attributable to the
portion of the period in question which falls after the Closing Date, computed
as if, for these purposes only, the period in question had ended on the Closing
Date (such amount to be determined by reference to any internal records of the
relevant Foreign Subsidiary and to the extent that such determination is not
possible by multiplying the Foreign Subsidiary Tax Liability by the same
fraction as in sub-paragraph (y) above.); and
"Foreign Subsidiary Tax Liability" shall mean both a
liability of a Foreign Subsidiary to make actual payments of Tax (or amounts in
respect of Tax), regardless of whether any such liability shall have been
discharged in whole or in part on or before the Closing Date save to the extent
such discharge is taken into account in the Final Balance Sheet or, if no such
discharge is there taken into account, in the last audited accounts of the
relevant Foreign Subsidiary and also (y) the loss of a right to repayment of Tax
which has been treated as an asset of the relevant Foreign Subsidiary in
preparing the Final Balance Sheet (or, if not so treated in the Final Balance
Sheet, in the last audited accounts of the relevant Foreign Subsidiary) or the
setting off of any such right to repayment of Tax against any actual Foreign
Subsidiary Tax Liability in respect of which the Buyer Parties would, but for
that setting off, have been able to make a claim against the Seller Parties; and
(z) the setting off against income, profits or gains which were earned, accrued
or received on or before the Closing Date or in respect of a period ended on or
before the Closing Date or against any Tax otherwise chargeable in respect of an
event occurring (or deemed to occur) on or before the Closing Date or in respect
of a period ended on or before the Closing Date of any relief which arises as a
consequence of or by reference to an event occurring (or deemed to occur) after
the Closing Date or in respect of a period commencing after the Closing Date and
not as a consequence of or by reference to any event occurring (or deemed to
occur) on or before the Closing Date or in respect of a period ended on or
before the Closing Date in circumstances where, but for such setting off, the
relevant Foreign Subsidiary would have had an actual Tax Liability in respect of
which the Buyer Parties would have been able to make a claim against the Seller
Parties. In any case falling within either of sub-paragraphs (y) or (z) of this
paragraph, the amount that is to be treated for the purposes of this Agreement
as a Foreign Subsidiary Tax Liability (the "Deemed Tax Liability") shall be
determined as follows:
(1) in a case which falls within sub-paragraph
(y) of this paragraph, the Deemed Tax Liability shall be the amount of the
repayment that would have been obtained but for the loss or setting off
mentioned in that sub-paragraph;
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(2) in a case which falls within sub-paragraph
(z) of this paragraph and where the relief that was the subject of the setting
off mentioned in that sub-paragraph was a deduction from or offset against Tax,
the Deemed Tax Liability shall be the amount of that relief; and
(3) in a case which falls within subparagraph
(z) of this paragraph and where the relief that was the subject of the setting
off mentioned in that sub-paragraph was a deduction from or offset against
income, profits or gains, the Deemed Tax Liability shall be the amount of Tax
which has been saved in consequence of the setting off.
(b) Subject to the provisions of this Article 9, excluding any
liability for Taxes which has been resolved by agreement of the parties or by
the final determination of a court of competent jurisdiction, with all
opportunities for appeal having been exhausted, pursuant to the Tax Sharing
Agreement which specifically relates to the facts giving rise to a claim for
indemnification under this Section 9.1(b), the Buyer Parties will jointly and
severally indemnify, defend and hold the Seller Parties and their affiliates,
predecessors, successors and assigns and their respective officers, directors,
partners, consultants, employees and agents (collectively, the "Seller
Indemnified Parties") harmless from and against all actions, suits, proceedings,
claims, obligations, deficiencies, demands, assessments, judgments, damages,
costs and expenses, whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured, subordinated or
unsubordinated, matured or unmatured, accrued, absolute, contingent or
otherwise, including reasonable attorneys' fees arising or resulting from the
following:
(i) a breach or inaccuracy of any representation or warranty on
the part of Buyers under the terms of this Agreement or any other document
executed or delivered by Buyers pursuant hereto;
(ii) non-fulfillment of or failure to perform or comply with
any agreement or covenant on the part of Buyers under the terms of this
Agreement or any other document executed by Buyers pursuant hereto, including,
without limitation, the Tax Sharing Agreement;
(iii) the Assumed Liabilities (as defined in the Assumption
Agreement);
(iv) any claim by any Person for brokers' commissions or
finders' fees or similar payments based upon any agreement alleged to have been
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made by, through or under any of the Buyers (or any Person acting on their
behalf) in connection with this Agreement and the transactions contemplated
hereunder;
(v) WARN or similar state or foreign Laws as a result of the
termination of employment, including a constructive termination, by Buyer or the
Subsidiaries of any Employee which occurs after the Closing, including with
respect to any termination prior to the Closing which results in liability under
such Laws because it is aggregated with terminations after the Closing;
(vi) any liability resulting from post-Closing changes in the
Subsidiary Severance Plans or the Ertl Company Medical Plans;
(vii) any liability or increased liability to Tax of the Seller
Parties or any of their subsidiaries which arises as a result of or by reference
to any reduction or disallowance of group relief that would otherwise have been
available to the Seller Parties or the relevant subsidiary or subsidiaries where
and to the extent that such reduction or disallowance occurs as a result of or
by reference to:
(A) any total or partial withdrawal effected by any of
the Foreign Subsidiaries after the Closing Date of any surrender of group relief
that was submitted by any of the Foreign Subsidiaries to the appropriate tax
authority on or before the Closing Date in respect of any accounting period
ended on or before the Closing Date;
(B) any total or partial disclaimer made by any of the
Foreign Subsidiaries after the Closing Date of any capital allowances available
to any of the Foreign Subsidiaries in respect of any accounting period ended on
or before the Closing Date except where any such withdrawal or disclaimer is
made at the express written request of the Seller Parties;
(viii) any liability or increased liability to Tax of the
Seller Parties or any of their subsidiaries which arises as a consequence of or
by reference to any of the following occurring or being deemed to occur at any
time after the Closing Date:
(A) the disposal by any Relevant Company of any asset or
of any interest in or right over any asset;
(B) the making by any Relevant Company of any such
payment or deemed payment as constitutes a payment made otherwise than for bona
fide commercial reasons or forming part of a scheme or arrangement the
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main purpose of which or one of the main purposes of which is the avoidance of
Tax;
(C) any Relevant Company ceasing to be resident in the
territory in which it is resident on the Closing Date for the purposes of any
Tax; or
(D) the effecting by any Relevant Company of any such
payment or transfer of assets as constitutes the receipt by another person of an
abnormal amount by way of dividend; or
(E) any Relevant Company failing to pay the whole of the
Tax charged by any tax assessment made in respect of that Relevant Company
within six months of the date of that tax assessment where (and to the extent
that) the liability for that Tax arises in circumstances such that the Buyer
Parties would not have been entitled to make a claim against the Seller Parties
under Section 9.1 (a) (xii) of this Agreement in respect of that Tax had it been
paid by the Relevant Company.
For the purposes of this sub-clause, the term "Relevant
Company" shall mean any of the Foreign Subsidiaries; and
(ix) any reasonable out-of-pocket legal and accounting costs
and expenses reasonably and properly incurred by the Seller Parties or any of
their subsidiaries in connection with any such liability or increased liability
to Tax (or claim therefor) or in taking any action under Section 9.1(b)(vii) or
(viii).
9.2 Determination of Damages and Related Matters.
(a) In calculating any amounts payable to the Buyer Indemnified
Parties by the Seller Parties pursuant to Sections 9.1(a) or 9.5, the Seller
Parties shall receive credit for (i) any reduction in actual tax liability of
the Buyer Indemnified Parties as a result of the facts giving rise to the claim
for indemnification (provided that no such credit shall be made prior to filing
of the tax return with respect to the taxable period in which the Buyer
Indemnified Parties actually receive the benefit of such reduced tax liability
and, if such tax benefit will accrue in periods after the indemnity payment is
due, the Seller Parties shall be required to pay the full amount due subject to
Buyers' obligation to repay to amount of the credit when the tax benefit is
actually realized pursuant to the last sentence of this Section 9.2(a)), (ii)
any insurance, litigation or other monetary recoveries actually received by the
Buyer Indemnified Parties as a result of the facts giving rise to the claim for
indemnification, (iii) the amount of any reserves
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or accruals on the Final Balance Sheet which specifically relate to the facts
giving rise to the claim for indemnification and (iv) any amounts paid to Buyers
pursuant to the Tax Sharing Agreement which specifically relate to the facts
giving rise to the claim for indemnification. To the extent a credit pursuant to
this Section 9.2(a) arises after the receipt by the Buyer Indemnified Parties of
the related indemnification amounts paid by the Seller Parties, Buyers shall
promptly pay to Sellers, or offset against any other outstanding claims of any
of the Buyer Indemnified Parties, the amount of such credit upon receipt by the
Buyers of such amount.
(b) In calculating any amounts payable to the Seller Indemnified
Parties by the Buyer Parties pursuant to Section 9.1(b), the Buyer Parties shall
receive credit for (i) any reduction in actual tax liability of the Seller
Indemnified Parties as a result of the facts giving rise to the claim for
indemnification (provided that no such credit shall be made prior to the taxable
period in which the Seller Indemnified Parties actually receive the benefit of
such reduced tax liability and, if such tax benefit will accrue in periods after
the indemnity payment is due, the Buyer Parties shall be required to pay the
full amount due subject to Sellers' obligation to repay to amount of the credit
when the tax benefit is actually realized pursuant to the last sentence of this
Section 9.2(b)), and (ii) any insurance, litigation or other monetary recoveries
actually received by the Seller Indemnified Parties as a result of the facts
giving rise to the claim for indemnification and (iii) any amounts paid to
Sellers pursuant to the Tax Sharing Agreement which specifically relate to the
facts giving rise to the claim for indemnification. To the extent a credit
pursuant to this Section 9.2(b) arises after the receipt by the Seller
Indemnified Parties of the related indemnification amounts paid by the Buyer
Parties, Sellers shall promptly pay to Buyers, or offset against any other
outstanding claims of any of the Seller Indemnified Parties, the amount of such
credit upon receipt by the Sellers of such amount.
(c) The Seller Parties or the Buyer Parties, as the case may be,
shall have no liability under Sections 9.1(a)(i) and 9.1(b)(i) for breaches of
representations and warranties under Articles 4 and 5 of this Agreement,
respectively, and the Seller Parties shall have no liability under Section
9.1(a)(ix) or for the payment of defense costs of the Buyer Parties pursuant to
Section 9.4(f) unless the aggregate amount of the damages and losses to the
Seller Parties or the Buyer Parties, as the case may be, from all claims finally
determined to arise under all such provisions with respect to such party exceed
an amount equal to one percent (1%) of the Purchase Price (the "Basket") and, in
such event, the Seller Parties and the Buyer Parties, as the case may be, shall
be required to pay only the amount by which such aggregate amount of claims
exceeds the amount of the Basket in the aggregate; provided, further, that in no
event shall the amount of the
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Seller Parties' or the Buyer Parties' aggregate liability under Sections
9.1(a)(i) and 9.1(b)(i), respectively, exceed the Purchase Price (the "Cap"). No
claim under Section 9.1(a)(i) or 9.1(b)(i) based upon fraud or the knowing
breach of a representation or warranty or the breach of any representation or
warranty contained in Sections 4.1, 4.2, 4.5, 4.8, 4.18, 5.1, 5.2, 5.6 or 5.8
will be subject to the Basket or the Cap, provided, however, that any damages or
losses with respect to such a claim will not be counted toward the Basket and
the Cap.
(d) The parties agree that the provisions set forth in this Article
9 can be specifically enforced in a court of competent jurisdiction. Apart from
such rights to specific enforcement, the indemnification provided for in this
Article 9 shall, from and after the Closing, be the sole remedy for any claim
for a breach of any representation or warranty contained in Article 4 or Article
5.
(e) Any qualifications in the representations, warranties and
covenants with respect to Material Adverse Effect, materiality or similar terms
will not have any effect with respect to the calculation of the amount of any
damages or losses or the application of the Cap or the Basket pursuant to this
Article 9. However, such qualifications will have an effect in determining
whether a breach has occurred.
(f) The right to indemnification and the other remedies of the
parties pursuant to this Article 9 will not be affected by any investigation
conducted, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy or performance of or
compliance with any representation, warranty, covenant or obligation pursuant to
this Agreement. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification or other
remedies pursuant to this Article 9 based on such representations, warranties,
covenants or obligations.
(g) The Seller Parties or the Buyer Parties, as the case may be,
shall have no liability for consequential damages, including, without
limitation, damages relating to business interruption, pursuant to Section 9.1
or 9.5, provided, however, any losses, costs, expenses or damages arising out of
or relating to a claim which is asserted by a third party against the Seller
Indemnified Parties or the Buyer Indemnified Parties, as the case may be, shall
not be deemed to be consequential damages for purposes of this Section 9.2(g).
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9.3 Time and Manner of Certain Claims. Except as otherwise expressly
provided herein, the Seller Parties and the Buyer Parties shall be liable for
damages asserted under Section 9.1(a)(i) or Section 9.1(b)(i), respectively,
only to the extent that notice of a claim therefor complying with the
requirements of this Section 9.3 is asserted by the other in writing and
delivered prior to the expiration of a period ending 18 months from the Closing
Date. Notwithstanding the foregoing, (i) the representations and warranties set
forth in Sections 4.1, 4.2, 4.5, 4.18, 5.1, 5.2, 5.6 and 5.8 and claims based
upon fraud or the knowing breach of a representation or warranty shall survive
indefinitely, and (ii) claims for indemnification for the representations and
warranties contained in Section 4.8 or Section 4.11 may be brought at any time
until the underlying Tax, ERISA or employee benefit obligation is barred by the
applicable period of limitation under federal, state, local or foreign laws
relating thereto (as such may be extended by waiver). Any notice of a claim (a
"Claim Notice") shall be in writing and shall state, to the extent reasonably
practicable at the time the notice of claim is delivered, the facts giving rise
to the alleged basis for the claim and the amount of liability asserted against
the other party by reason of the claim.
9.4 Procedure for Indemnification. All claims for indemnification
pursuant to Section 9.1 shall be asserted and resolved as follows:
(a) In the event that any claim or demand, or other circumstance or
state of facts which could give rise to any claim or demand, for which the Buyer
Parties or the Seller Parties, as applicable (an "Indemnifying Party") may be
liable to any of the Seller Indemnified Parties or the Buyer Indemnified
Parties, as applicable (an "Indemnified Party") is asserted against or sought to
be collected by a third party (an "Asserted Liability"), the Indemnified Party
shall as soon as reasonably possible deliver a Claim Notice to the Indemnifying
Party, which Claim Notice shall specify the nature of such Asserted Liability,
except that no delay on the part of the Indemnified Party in giving any such
Claim Notice shall relieve the Indemnifying Party of any indemnification
obligation hereunder, except to the extent that the Indemnifying Party
demonstrates that it is materially prejudiced in its ability to defend the suit,
action, claim, proceeding or investigation (a "Proceeding") for which such
indemnification is sought by reason of such delay.
(b) Upon receipt of a Claim Notice the Indemnifying Party shall be
entitled at its option to assume the defense of such Proceeding with respect to
which it is called upon to indemnify an Indemnified Party pursuant to this
Article 9 if the Indemnifying Party (i) notifies the Indemnified Party within 30
days (or less if the nature of the Asserted Liability requires) of its receipt
of the Claim Notice (the "Notice Period") that the Indemnifying Party desires,
at the
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Indemnifying Party's sole cost and expense and by counsel of its own choosing,
to defend against such Asserted Liability, and (ii) the Indemnifying Party
provides reasonable assurance to the Indemnified Party of its financial capacity
to defend such Proceeding and provide Indemnification with respect to such
Proceeding. If, (i) under applicable standards of professional conduct a
conflict on any significant issue between the Indemnifying Party and any
Indemnified Party exists in respect of such Asserted Liability which requires
the employment of separate counsel for the Indemnified Party, or (ii) the
Indemnifying Party shall not have promptly retained counsel reasonably
satisfactory to the Indemnified Party to take charge of the defense of such
Proceeding and the Indemnified Party has employed counsel to take charge of such
defense, then the Indemnifying Party shall reimburse the Indemnified Party for
the reasonable fees and expenses of such counsel (who shall be reasonably
acceptable to the Indemnifying Party) and the Indemnifying Party shall not have
the right to direct the defense of any Proceeding on behalf of the Indemnified
Party. The Indemnifying Party shall not consent to any compromise or settlement
without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed) unless such settlement (i) includes a
complete release of the Indemnified Party and (ii) does not require the
Indemnified Party to make any payment or forego or take any action and does not
include any finding or admission of any violation by any Indemnified Person of
Law or other legal requirements. If the Indemnifying Party undertakes to defend
against such Asserted Liability, the Indemnified Party shall cooperate to the
extent reasonably requested with the Indemnifying Party and its counsel in the
investigation, defense and settlement thereof, but the Indemnifying Party shall
control the investigation, defense and settlement thereof. If the Indemnified
Party desires to participate in any such defense it may do so at its sole cost
and expense, except as set forth herein.
(c) If the Indemnifying Party elects not to defend against such
Asserted Liability, then the Indemnifying Party has the right to participate in
any such defense at its sole cost and expense, but the Indemnified Party shall
control the investigation, defense and settlement thereof at the reasonable cost
and expense of the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any Asserted Liability effected without its prior
written consent (which consent shall not be unreasonably withheld or delayed).
(d) Notwithstanding the foregoing, if any Indemnified Party
determines in good faith that there is a reasonable probability that an action
for which it seeks indemnity may materially and adversely affect it or its
subsidiaries or affiliates, such Indemnified Party may, by written notice to the
Indemnifying Party, assume the exclusive right to defend and, with the consent
of the Indemnifying Party, may compromise or settle such action. If an
Indemnified
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Party has a claim against the Indemnifying Party by reason of the provisions of
this Article 9, other than as provided in Section 9.4(b), such payment shall be
made within fifteen (15) days after such claim is finally determined by mutual
agreement of the parties hereto or pursuant to the final judgment of a court of
competent jurisdiction.
(e) In the event that an Indemnified Party has a claim against an
Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall send a Claim Notice with respect to such claim to the
Indemnifying Party. The Indemnifying Party must within 45 days from the date
such Claim Notice is delivered notify the Indemnified Party in writing of any
good faith objections it has to the Indemnified Party's Claim Notice or claims
for indemnification, setting forth in reasonable detail each of the Indemnifying
Party's objections thereto. If the Indemnifying Party does not deliver such
written notice of objection within such 45-day period, the Indemnifying Party
shall pay such amounts to the Indemnified Party upon the date such 45-day period
expires. If the Indemnifying Party does deliver such written notice of objection
within such 45-day period, the Indemnifying Party and the Indemnified Party
shall attempt in good faith to resolve any such dispute within 60 days of the
delivery by the Indemnifying Party of such written notice of objection.
(f) Notwithstanding the foregoing, Buyers shall control the defense
of any Proceeding for any Asserted Liability relating to Section 9.1(a)(ix), and
the Seller Parties shall pay the reasonable costs and expenses (including,
without limitation, reasonable attorneys' fees) of Buyers' defense of such
Proceeding, subject to the Basket as provided in Section 9.2(c). The Buyers will
consult with the Seller Parties in the defense of any such Proceeding.
9.5 Environmental Indemnification.
(a) Subject to the requirements of Section(s) 9.5 (b) through (f)
herein, the Seller Parties shall be responsible for and shall jointly and
severally indemnify, reimburse, defend and hold the Buyer Indemnified Parties
harmless from and against any and all notices, demands, information requests,
claims, orders, consent orders, injunctions, judgments, decrees, rulings, writs,
assessments, awards, and any and all other legal or administrative proceedings,
asserted, filed, brought or alleged by any person or entity, and any and all
losses, fees, expenses, costs (including, without limitation, legal, accounting,
consulting, contracting, engineering and similar expenses, cleanup costs,
remediation, removal or other response costs at any location, whether on-site or
off-site, and costs to cause any Subsidiary or the Business, or any of their
assets or properties, to come
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into compliance with Environmental Laws or incurred by reason or in the course
of any remodeling, renovation, expansion, repair or rehabilitation of the
Business or the Real Property), investigation costs, amounts paid in settlement,
damages, fines, interest, penalties, judgments or liabilities (including,
without limitation, any actual or punitive damages, any damages of third parties
for personal injury or property damage or to natural resources, and any
diminution in value of any property), arising out of or relating in any way to:
(i) any breach of any representations or warranties of the
Seller Parties set forth in Section 4.15;
(ii) any actual violation, or any violation alleged by a third
party, by any of the Subsidiaries, any of their respective predecessors or the
Business, of, or failure by any of the Subsidiaries, any of their respective
predecessors or the Business, to comply with, any Environmental Law or
Environmental Permits, as of or prior to the Closing Date and any continuation
of such matter from and after the Closing Date other than fines or penalties
imposed by an Environmental Authority and incurred by the Buyer Indemnified
Parties as a result of actions taken by the Buyer Indemnified Parties in the
operation of the Business after Closing;
(iii) any actual transportation, treatment, deposit, Release,
threatened release, handling, storage, recycling, or use, or any transportation,
treatment, deposit, Release, threatened release, handling, storage, recycling,
or use alleged by any third party, by any of the Subsidiaries, any of their
respective predecessors or the Business, of any Hazardous Materials off the
Owned Property or Leased Property or any other property currently or formerly
owned or leased by any of the Subsidiaries or any of their predecessors as of or
prior to the Closing Date and any continuation of such matter from and after the
Closing Date other than fines or penalties imposed by an Environmental Authority
and incurred by the Buyer Indemnified Parties as a result of actions taken by
the Buyer Indemnified Parties in the operation of the Business after Closing;
(iv) the presence, handling, storage, treatment, or Release of
any Hazardous Materials on, at, upon, in, beneath, or migrating to or from the
Owned Property or Leased Property or any other property currently or formerly
owned or leased by any of the Subsidiaries or any of their predecessors as of or
prior to the Closing Date and any continuation of such matter from and after the
Closing Date other than fines or penalties imposed by an Environmental Authority
and incurred by the Buyer Indemnified Parties as a result of actions taken by
the Buyer Indemnified Parties in the operation of the Business after Closing;
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(v) the exposure or alleged exposure of any person or property
at any time to any Hazardous Materials existing at, in, upon, or beneath or
transported, Released or emanating to or from the Owned Property or Leased
Property or any other property currently or formerly owned or leased by any of
the Subsidiaries or any of their predecessors as of or prior to the Closing Date
and any continuation of such matter from and after the Closing Date other than
fines or penalties imposed by an Environmental Authority and incurred by the
Buyer Indemnified Parties as a result of actions taken by the Buyer Indemnified
Parties in the operation of the Business after Closing;
(vi) those matters listed in Schedule 9.5(a)(vi) hereto,
however the Environmental Claim Notice requirement set forth in Section 9.5(b)
hereto shall not apply, and the Seller Parties hereby agree to fully indemnify
and undertake the defense of these matters; or
(vii) the implementation of the Phase II investigation of the
Domestic Subsidiary's Dyersville Plants 1 & 2 ("Phase II Study"), a true copy of
the scope of work for which is attached hereto in Schedule 9.5(a)(vii), and any
and all Environmental Claims, Environmental Costs or Liabilities, or Remedial
Action, arising out of or relating to any Hazardous Materials identified through
implementation of the Phase II Study, and the Seller Parties shall in a
commercially reasonable and diligent manner complete the Phase II Study in
accordance with such scope of work and perform any and all the Remedial Actions
resulting therefrom.
(b) To the extent the Buyer Indemnified Parties (including those
described in Section 9.5(e) hereof) seek indemnification under Section 9.5(a),
the Buyer Indemnified Parties shall first be obligated to provide the Seller
Parties with prompt written notice ("Environmental Claim Notice") of each such
claim for which an indemnification is claimed hereunder and shall provide the
Seller Parties with copies of any documents transmitted to or from any
Environmental Authorities regarding each such Claim, except that no delay on the
part of the Buyer Indemnified Parties in giving any such Environmental Claim
Notice shall relieve the Seller Parties of any indemnification obligation
hereunder, except to the extent that the Seller Parties demonstrate that they
are materially prejudiced in their ability to defend the proceeding for which
such indemnification is sought by reason of such delay. The foregoing shall not
be construed as authorizing the Buyer Indemnified Parties to proceed with the
response to or management of any matter, including, but not limited to, any
Environmental Claim, for which indemnification will or may be sought under
Section 9.5(a) hereof, it being the intent of the parties hereto that the Seller
Parties, pursuant to the following procedure, shall be given the first
opportunity to manage each such Environmental
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Claim. If, within 30 days of any Environmental Claim Notice, the Seller Parties
fail to respond, deny the Claim or advise of their choice not to undertake
management of the Claim, the Buyer Indemnified Parties may do so, as long as the
Remedial Actions and settlements undertaken by the Buyer are acceptable to
applicable Environmental Authorities and are in conformance with applicable
Environmental Law. The Sellers shall be provided with true copies of invoices or
other charges associated with each such Claim to the extent the Seller Parties
refuse or decline management of the subject Claim. If the Seller Parties choose
to manage the response to any such Claim, the Seller Parties shall notify the
Buyer Indemnified Parties of same within 30 days of its receipt of the
Environmental Claim Notice. Regardless of the Sellers' decision to undertake the
management or supervision of any Claim, and unless the parties are in litigation
regarding their respective rights under this Agreement, the parties shall
cooperate with one another and shall provide access to the Real Property, share
data and exchange non-privileged documents received or transmitted from third
parties. Any proposed or final Remedial Action or response undertaken by the
Seller Parties shall not result in the imposition of any deed or well notice or
restriction, or any other notice or restriction affecting the Real Property due
to the presence of Hazardous Materials in, on, at, upon, beneath or from the
Real Property.
(c) Except as required by applicable Environmental Law or
Environmental Authorities, Buyers shall not purposefully engage in the
investigation of the environmental condition of the Real Property in an effort
to accelerate the timing of any obligations of the Seller Parties under Section
9.5(a). The foregoing shall not be construed to limit the Seller Parties'
indemnification obligations under Section 9.5(a) in the event Hazardous
Materials or other indemnifiable circumstances under this Section 9.5 are
identified by Buyers, the Subsidiaries, their respective tenants, transferees or
assigns, or any of their contractors, advisors, agents or representatives, or
and Environmental Authority or governmental agent in the course of the operation
of the Business or the Real Property, including, by way of example and not
limitation, activities such as the repair, modification or expansion of facility
structures and the conduct by Buyers, the Subsidiaries or any of their
respective transferees, tenants, agents or assigns or other third parties of due
diligence investigations in connection with any financing, refinancing,
transfer, assignment, lease, merger, sale or other similar transaction. To the
extent the Buyer Indemnified Parties believe that applicable Environmental Law
requires that investigations of the Real Property be conducted or that reporting
to any Environmental Authority of any matter be undertaken which may trigger the
Seller Parties' obligations under Section 9.5(a) hereof, the Buyers Indemnified
Parties shall first provide the Seller Parties with reasonable, advance written
notice of their intent to pursue such investigations or reporting.
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(d) For so long as the Seller Parties' indemnification of the Buyer
Indemnified Parties set forth in Section 9.5(a) shall be in effect, Buyers shall
provide to Sellers a copy of all information or reports that are provided by
Buyers or their agents to the National Response Center or other federal, state,
local or foreign agency, with regard to all Releases of Hazardous Materials on
or from the Real Property where such Releases are or may relate to Hazardous
Materials which exists or may have existed as of Closing and for which the
Seller Parties may have liability to Buyers.
(e) In the event that title to all or any part of the Real Property
is transferred after the Closing Date, the successor in title to such Real
Property or lessee of such Real Property will be a Buyer Indemnified Party for
purposes of this Section 9.5 and may bring a claim for indemnification pursuant
to this Section 9.5.
(f) The provisions of this Section 9.5 shall remain in full force
and effect and shall survive for a period of seven (7) years following the
Closing Date, provided, however, that the Seller Parties' obligations pursuant
to this Section 9.5 shall continue with respect to any matter for which an
Environmental Claim Notice is delivered in accordance with Section 9.5(b) prior
to the end of such 20-year period.
9.6 Additional Provisions regarding Foreign Taxes. The Seller Parties
and the Buyer Parties also agree that the procedures and matters set forth on
Schedule 9.6 shall be applicable to Tax matters with respect to the Foreign
Subsidiaries.
SECTION 10. MISCELLANEOUS.
10.1 Entire Agreement. This Agreement (with its Schedules and Exhibits)
together with the existing Confidentiality Agreement between the parties
contains, and is intended as, a complete statement of all of the terms of the
arrangements between the parties with respect to the matters provided for,
supersedes any previous agreements and understandings between the parties with
respect to those matters (except as otherwise provided in Section 6.1), and
cannot be changed or terminated orally.
10.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Illinois without giving effect to
conflicts of law principles thereof.
10.3 Tables of Contents and Headings. The table of contents and Section
headings of this Agreement and titles given to Schedules to this Agreement
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are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
10.4 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed duly given (i) when delivered personally
or by prepaid overnight courier, with a record of receipt, (ii) the second day
after mailing, if mailed by certified mail, return receipt requested, or (iii)
the day after transmission, if sent by facsimile or telecopy (with a copy
promptly sent by certified mail, return receipt requested), to the parties at
the following addresses or telecopy numbers (or to such address or telecopy
number as a party may have specified by notice given to the other party pursuant
to this provision):
If to the Seller Parties, to:
U.S. Industries, Inc.
101 Wood Avenue South
Iselin, NJ 08830
Attention: General Counsel
Telecopy: 732-767-2208
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Ellen J. Odoner, Esq.
Telecopy: 212-310-8007
If to the Buyer Parties, to:
Racing Champions Corporation
800 Roosevelt Road
Building C, Suite 320
Glen Ellyn, IL 60137
Attention: Chief Executive Officer
Telecopy: 630-790-0406
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with copies to:
Reinhart, Boerner, Van Deuren,
Norris & Rieselbach, s.c.
1000 North Water Street, Suite 2100
P.O. Box 514000
Milwaukee, WI 53203-3400
Attention: Michael T. Pepke, Esq. &
James M. Bedore, Esq.
Telecopy: 414-298-8097
10.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
10.6 Amendment; Waiver. The parties may by mutual agreement amend this
Agreement in any respect, and any party, as to such party, may (i) extend the
time for the performance of any of the obligations of any other party, (ii)
waive any inaccuracies in representations by any other party, (iii) waive
compliance by any other party with any of the agreements contained herein and
performance of any obligations by such other party, or (iv) waive the
fulfillment of any condition that is precedent to the performance by such party
of any of its obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party against whom
enforcement of the same is sought.
Neither the failure of any party hereto to exercise any right,
power or remedy provided under this Agreement where otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party with its obligations hereunder, nor any custom or practice of the parties
at variance with the terms hereof, shall constitute a waiver by such party of
its right to exercise any such right, power or remedy or to demand such
compliance. The rights and remedies of the parties hereto are cumulative and not
exclusive of the rights and
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remedies that they otherwise might have now or hereafter, at law, in equity, by
statute or otherwise.
10.7 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement other than the Buyer Indemnified Parties and the Seller Indemnified
Parties. No assignment of this Agreement or of any rights or obligation
hereunder may be made by either party (by operation of law or otherwise) without
the prior written consent of the other and any attempted assignment without the
required consent shall be void; provided, however, that no such consent shall be
required of any party hereto to assign part or all of its rights under this
Agreement to one or more of their wholly-owed subsidiaries or affiliates, but no
such assignment by such party of its rights or obligations hereunder shall
relieve such party of any of its obligations under the Agreement to the other
parties hereto.
10.8 Best Knowledge. As used in this Agreement "to the best of Sellers'
knowledge" or words of similar import shall mean actual knowledge possessed by a
director or officer of any Seller Party or Subsidiary together with Mr. Gary
Skidmore and James O'Leary, and "to the best of Buyers' knowledge" or words of
similar import shall mean actual knowledge possessed by a director or officer of
any of the Buyer Parties.
10.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but which together shall constitute one and the
same Agreement.
10.10 Bulk Sales Laws. The parties hereby waive compliance with the
Bulk Sales Laws of any state or territory in which the assets of Ertl Canada are
located or in which operations relating to the assets of Ertl Canada are
conducted.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first set forth above.
U.S. INDUSTRIES, INC.
BY /s/ George H. MacLean
----------------------------------------
Its Senior Vice President
-------------------------------------
JUSI HOLDINGS, INC.
BY /s/ George H. MacLean
----------------------------------------
Its Senior Vice President
-------------------------------------
USI OVERSEAS HOLDINGS LIMITED
BY /s/ George H. MacLean
----------------------------------------
Its Director
-------------------------------------
USI CANADA, INC.
BY /s/ George H. MacLean
----------------------------------------
Its Vice President
-------------------------------------
RACING CHAMPIONS CORPORATION
BY /s/ Robert E. Dods
----------------------------------------
Its Chief Executive Officer
-------------------------------------
RACING CHAMPIONS, INC.
BY /s/ Robert E. Dods
----------------------------------------
Its Chief Executive Officer
-------------------------------------
RCNA HOLDINGS, INC.
BY /s/ Robert E. Dods
----------------------------------------
Its Chief Executive Officer
-------------------------------------
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RACING CHAMPIONS WORLDWIDE LIMITED
BY /s/ Robert E. Dods
----------------------------------------
Its Director
-------------------------------------
RACING CHAMPIONS LIMITED
BY /s/ Avy Stein
----------------------------------------
Its Director
-------------------------------------
69
<PAGE> 1
EXHIBIT 99.1
- --------------------------------------------------------------------------------
$175,000,000
CREDIT AGREEMENT
among
RACING CHAMPIONS, INC. and RACING CHAMPIONS SOUTH, INC.
as U.S. Borrowers,
RACING CHAMPIONS WORLDWIDE LIMITED,
as U.K. Borrower,
RACING CHAMPIONS CORPORATION
and
CERTAIN OF ITS DOMESTIC SUBSIDIARIES
FROM TIME TO TIME PARTIES HERETO
as Guarantors,
THE LENDERS PARTIES HERETO,
FIRST UNION NATIONAL BANK,
as Administrative Agent,
FIRST UNION CAPITAL MARKETS CORP.,
as Lead Arranger and Syndication Agent,
and
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
THE FIRST NATIONAL BANK OF CHICAGO,
HARRIS TRUST AND SAVINGS BANK
and
NORTHERN TRUST COMPANY,
as Co-Agents
Dated as of April 13, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS..............................................................................................1
Section 1.1 Defined Terms.................................................................................1
Section 1.2 Other Definitional Provisions................................................................26
Section 1.3 Accounting Terms.............................................................................26
ARTICLE II THE LOANS; AMOUNT AND TERMS............................................................................27
Section 2.1 Revolving Loans..............................................................................27
Section 2.2 Swingline Loan Subfacility...................................................................29
Section 2.3 Letter of Credit Subfacility.................................................................31
Section 2.4 U.K. Revolving Loan Subfacility..............................................................35
Section 2.5 Term Loan....................................................................................37
Section 2.6 Fees.........................................................................................39
Section 2.7 Commitment Reductions........................................................................40
Section 2.8 Prepayments..................................................................................41
Section 2.9 Minimum Principal Amount of Tranches.........................................................43
Section 2.10 Default Rate and Payment Dates..............................................................44
Section 2.11 Conversion Options..........................................................................44
Section 2.12 Computation of Interest and Fees............................................................45
Section 2.13 Pro Rata Treatment and Payments.............................................................45
Section 2.14 Non-Receipt of Funds by the Administrative Agent............................................46
Section 2.15 Inability to Determine Interest Rate........................................................47
Section 2.16 Illegality..................................................................................48
Section 2.17 Requirements of Law.........................................................................48
Section 2.18 Indemnity...................................................................................50
Section 2.19 Taxes.......................................................................................50
Section 2.20 Indemnification; Nature of Issuing Lender's Duties..........................................53
Section 2.21 Judgment Currency...........................................................................54
ARTICLE III REPRESENTATIONS AND WARRANTIES........................................................................55
Section 3.1 Financial Condition..........................................................................55
Section 3.2 No Change....................................................................................56
Section 3.3 Corporate Existence; Compliance with Law.....................................................56
Section 3.4 Corporate Power; Authorization; Enforceable Obligations......................................56
Section 3.5 No Legal Bar; No Default.....................................................................57
Section 3.6 No Material Litigation.......................................................................57
Section 3.7 Investment Company Act.......................................................................57
Section 3.8 Margin Regulations...........................................................................57
Section 3.9 ERISA........................................................................................58
Section 3.10 Environmental Matters.......................................................................58
Section 3.11 Purpose of Loans............................................................................59
Section 3.12 Subsidiaries................................................................................60
Section 3.13 Ownership...................................................................................60
</TABLE>
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<TABLE>
<S> <C>
Section 3.14 Indebtedness................................................................................60
Section 3.15 Taxes.......................................................................................60
Section 3.16 Intellectual Property.......................................................................60
Section 3.17 Solvency....................................................................................61
Section 3.18 Investments.................................................................................61
Section 3.19 Location of Property........................................................................61
Section 3.20 No Burdensome Restrictions..................................................................61
Section 3.21 Brokers'Fees................................................................................62
Section 3.22 Labor Matters...............................................................................62
Section 3.23 Accuracy and Completeness of Information....................................................62
Section 3.24 Year 2000 Issue.............................................................................62
ARTICLE IV CONDITIONS PRECEDENT...................................................................................63
Section 4.1 Conditions to Closing Date and Initial Revolving Loans and Term Loans........................63
Section 4.2 Conditions to All Extensions of Credit.......................................................67
ARTICLE V AFFIRMATIVE COVENANTS...................................................................................69
Section 5.1 Financial Statements.........................................................................69
Section 5.2 Certificates; Other Information..............................................................70
Section 5.3 Payment of Obligations.......................................................................71
Section 5.4 Conduct of Business and Maintenance of Existence.............................................71
Section 5.5 Maintenance of Property; Insurance...........................................................72
Section 5.6 Inspection of Property; Books and Records; Discussions.......................................72
Section 5.7 Notices......................................................................................73
Section 5.8 Environmental Laws...........................................................................74
Section 5.9 Financial Covenants..........................................................................74
Section 5.10 Additional Subsidiary Guarantors............................................................75
Section 5.11 Compliance with Law.........................................................................75
Section 5.12 Pledged Assets..............................................................................76
Section 5.13 Additional Credit Parties...................................................................76
Section 5.14 Year 2000 Compliance........................................................................76
Section 5.15 Interest Rate Protection Agreements.........................................................77
Section 5.16 Further Assurances..........................................................................77
ARTICLE VI NEGATIVE COVENANTS.....................................................................................77
Section 6.1 Indebtedness.................................................................................77
Section 6.2 Liens........................................................................................79
Section 6.3 Guaranty Obligations.........................................................................79
Section 6.4 Nature of Business...........................................................................79
Section 6.5 Consolidation, Merger, Sale or Purchase of Assets, etc.......................................79
Section 6.6 Advances, Investments and Loans..............................................................80
Section 6.7 Transactions with Affiliates.................................................................81
Section 6.8 Ownership of Subsidiaries; Restrictions......................................................81
Section 6.9 Fiscal Year; Organizational Documents; Material Contracts....................................81
Section 6.10 Limitation on Actions......................................................................81
</TABLE>
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<TABLE>
<S> <C>
Section 6.11 Restricted Payments.........................................................................82
Section 6.12 Prepayments of Indebtedness, etc............................................................82
Section 6.13 Sale Leasebacks.............................................................................83
Section 6.14 No Further Negative Pledges.................................................................83
ARTICLE VII EVENTS OF DEFAULT.....................................................................................84
Section 7.1 Events of Default............................................................................84
Section 7.2 Acceleration; Remedies.......................................................................87
ARTICLE VIII THE AGENT............................................................................................88
Section 8.1 Appointment..................................................................................88
Section 8.2 Delegation of Duties.........................................................................88
Section 8.3 Exculpatory Provisions.......................................................................88
Section 8.4 Reliance by Administrative Agent.............................................................89
Section 8.5 Notice of Default............................................................................89
Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.......................................90
Section 8.7 Indemnification..............................................................................90
Section 8.8 Administrative Agent in Its Individual Capacity..............................................91
Section 8.9 Successor Administrative Agent...............................................................91
Section 8.10 Co-Agents, etc..............................................................................91
ARTICLE IX MISCELLANEOUS..........................................................................................92
Section 9.1 Amendments, Waivers and Release of Collateral................................................92
Section 9.2 Notices......................................................................................94
Section 9.3 No Waiver; Cumulative Remedies...............................................................95
Section 9.4 Survival of Representations and Warranties...................................................95
Section 9.5 Payment of Expenses and Taxes................................................................95
Section 9.6 Successors and Assigns; Participations; Purchasing Lenders...................................96
Section 9.7 Adjustments; Set-off.........................................................................99
Section 9.8 Table of Contents and Section Headings......................................................101
Section 9.9 Counterparts................................................................................101
Section 9.10 Effectiveness..............................................................................101
Section 9.11 Severability...............................................................................101
Section 9.12 Integration................................................................................101
Section 9.13 Governing Law..............................................................................101
Section 9.14 Consent to Jurisdiction and Service of Process.............................................102
Section 9.15 Arbitration................................................................................102
Section 9.16 Confidentiality............................................................................104
Section 9.17 Acknowledgments............................................................................104
Section 9.18 Waivers of Jury Trial......................................................................105
Section 9.19 Joint and Several Liability; Maximum Liability; Waiver of Subrogation......................105
ARTICLE X GUARANTY...............................................................................................107
Section 10.1 The Guaranty...............................................................................107
Section 10.2 Bankruptcy.................................................................................108
Section 10.3 Nature of Liability........................................................................108
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Section 10.4 Independent Obligation......................................................................109
Section 10.5 Authorization...............................................................................109
Section 10.6 Reliance....................................................................................109
Section 10.7 Waiver......................................................................................110
Section 10.8 Limitation on Enforcement...................................................................111
Section 10.9 Confirmation of Payment.....................................................................111
</TABLE>
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SCHEDULES
Schedule 1.1(a) Account Designation Letter
Schedule 1.1(b) MLA Costs
Schedule 2.1(a) Schedule of Lenders and Commitments
Schedule 2.1(b)(i) Form of Notice of Borrowing
Schedule 2.1(e) Form of U.S. Revolving Note
Schedule 2.2(d) Form of Swingline Note
Schedule 2.4(e) Form of U.K. Revolving Note
Schedule 2.5(d) Form of Term Note
Schedule 2.8 Form of Notice of Prepayment
Schedule 2.11 Form of Notice of Conversion/Extension
Schedule 2.19 Section 2.19 Certificate
Schedule 3.6 Litigation
Schedule 3.9 ERISA
Schedule 3.12 Subsidiaries
Schedule 3.16 Intellectual Property
Schedule 3.19(a) Location of Real Property
Schedule 3.19(b) Location of Property
Schedule 3.19(c) Chief Executive Offices
Schedule 3.22 Labor Matters
Schedule 4.1(b) Form of Secretary's Certificate
Schedule 4.1(g) Form of Solvency Certificate
Schedule 5.5(b) Insurance
Schedule 5.13 Form of Joinder Agreement
Schedule 6.1(b) Indebtedness
Schedule 9.2 Schedule of Lenders' Lending Offices
Schedule 9.6(c) Form of Commitment Transfer Supplement
v
<PAGE> 7
CREDIT AGREEMENT, dated as of April 13, 1999, among RACING CHAMPIONS,
INC., an Illinois corporation ("RCI"), and RACING CHAMPIONS SOUTH, INC., a North
Carolina corporation ("RCS"), (each of RCI and RCS individually a "U.S.
Borrower", and collectively, the "U.S. Borrowers"), RACING CHAMPIONS WORLDWIDE
LIMITED, a corporation organized under the laws of the United Kingdom (the "U.K.
Borrower"), RACING CHAMPIONS CORPORATION, as parent guarantor (the "Company"),
those Domestic Subsidiaries of the Company identified as a "Guarantor" on the
signature pages hereto and such other Domestic Subsidiaries of the Company as
may from time to time become a party hereto (collectively with the Company, the
"Guarantors"), the several banks and other financial institutions as may from
time to time become parties to this Agreement (collectively, the "Lenders"; and
individually, a "Lender"), and FIRST UNION NATIONAL BANK, a national banking
association, as administrative agent for the Lenders hereunder (in such
capacity, the "Administrative Agent").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrowers have requested that the Lenders make loans and
other financial accommodations to the Borrowers in the amount of up to
$175,000,000, as more particularly described herein;
WHEREAS, the Lenders have agreed to make such loans and other financial
accommodations to the Borrowers on the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
As used in this Agreement, terms defined in the preamble to this
Agreement have the meanings therein indicated, and the following terms have the
following meanings:
<PAGE> 8
"Account Designation Letter" shall mean the Notice of Account
Designation Letter dated the Closing Date from the Borrowers to the
Administrative Agent substantially in the form attached hereto as Schedule
1.1(a).
"Acquired Company" shall mean The Ertl Company, Inc., a Delaware
corporation.
"Acquisition" shall mean the purchases, contributions and other
acquisitions of assets contemplated by the Acquisition Documents.
"Acquisition Documents" shall mean the Stock and Asset Purchase
Agreement dated as of April 13, 1999, among U.S. Industries, Inc., JUSI
Holdings, Inc., USI Overseas Holdings Limited and USI Canada, Inc., as sellers,
and the Company, RCI, the U.K. Borrower, RCNA Holdings, Inc. and Racing
Champions Limited, as buyers, as amended, together with exhibits and schedules
thereto, and all documents, instruments, certificates and agreements identified
therein and required to be executed or exchanged by or between the parties
thereto pursuant thereto or in connection therewith.
"Additional Credit Party" shall mean each Person that becomes a
Guarantor by execution of a Joinder Agreement in accordance with Section 5.10.
"Administrative Agent" shall have the meaning set forth in the first
paragraph of this Agreement and any successors in such capacity.
"Affiliate" shall mean as to any Person, any other Person (excluding
any Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, a Person shall be deemed to be "controlled by" a Person if such
Person possesses, directly or indirectly, power either (a) to vote 10% or more
of the securities having ordinary voting power for the election of directors of
such Person or (b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time in accordance with its terms.
"Alternate Base Rate" shall mean, for any day, a rate per annum equal
to the greater of (a) the Prime Rate in effect on such day and (b) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof:
"Prime Rate" shall mean, at any time, the rate of interest per annum publicly
announced from time to time by First Union at its principal office in Charlotte,
North Carolina as its prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly by First
Union as its Prime Rate is an index or base rate and shall not necessarily
2
<PAGE> 9
be its lowest or best rate charged to its customers or other banks; and "Federal
Funds Effective Rate" shall mean, for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is not so
published on the next succeeding Business Day, the average of the quotations for
the day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. If for any reason
the Administrative Agent shall have determined (which determination shall be
conclusive in the absence of manifest error) that it is unable to ascertain the
Federal Funds Effective Rate, for any reason, including the inability or failure
of the Administrative Agent to obtain sufficient quotations in accordance with
the terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the opening of business on the date of such
change.
"Alternate Base Rate Loans" shall mean Loans that bear interest at an
interest rate based on the Alternate Base Rate.
"Applicable Percentage" shall mean, for any day, the rate per annum set
forth below opposite the applicable Level then in effect, it being understood
that the Applicable Percentage for (i) U.S. Revolving Loans and Term Loans which
are Alternate Base Rate Loans shall be the percentage set forth under the column
"Alternate Base Rate Margin for U.S. Revolving Loans and Term Loans", (ii) U.S.
Revolving Loans, U.K. Revolving Loans and Term Loans which are LIBOR Rate Loans
shall be the percentage set forth under the column "LIBOR Rate Margin for U.S.
Revolving Loans, U.K. Revolving Loans, Term Loans and Letter of Credit Fee",
(iii) the Letter of Credit Fee shall be the percentage set forth under the
column "LIBOR Rate Margin for U.S. Revolving Loans, U.K. Revolving Loans, Term
Loans and Letter of Credit Fee"; and (iv) the Commitment Fee shall be the
percentage set forth under the column "Commitment Fee":
3
<PAGE> 10
<TABLE>
<CAPTION>
------------ ------------------------ ----------------------- -------------------------------- -------------------
LIBOR Rate
Alternate Margin for
Base Rate U.S. Revolving Loans, U.K.
Margin for Revolving Loans, Term Loans
U.S. Revolving Loans and Letter of
Leverage and Term Loans Credit Fee Commitment
Level Ratio Fee
------------ ------------------------ ----------------------- -------------------------------- -------------------
<S> <C> <C> <C> <C>
I > 2.50 to 1.0 .50% 1.50% .300%
-
------------ ------------------------ ----------------------- -------------------------------- -------------------
II < 2.50 to 1.0 but => .25% 1.25% .275%
2.00 to 1.0
------------ ------------------------ ----------------------- -------------------------------- -------------------
III < 2.00 to 1.0 but => .00% 1.00% .250%
1.50 to 1.0
------------ ------------------------ ----------------------- -------------------------------- -------------------
IV < 1.50 to 1.0 .00% .75% .225%
------------ ------------------------ ----------------------- -------------------------------- -------------------
</TABLE>
The Applicable Percentage shall, in each case, be determined and
adjusted quarterly on the date ten (10) Business Days after the date on which
the Administrative Agent has received from the Borrowers the quarterly financial
information and certifications required to be delivered to the Administrative
Agent and the Lenders in accordance with the provisions of Sections 5.1(b) and
5.2(b) (each an "Interest Determination Date"). Such Applicable Percentage shall
be effective from such Interest Determination Date until the next such Interest
Determination Date. The initial Applicable Percentages shall be not less than
those provided for in Level I or Level II (as appropriate) until the first
Interest Determination Date occurring after September 30, 1999. After the
Closing Date, if the Borrowers shall fail to provide the quarterly financial
information and certifications in accordance with the provisions of Sections
5.1(b) and 5.2(b), the Applicable Percentage from such Interest Determination
Date shall, on the date ten (10) Business Days after the date by which the
Borrowers were so required to provide such financial information and
certifications to the Administrative Agent and the Lenders, be based on Level I
until such time as such information and certifications are provided, whereupon
the Level shall be determined by the then current Leverage Ratio.
"Asset Disposition" shall mean the disposition of any or all of the
assets (including, without limitation, the Capital Stock of a Subsidiary or any
ownership interest in a joint venture) of the Company or any Subsidiary whether
by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not
include (i) Specified Sales, (ii) the sale, lease or transfer of assets
permitted by Section 6.5(a)(iii) or (iv) hereof, or (iii) any Equity Issuance.
4
<PAGE> 11
"Bankruptcy Code" shall mean the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time to
time.
"Borrower" shall mean any of the U.S. Borrowers or the U.K. Borrower
and "Borrowers" shall mean a collective reference thereto.
"Borrowing Date" shall mean, in respect of any Loan, the date such Loan
is made.
"British Pounds Sterling" means the lawful currency of the United
Kingdom.
"Business" shall have the meaning set forth in Section 3.10.
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina or New York, New York
are authorized or required by law to close; provided, however, that when used in
connection with a rate determination, borrowing or payment in respect of a LIBOR
Rate Loan, the term "Business Day" shall also exclude any day on which banks in
London, England are not open for dealings in Dollar deposits and/or British
Pounds Sterling in the London interbank market.
"Capital Lease" shall mean any lease of property, real or personal, the
obligations with respect to which are required to be capitalized on a balance
sheet of the lessee in accordance with GAAP.
"Capital Lease Obligations" shall mean the capitalized lease
obligations relating to a Capital Lease determined in accordance with GAAP.
"Capital Stock" shall mean (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company, membership interests and (v) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of 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 twelve months from the date of acquisition ("Government Obligations"), (ii)
U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit of (y) any domestic commercial bank of recognized
5
<PAGE> 12
standing having capital and surplus in excess of $250,000,000 or (z) any bank
whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent thereof
(any such bank being an "Approved Bank"), in each case with maturities of not
more than 364 days from the date of acquisition, (iii) commercial paper and
variable or fixed rate notes issued by any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six
months of the date of acquisition, (iv) repurchase agreements with a bank or
trust company (including a Lender) or a recognized securities dealer having
capital and surplus in excess of $500,000,000 for direct obligations issued by
or fully guaranteed by the United States of America, (v) obligations of any
state of the United States or any political subdivision thereof for the payment
of the principal and redemption price of and interest on which there shall have
been irrevocably deposited Government Obligations maturing as to principal and
interest at times and in amounts sufficient to provide such payment, and (vi)
auction preferred stock rated in the highest short-term credit rating category
by S&P or Moody's.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean a collective reference to the collateral which
is identified in, and at any time will be covered by, the Security Documents.
"Commitment" shall mean the Revolving Commitment, the LOC Commitment,
the Swingline Commitment and the Term Loan Commitment, individually or
collectively, as appropriate.
"Commitment Fee" shall have the meaning set forth in Section 2.6(a).
"Commitment Percentage" shall mean the Revolving Commitment Percentage,
the LOC Commitment Percentage and/or the Term Loan Commitment Percentage, as
appropriate.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Revolving Commitment Termination Date.
"Commitment Transfer Supplement" shall mean a Commitment Transfer
Supplement, substantially in the form of Schedule 9.6(c).
6
<PAGE> 13
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with any Borrower within the meaning
of Section 4001 of ERISA or is part of a group which includes any Borrower and
which is treated as a single employer under Section 414 of the Code.
"Consolidated Capital Expenditures" means, for any period, all capital
expenditures of the Company and its Subsidiaries on a consolidated basis for
such period, as determined in accordance with GAAP.
"Consolidated Cash Taxes" means, for any period, the aggregate of all
taxes of the Company and its Subsidiaries on a consolidated basis for such
period, as determined in accordance with GAAP, to the extent the same are paid
in cash during such period.
"Consolidated EBIT" means, for any period the sum of (i) Consolidated
Net Income for such period, plus (ii) an amount which, in the determination of
Consolidated Net Income for such period, has been deducted for (A) Consolidated
Interest Expense and (B) total federal, state, local and foreign income, value
added and similar taxes.
"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in the
determination of Consolidated Net Income for such period, has been deducted for
(A) Consolidated Interest Expense, (B) total federal, state, local and foreign
income, value added and similar taxes, (C) depreciation, amortization expense
and other non-cash charges, (D) cost savings add-backs resulting from
non-recurring charges related to acquisitions as approved by the Administrative
Agent and the Required Lenders, and (E) other adjustments to Consolidated EBITDA
reasonably acceptable to the Required Lenders.
"Consolidated Interest Expense" means, for any period, all interest
expense of the Company and its Subsidiaries including the interest component
under Capital Leases, as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income (excluding
extraordinary items) after taxes for such period of the Company and its
Subsidiaries on a consolidated basis, as determined in accordance with GAAP.
"Contractual Obligation" shall mean, as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Credit Documents" shall mean this Agreement, each of the Notes, any
Joinder Agreement, the Letters of Credit, LOC Documents and the Security
Documents.
7
<PAGE> 14
"Credit Party" shall mean any of the Borrowers or the Guarantors.
"Credit Party Obligations" shall mean, without duplication, (i) all of
the obligations of the Credit Parties to the Lenders (including the Issuing
Lender) and the Administrative Agent, whenever arising, under this Agreement,
the Notes or any of the other Credit Documents (including, but not limited to,
any interest accruing after the occurrence of a filing of a petition of
bankruptcy under the Bankruptcy Code with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the Bankruptcy
Code) and (ii) all liabilities and obligations, whenever arising, owing from any
Credit Party to any Lender, or any Affiliate of a Lender, arising under any
Hedging Agreement.
"Debt Issuance" shall mean the issuance of any Indebtedness for
borrowed money by the Company or any of its Subsidiaries (excluding, for
purposes hereof, Subordinated Debt, any Equity Issuance or any Indebtedness of
the Company and its Subsidiaries permitted to be incurred pursuant to Section
6.1 hereof).
"Default" shall mean any of the events specified in Section 7.1,
whether or not any requirement for the giving of notice or the lapse of time, or
both, or any other condition, has been satisfied.
"Defaulting Lender" shall mean, at any time, any Lender that, at such
time (a) has failed to make a Loan required pursuant to the term of this Credit
Agreement, including the funding of a Participation Interest in accordance with
the terms hereof, (b) has failed to pay to the Administrative Agent or any
Lender an amount owed by such Lender pursuant to the terms of this Credit
Agreement, or (c) has been deemed insolvent or has become subject to a
bankruptcy or insolvency proceeding or to a receiver, trustee or similar
official.
"Dollar Equivalent" means, on any date, with respect to an amount
denominated in British Pounds Sterling, the amount of Dollars into which the
Administrative Agent could, in accordance with its practice from time to time in
the interbank foreign exchange market, convert such amount of British Pounds
Sterling at its spot rate of exchange (inclusive of all reasonable related costs
of conversion) applicable to the relevant transaction at or about 10:00 A.M.,
Charlotte, North Carolina time, on such date.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Lending Office" shall mean, initially, the office of each
Lender designated as such Lender's Domestic Lending Office shown on Schedule
9.2; and thereafter, such other office of such Lender as such Lender may from
time to time specify
8
<PAGE> 15
to the Administrative Agent and the Borrowers as the office of such Lender at
which Alternate Base Rate Loans of such Lender are to be made.
"Domestic Subsidiary" shall mean any Subsidiary that is organized and
existing under the laws of the United States or any state or commonwealth
thereof or under the laws of the District of Columbia.
"Environmental Laws" shall mean any and all applicable foreign,
Federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental Authority or other
Requirement of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health or the
environment, as now or may at any time be in effect during the term of this
Agreement.
"Equity Issuance" shall mean any issuance by the Company or any
Subsidiary to any Person which is not a Credit Party of (a) shares of its
Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to the
conversion of any debt securities to equity. The term "Equity Issuance" shall
not include any Asset Disposition, any Debt Issuance or the issuance of common
stock of the Company's Subsidiaries to its officers, directors or employees in
connection with stock offering plans and other benefit plans of such
Subsidiaries.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Reserve Percentage" shall mean for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as
in effect from time to time, or any similar category of liabilities for a member
bank of the Federal Reserve System in New York City.
"Event of Default" shall mean any of the events specified in Section
7.1; provided, however, that any requirement for the giving of notice or the
lapse of time, or both, or any other condition, has been satisfied.
"Extension of Credit" shall mean, as to any Lender, the making of a
Loan by such Lender or the issuance of, or participation in, a Letter of Credit
by such Lender.
9
<PAGE> 16
"Federal Funds Effective Rate" shall have the meaning set forth in the
definition of "Alternate Base Rate".
"Fee Letter" shall mean the letter agreement dated March 4, 1999
addressed to RCI from the Administrative Agent, as amended, modified or
otherwise supplemented.
"First Union" shall mean First Union National Bank, a national banking
association.
"Fixed Charge Coverage Ratio" means, with respect to the Company and
its Subsidiaries on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter of the Company (or the twelve month period
then beginning with respect to subsection (b)(ii) below), the ratio of (a)
Consolidated EBITDA minus Consolidated Capital Expenditures minus Consolidated
Cash Taxes for such period to (b) the sum of (i) Consolidated Interest Expense
plus (ii) Scheduled Payments of Funded Debt plus (iii) dividends for such
period. Notwithstanding the foregoing, the Fixed Charge Coverage Ratio of the
Company and its Subsidiaries for the first three complete fiscal quarters to
occur after the Closing Date shall be determined by annualizing the components
thereof such that for the first complete fiscal quarter to occur after the
Closing Date such components would be multiplied by four (4), the first two
complete fiscal quarters would be multiplied by two (2) and the first three
complete fiscal quarters would be multiplied by one and one-third (1).
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"Funded Debt" shall mean, with respect to any Person, without
duplication, (a) all Indebtedness of such Person other than Indebtedness of the
types referred to in clause (e), (g), (i) and (m) of the definition of
"Indebtedness" set forth in this Section 1.1, (b) all Funded Debt of others of
the type referred to in clause (a) above secured by (or for which the holder of
such Funded Debt has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from, property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (c) all Guaranty Obligations of such Person with respect to
Funded Debt of the type referred to in clause (a) above of another Person and
(d) Funded Debt of the type referred to in clause (a) above of any partnership
or unincorporated joint venture in which such Person is legally obligated or has
a reasonable expectation of being liable with respect thereto.
"GAAP" shall mean generally accepted accounting principles in effect in
the United States of America applied on a consistent basis, subject, however, in
the case of determination of compliance with the financial covenants set out in
Section 5.9 to the provisions of Section 1.3.
10
<PAGE> 17
"Government Acts" shall have the meaning set forth in Section 2.20.
"Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including without limitation any
obligation, whether or not contingent, (i) to purchase any such Indebtedness or
any property constituting security therefor, (ii) to advance or provide funds or
other support for the payment or purchase of any such Indebtedness or to
maintain working capital, solvency or other balance sheet condition of such
other Person (including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease or
purchase Property, securities or services primarily for the purpose of assuring
the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless
the holder of such Indebtedness against loss in respect thereof. The amount of
any Guaranty Obligation hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or
maximum principal amount, if larger) of the Indebtedness in respect of which
such Guaranty Obligation is made.
"Guarantor" shall mean any of the Company and the Domestic Subsidiaries
identified as a "Guarantor" on the signature pages hereto and the Additional
Credit Parties which execute a Joinder Agreement, together with their successors
and permitted assigns.
"Guaranty" shall mean the guaranty of the Guarantors set forth in
Article X.
"Hedging Agreements" shall mean, with respect to any Person, any
agreement entered into to protect such Person against fluctuations in interest
rates, or currency or raw materials values, including, without limitation, any
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more counterparties, any foreign currency exchange agreement,
currency protection agreements, commodity purchase or option agreements or other
interest or exchange rate or commodity price hedging agreements.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title
11
<PAGE> 18
retention agreements relating to Property purchased by such Person (other than
customary reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations of such
Person issued or assumed as the deferred purchase price of Property or services
purchased by such Person (other than trade debt incurred in the ordinary course
of business and due within six months of the incurrence thereof) which would
appear as liabilities on a balance sheet of such Person, (e) all obligations of
such Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guaranty Obligations of such Person
with respect to Indebtedness of another Person, (h) the principal portion of all
obligations of such Person under Capital Leases, (i) all obligations of such
Person under Hedging Agreements, (j) the maximum amount of all standby letters
of credit issued or bankers' acceptances facilities created for the account of
such Person and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), (k) all preferred Capital Stock issued by such Person and which
by the terms thereof could be (at the request of the holders thereof or
otherwise) subject to mandatory sinking fund payments, redemption or other
acceleration, (l) the principal balance outstanding under any synthetic lease,
tax retention operating lease, accounts receivable securitization program,
off-balance sheet loan or similar off-balance sheet financing product, and (m)
the Indebtedness of any partnership or unincorporated joint venture in which
such Person is a general partner or a joint venturer.
"Insolvency" shall mean, with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as used in
Section 4245 of ERISA.
"Insolvent" shall mean being in a condition of Insolvency.
"Interest Coverage Ratio" means, with respect to the Company and its
Subsidiaries on a consolidated basis for the twelve month period ending on the
last day of any fiscal quarter of the Company, the ratio of (a) Consolidated
EBIT to (b) Consolidated Interest Expense. Notwithstanding the foregoing, for
purposes of calculating the Interest Coverage Ratio of the Company and its
Subsidiaries for the first three complete fiscal quarters to occur after the
Closing Date, the Interest Coverage Ratio shall be determined by annualizing the
components thereof such that for the first complete fiscal quarter to occur
after the Closing Date such components would be multiplied by four (4), the
first two complete fiscal quarters would be multiplied by two (2) and the first
three complete fiscal quarters would be multiplied by one and one-third
(1).
12
<PAGE> 19
"Interest Payment Date" shall mean (a) as to any Alternate Base Rate
Loan or Swingline Loan, the last Business Day of each March, June, September and
December and on the applicable Maturity Date, (b) as to any LIBOR Rate Loan
having an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any LIBOR Rate Loan having an Interest Period longer than
three months, each day which is three months after the first day of such
Interest Period and the last day of such Interest Period.
"Interest Period" shall mean, with respect to any LIBOR Rate Loan,
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such LIBOR Rate
Loan and ending one, two, three or six months thereafter, as selected by
the applicable Borrower in the notice of borrowing or notice of
conversion given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such LIBOR Rate
Loan and ending one, two, three or six months thereafter, as selected
by the applicable Borrower by irrevocable notice to the Administrative
Agent not less than three Business Days prior to the last day of the
then current Interest Period with respect thereto;
provided that the foregoing provisions are subject to the
following:
(A) if any Interest Period pertaining to a LIBOR Rate
Loan would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period pertaining to a LIBOR Rate Loan
that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the relevant calendar
month;
(C) if any Borrower shall fail to give notice as
provided above, the U.S. Borrowers shall be deemed to have
selected an Alternate Base Rate Loan to replace the affected
LIBOR Rate Loan;
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(D) any Interest Period in respect of any Loan that
would otherwise extend beyond the applicable Maturity Date
and, further with regard to the Term Loans, no Interest Period
shall extend beyond any principal amortization payment date
unless the portion of such Term Loan consisting of Alternate
Base Rate Loans together with the portion of such Term Loan
consisting of LIBOR Rate Loans with Interest Periods expiring
prior to or concurrently with the date such principal
amortization payment date is due, is at least equal to the
amount of such principal amortization payment due on such
date; and
(E) no more than eight (8) LIBOR Rate Loans may be in
effect at any time. For purposes hereof, LIBOR Rate Loans with
different Interest Periods shall be considered as separate
LIBOR Rate Loans, even if they shall begin on the same date
and have the same duration, although borrowings, extensions
and conversions may, in accordance with the provisions hereof,
be combined at the end of existing Interest Periods to
constitute a new LIBOR Rate Loan with a single Interest
Period.
"Issuing Lender" shall mean First Union.
"Issuing Lender Fees" shall have the meaning set forth in Section
2.6(c).
"Joinder Agreement" shall mean a Joinder Agreement substantially in the
form of Schedule 5.10, executed and delivered by an Additional Credit Party in
accordance with the provisions of Section 5.10.
"Lender" shall have the meaning set forth in the first paragraph of
this Agreement.
"Letters of Credit" shall mean any letter of credit issued by the
Issuing Lender pursuant to the terms hereof, as such Letters of Credit may be
amended, modified, extended, renewed or replaced from time to time.
"Letter of Credit Fee" shall have the meaning set forth in Section
2.6(b).
"Leverage Ratio" means, with respect to the Company and its
Subsidiaries on a consolidated basis for the twelve month period ending on the
last day of any fiscal quarter, the ratio of (a) Funded Debt of the Company and
its Subsidiaries on a consolidated basis on the last day of such period to (b)
Consolidated EBITDA for such period.
"LIBOR" shall mean, for any LIBOR Rate Loan for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3740 or 3750 (or any successor pages) as
the London interbank offered rate for
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deposits in Dollars or British Pounds Sterling, as applicable, at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period plus in the case
of U.K. Revolving Loans, the applicable MLA Cost. If for any reason such rate is
not available, the term "LIBOR" shall mean, for any LIBOR Rate Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars or British Pounds Sterling, as
applicable, at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period plus in the case of U.K. Revolving Loans, the applicable MLA Cost;
provided, however, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%). If, for any reason,
neither of such rates is available, then "LIBOR" shall mean the rate per annum
at which, as determined by the Administrative Agent, Dollars or British Pounds
Sterling, as applicable, in an amount comparable to the Loans then requested are
being offered to leading banks at approximately 11:00 A.M. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected, plus in the
case of U.K. Revolving Loans, the applicable MLA Cost.
"LIBOR Lending Office" shall mean, initially, the office of each Lender
designated as such Lender's LIBOR Lending Office shown on Schedule 9.2; and
thereafter, such other office of such Lender as such Lender may from time to
time specify to the Administrative Agent and the Borrower as the office of such
Lender at which the LIBOR Rate Loans of such Lender are to be made.
"LIBOR Rate" shall mean a rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) determined by the Administrative
Agent pursuant to the following formula:
LIBOR Rate = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
"LIBOR Rate Loan" shall mean Loans the rate of interest applicable to
which is based on the LIBOR Rate.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other
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title retention agreement and any Capital Lease having substantially the same
economic effect as any of the foregoing).
"Loan" shall mean a U.S. Revolving Loan, a U.K. Revolving Loan, a
Swingline Loan and/or the Term Loans, as appropriate.
"LOC Commitment" shall mean the commitment of the Issuing Lender to
issue Letters of Credit and with respect to each Lender, the commitment of such
Lender to purchase participation interests in the Letters of Credit up to such
Lender's LOC Committed Amount as specified in Schedule 2.1(a), as such amount
may be reduced from time to time in accordance with the provisions hereof.
"LOC Commitment Percentage" shall mean, for each Lender, the percentage
identified as its LOC Commitment Percentage on Schedule 2.1(a), as such
percentage may be modified in connection with any assignment made in accordance
with the provisions of Section 9.6(c).
"LOC Committed Amount" shall mean, collectively, the aggregate amount
of all of the LOC Commitments of the Lenders to issue and participate in Letters
of Credit as referenced in Section 2.3 and, individually, the amount of each
Lender's LOC Commitment as specified in Schedule 2.1(a).
"LOC Documents" shall mean, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or (ii) any collateral security for such obligations.
"LOC Obligations" shall mean, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be drawn
under Letters of Credit then outstanding, assuming compliance with all
requirements for drawings referred to in such Letters of Credit plus (ii) the
aggregate amount of all drawings under Letters of Credit honored by the Issuing
Lender but not theretofore reimbursed.
"MLA Cost" shall mean with respect to any U.K. Revolving Loan made by
any Lender, the cost imputed to such Lender of compliance with the Mandatory
Liquid Assets requirements of the Bank of England during the Interest Period
applicable to such U.K. Revolving Loan, expressed as a rate per annum and
determined in accordance with Schedule 1.1(b).
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"Mandatory Borrowing" shall have the meaning set forth in Section
2.2(b)(ii) or Section 2.3(e), as the context may require.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, property, prospects or condition (financial or
otherwise) of the Company or of the Borrowers and their Subsidiaries taken as a
whole, (b) the ability of any Borrower or any Guarantor to perform its
obligations, when such obligations are required to be performed, under this
Agreement, any of the Notes or any other Credit Document or (c) the validity or
enforceability of this Agreement, any of the Notes or any of the other Credit
Documents or the rights or remedies of the Administrative Agent or the Lenders
hereunder or thereunder.
"Material Contract" shall mean any contract or other arrangement,
whether written or oral, to which the Company, any Borrower or any of their
Subsidiaries is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto could reasonably be expected to have a
Material Adverse Effect.
"Materials of Environmental Concern" shall mean any gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date" shall mean (i) with respect to the Term Loan, the last
scheduled quarterly payment date for the Term Loan set forth in Section 2.5(b)
and (ii) with respect to the Revolving Loans or any Swingline Loan, the
Revolving Commitment Termination Date.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by
the Company or any Subsidiary in respect of any Asset Disposition, Equity
Issuance or Debt Issuance, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions) and (b) taxes paid or payable as a result thereof; it being
understood that "Net Cash Proceeds" shall include, without limitation, any cash
received upon the sale or other disposition of any non-cash consideration
received by the Company or any Subsidiary in any Asset Disposition, Equity
Issuance or Debt Issuance.
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"Note" or "Notes" shall mean the U.S. Revolving Notes, the U.K.
Revolving Note the Swingline Note and/or the Term Notes, collectively,
separately or individually, as appropriate.
"Notice of Borrowing" shall mean the written notice of borrowing as
referenced and defined in Section 2.1(b)(i), 2.2(b)(i) or 2.3(b), as
appropriate.
"Notice of Conversion" shall mean the written notice of extension or
conversion as referenced and defined in Section 2.11.
"Notice of Repayment" shall mean the written notice of repayment as
referenced and defined in Section 2.8.
"Obligations" shall mean, collectively, Loans and LOC Obligations.
"Participant" shall have the meaning set forth in Section 9.6(b).
"Participation Interest" shall mean the purchase by a Lender of a
participation interest in (i) Swingline Loans as provided in Section 2.2(b),
(ii) Letters of Credit as provided in Section 2.3 or (iii) U.K.
Revolving Loans as provided in Section 2.4.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Investments" shall mean:
(i) cash and Cash Equivalents;
(ii) receivables owing to any Borrower or any of its
Subsidiaries or any receivables and advances to 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;
(iii) investments in and loans to any Credit Parties;
(iv) loans and advances to officers, directors, employees and
Affiliates in an aggregate amount not to exceed $500,000 at any time
outstanding;
(v) 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;
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<PAGE> 25
(vi) investments, acquisitions or transactions permitted
under Section 6.5(b); and
(vii) additional loan advances and/or investments of a nature
not contemplated by the foregoing clauses hereof, provided that such
loans, advances and/or investments made pursuant to this clause (vii)
shall not exceed an aggregate amount of $500,000.
As used herein, "investment" means all investments, in cash or by
delivery of property made, directly or indirectly in, to or from any Person,
whether by acquisition of shares of Capital Stock, property, assets,
indebtedness or other obligations or securities or by loan advance, capital
contribution or otherwise.
"Permitted Liens" shall mean:
(i) Liens created by or otherwise existing, under or in
connection with this Agreement or the other Credit Documents in favor
of the Lenders;
(ii) Liens in favor of a Lender hereunder in connection with
Hedging Agreements, but only (A) to the extent such Liens secure
obligations under Hedging Agreements with any Lender, or any Affiliate
of a Lender, (B) to the extent such Liens are on the same collateral as
to which the Administrative Agent on behalf of the Lenders also has a
Lien and (C) if such provider and the Lenders shall share pari passu in
the collateral subject to such Liens;
(iii) purchase money Liens securing purchase money
indebtedness (and refinancings thereof) to the extent permitted under
Section 6.1(c);
(iv) Liens for taxes, assessments, charges or other
governmental levies not yet due or as to which the period of grace (not
to exceed 60 days), if any, related thereto has not expired or which
are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books
of any Company or its Subsidiaries, as the case may be, in conformity
with GAAP (or, in the case of Subsidiaries with significant operations
outside of the United States of America, generally accepted accounting
principles in effect from time to time in their respective
jurisdictions of incorporation);
(v) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business for charges which are
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not overdue for a period of more than 60 days or which are being
contested in good faith by appropriate proceedings;
(vi) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(vii) deposits to secure the performance of bids, trade
contracts, (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(viii) any extension, renewal or replacement (or successive
extensions, renewals or replacements) , in whole or in part, of any
Lien referred to in the foregoing clauses; provided that such
extension, renewal or replacement Lien shall be limited to all or a
part of the property which secured the Lien so extended, renewed or
replaced (plus improvements on such property); and
(ix) existing Liens set forth on Schedule 6.1(b) and other
Liens on assets of the Company and its Subsidiaries securing
Indebtedness permitted pursuant to Section 6.1(i).
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan" shall mean, at any particular time, any employee benefit plan
which is covered by Title IV of ERISA and in respect of which the Company, any
Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at
such time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the
Closing Date given by the Company, the U.S. Borrowers and the other Credit
Parties (excluding the U.K. Borrower) to the Administrative Agent, as amended,
modified or supplemented from time to time in accordance with its terms.
"Prime Rate" shall have the meaning set forth in the definition of
Alternate Base Rate.
"Properties" shall have the meaning set forth in Section 3.10(a).
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"Purchasing Lenders" shall have the meaning set forth in Section
9.6(c).
"Recovery Event" shall mean the receipt by any Borrower or any of its
Subsidiaries of any cash insurance proceeds or condemnation award payable by
reason of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective property or assets.
"Register" shall have the meaning set forth in Section 9.6(d).
"Reorganization" shall mean, with respect to any Multiemployer Plan,
the condition that such Plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty-day notice
period is waived under PBGC Reg. ss.4043.
"Required Lenders" shall mean (i) Lenders holding in the aggregate not
less than 51% of all Revolving Loans and LOC Obligations then outstanding at
such time plus the aggregate unused Revolving Commitments at such time (treating
for purposes hereof in the case of Swingline Loans, U.K. Revolving Loans and LOC
Obligations, in the case of the Swingline Lender, the U.K. Lender and the
Issuing Lender, only the portion of the Swingline Loans, U.K. Revolving Loans
and the LOC Obligations of the Swingline Lender, the U.K. Lender and the Issuing
Lender, respectively, which is not subject to the Participation Interests of the
other Lenders and, in the case of the Lenders other than the Swingline Lender,
the U.K. Lender and the Issuing Lender, the Participation Interests of such
Lenders in Swingline Loans, U.K. Revolving Loans and LOC Obligations hereunder
as direct Obligations) and (ii) Lenders holding in the aggregate not less than
51% of all Term Loans then outstanding at such time; provided, however, that if
any Lender shall be a Defaulting Lender at such time, then there shall be
excluded from the determination of Required Lenders, Obligations (including
Participation Interests) owing to such Defaulting Lender and such Defaulting
Lender's Commitments, or after termination of the Commitments, the principal
balance of the Obligations owing to such Defaulting Lender.
"Required Revolving Lenders" shall mean Lenders with Revolving
Commitments which would constitute "Required Lenders" if all of the Term Loans
had been funded and paid in full.
"Requirement of Law" shall mean, as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing documents of such
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Person, and each law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer" shall mean, as to (a) the Company and the
Borrowers, the President, the Chief Executive Officer, the Chief Financial
Officer, the Executive Vice President - Finance and Operations and the Vice
President, Finance of any such entity or (b) any other Credit Party, any duly
authorized officer thereof.
"Restricted Payment" shall mean (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of Capital Stock of
the Company or any of its Subsidiaries, now or hereafter outstanding, (b) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Company or any of its Subsidiaries, now or hereafter outstanding,
(c) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of Capital
Stock of the Company or any of its Subsidiaries, now or hereafter outstanding,
or (d) any payment or prepayment of principal of, premium, if any, or interest
on, redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Subordinated Debt.
"Revolving Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans in an aggregate principal
amount at any time outstanding up to such Lender's Revolving Committed Amount as
specified in Schedule 2.1(a), as such amount may be reduced from time to time in
accordance with the provisions hereof.
"Revolving Commitment Percentage" shall mean, for each Lender, the
percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a),
as such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6(c).
"Revolving Commitment Termination Date" shall mean March 31, 2004.
"Revolving Committed Amount" shall mean, collectively, the aggregate
amount of all Revolving Commitments as referenced in Section 2.1(a), as such
amount may be reduced from time to time in accordance with the provisions
hereof, and, individually, the amount of each Lender's Revolving Commitment as
specified on Schedule 2.1(a).
"Revolving Loans" shall mean the U.S. Revolving Loans as set forth in
Section 2.1 and the U.K. Revolving Loans as set forth in Section 2.4.
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"S&P" shall mean Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"Scheduled Payments of Funded Debt" shall mean, on any date of
determination, with respect to the Company and its Subsidiaries on a
consolidated basis, the sum of all scheduled payments of principal on Funded
Debt to be made during the twelve month period then beginning (including the
principal component of payments due on Capital Leases or under any synthetic
lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product); it being understood that scheduled
payments on Funded Debt shall not include optional prepayments or the mandatory
prepayments required pursuant to Section 2.8.
"Security Documents" shall mean the Pledge Agreement and such other
documents executed and delivered in connection with the attachment and
perfection of the Agent's security interests and liens arising thereunder,
including, without limitation, UCC financing statements.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
"Specified Sales" shall mean (a) the sale, transfer, lease or other
disposition of inventory and materials in the ordinary course of business and
(b) the sale, transfer or other disposition of Permitted Investments described
in clause (i) of the definition thereof.
"Subordinated Debt" means Indebtedness incurred by the Company or any
of its Subsidiaries which by its terms is specifically subordinated in right of
payment to the prior payment of the Credit Party Obligations and which is
otherwise on terms and conditions satisfactory to the Required Lenders.
"Subsidiary" shall mean, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrowers or the Company, as applicable.
"Swingline Commitment" shall mean the commitment of the Swingline
Lender to make Swingline Loans in an aggregate principal amount at any time
outstanding up to the Swingline Committed Amount, and the commitment of the
Lenders to purchase
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participation interests in the Swingline Loans as provided in Section
2.2(b)(ii), as such amounts may be reduced from time to time in accordance with
the provisions hereof.
"Swingline Committed Amount" shall mean the amount of the Swingline
Lender's Swingline Commitment as specified in Section 2.2(a).
"Swingline Lender" shall mean First Union, in its capacity as such.
"Swingline Loan" or "Swingline Loans" shall have the meaning set forth
in Section 2.2(a).
"Swingline Note" shall mean the promissory note of the U.S. Borrowers
in favor of the Swingline Lender evidencing the Swingline Loans provided
pursuant to Section 2.2(d), as such promissory note may be amended, modified,
supplemented, extended, renewed or replaced from time to time.
"Taxes" shall have the meaning set forth in Section 2.19.
"Term Loan" shall have the meaning set forth in Section 2.5(a).
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make its portion of the Term Loan in a principal
amount equal to such Lender's Term Loan Commitment Percentage of the Term Loan
Committed Amount (and for purposes of making determinations of Required Lenders
hereunder after the Closing Date, the principal amount outstanding on the Term
Loan).
"Term Loan Commitment Percentage" shall mean, for any Lender, the
percentage identified as its Term Loan Commitment Percentage on Schedule 2.1(a),
as such percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 9.6.
"Term Loan Committed Amount" shall have the meaning set forth in
Section 2.5(a).
"Term Note" or "Term Notes" shall mean the promissory notes of the U.S.
Borrowers in favor of each of the Lenders evidencing the portion of the Term
Loan provided pursuant to Section 2.5(d), individually or collectively, as
appropriate, as such promissory notes may be amended, modified, restated,
supplemented, extended, renewed or replaced from time to time.
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"Tranche" shall mean the collective reference to LIBOR Rate Loans whose
Interest Periods begin and end on the same day. A Tranche may sometimes be
referred to as a "LIBOR Tranche".
"Transfer Effective Date" shall have the meaning set forth in each
Commitment Transfer Supplement.
"2.19 Certificate" shall have the meaning set forth in Section 2.19.
"Type" shall mean, as to any Loan, its nature as an Alternate Base Rate
Loan, LIBOR Rate Loan or Swingline Loan, as the case may be.
"U.K. Lender" shall mean First Union National Bank, London Branch.
"U.K. Revolving Commitment" shall mean the commitment of the U.K.
Lender to make U.K. Revolving Loans in an aggregate principal amount at any time
outstanding as to the U.K. Revolving Committed Amount, and the commitment of the
Lenders to purchase participation interests in the U.K. Revolving Loans as
provided in Section 2.4(b)(ii), as such amounts may be reduced from time to time
in accordance with the provisions hereof.
"U.K. Revolving Committed Amount" shall mean the amount of the U.K.
Lender's U.K. Revolving Commitment as specified in Section 2.4.
"U.K. Revolving Loans" shall have the meaning set forth in Section 2.4.
"U.S. Revolving Loans" shall have the meaning set forth in Section 2.1.
"U.S. Revolving Note" or "U.S. Revolving Notes" shall mean the
promissory notes of the U.S. Borrowers in favor of each of the Lenders
evidencing the Revolving Loans provided pursuant to Section 2.1(e), individually
or collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to time.
"Voting Stock" means, with respect to any Person, Capital Stock issued
by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
"Year 2000 Compliant" shall have the meaning set forth in Section 3.24.
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SECTION 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in the Notes
or other Credit Documents or any certificate or other document made or
delivered pursuant hereto.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Section, subsection, Schedule and Exhibit references are
to this Agreement unless otherwise specified.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 1.3 ACCOUNTING TERMS.
Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of the Company delivered to the Lenders;
provided that, if the Borrowers notify the Administrative Agent that they wish
to amend any covenant in Section 5.9 to eliminate the effect of any change in
GAAP on the operation of such covenant (or if the Administrative Agent notifies
the Borrowers that the Required Lenders wish to amend Section 5.9 for such
purpose), then the Credit Parties' compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective, until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Borrowers and the Required Lenders.
The Borrowers shall deliver to the Administrative Agent and each Lender
at the same time as the delivery of any annual or quarterly financial statements
given in accordance with the provisions of Section 5.1, (i) a description in
reasonable detail of any material change in the application of accounting
principles employed in the preparation of such financial statements from those
applied in the most recently preceding quarterly or annual financial statements
as to which no objection shall have been made in accordance with the provisions
above and (ii) a reasonable estimate of the effect on the financial statements
on account of such changes in application.
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ARTICLE II
THE LOANS; AMOUNT AND TERMS
SECTION 2.1 REVOLVING LOANS.
(a) U.S. Revolving Commitment. During the Commitment Period,
subject to the terms and conditions hereof, each Lender severally
agrees to make revolving credit loans ("U.S. Revolving Loans") to the
U.S. Borrowers from time to time for the purposes hereinafter set
forth; provided, however, that (i) with regard to each Lender
individually, the sum of such Lender's share of outstanding U.S.
Revolving Loans plus the Dollar Equivalent of such Lender's Revolving
Commitment Percentage of U.K. Revolving Loans plus such Lender's
Revolving Commitment Percentage of Swingline Loans plus such Lender's
LOC Commitment Percentage of LOC Obligations shall not exceed such
Lender's Revolving Commitment Percentage of the aggregate Revolving
Committed Amount, and (ii) with regard to the Lenders collectively, the
sum of the aggregate amount of outstanding U.S. Revolving Loans plus
the Dollar Equivalent of outstanding U.K. Revolving Loans plus
Swingline Loans plus LOC Obligations shall not exceed the Revolving
Committed Amount. For purposes hereof, the aggregate amount available
hereunder shall be SIXTY MILLION DOLLARS ($60,000,000) (as such
aggregate maximum amount may be reduced from time to time as provided
in Section 2.7, the "Revolving Committed Amount"). U.S. Revolving Loans
may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a
combination thereof, as the U.S. Borrowers may request, and may be
repaid and reborrowed in accordance with the provisions hereof. LIBOR
Rate Loans shall be made by each Lender at its LIBOR Lending Office and
Alternate Base Rate Loans at its Domestic Lending Office.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The U.S. Borrowers shall
request a U.S. Revolving Loan borrowing by written notice (or
telephone notice promptly confirmed in writing which
confirmation may be by fax) to the Administrative Agent not
later than 11:00 A.M. (Charlotte, North Carolina time) on the
date of the requested borrowing in the case of Alternate Base
Rate Loans, and on the third Business Day prior to the date of
the requested borrowing in the case of LIBOR Rate Loans. Each
such request for borrowing shall be irrevocable and shall
specify (A) that a U.S. Revolving Loan is requested, (B) the
applicable Borrower, (C) the date of the requested borrowing
(which shall be a Business Day), (D) the aggregate principal
amount to be borrowed, and (E) whether the borrowing shall be
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comprised of Alternate Base Rate Loans, LIBOR Rate Loans or a
combination thereof, and if LIBOR Rate Loans are requested,
the Interest Period(s) therefor. A form of Notice of Borrowing
(a "Notice of Borrowing") is attached as Schedule 2.1(b)(i).
If the U.S. Borrowers shall fail to specify in any such Notice
of Borrowing (I) an applicable Interest Period in the case of
a LIBOR Rate Loan, then such notice shall be deemed to be a
request for an Interest Period of one month, or (II) the type
of U.S. Revolving Loan requested, then such notice shall be
deemed to be a request for an Alternate Base Rate Loan
hereunder. The Administrative Agent shall give notice to each
Lender promptly upon receipt of each Notice of Borrowing, the
contents thereof and each such Lender's share thereof. All
U.S. Revolving Loans made on the Closing Date shall bear
interest at the Alternate Base Rate until three (3) Business
Days after the Closing Date.
(ii) Minimum Amounts. Each U.S. Revolving Loan borrowing
shall be in a minimum aggregate amount of $3,000,000 and
integral multiples of $1,000,000 in excess thereof (or the
remaining amount of the Revolving Committed Amount, if less).
(iii) Advances. Each Lender will make its Revolving
Commitment Percentage of each U.S. Revolving Loan borrowing
available to the Administrative Agent for the account of the
U.S. Borrowers at the office of the Administrative Agent
specified in Schedule 9.2, or at such other office as the
Administrative Agent may designate in writing, by 1:00 P.M.
(Charlotte, North Carolina time) on the date specified in the
applicable Notice of Borrowing in Dollars and in funds
immediately available to the Administrative Agent. Such
borrowing will then be made available to the U.S. Borrowers by
the Administrative Agent by crediting the account of the U.S.
Borrowers on the books of such office with the aggregate of
the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative
Agent.
(c) Repayment. The principal amount of all U.S. Revolving
Loans shall be due and payable in full on the Revolving Commitment
Termination Date.
(d) Interest. Subject to the provisions of Section 2.10, U.S.
Revolving Loans shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as U.S.
Revolving Loans shall be comprised of Alternate Base Rate
Loans, each such Alternate Base Rate Loan shall bear interest
at a per annum rate equal to the sum of the Alternate Base
Rate plus the Applicable Percentage; and
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(ii) LIBOR Rate Loans. During such periods as U.S.
Revolving Loans shall be comprised of LIBOR Rate Loans, each
such LIBOR Rate Loan shall bear interest at a per annum rate
equal to the sum of the LIBOR Rate plus the Applicable
Percentage.
Interest on U.S. Revolving Loans shall be payable in arrears on each
Interest Payment Date.
(e) U.S. Revolving Notes. Each Lender's Revolving Commitment
Percentage of the U.S. Revolving Loans shall be evidenced by a duly
executed promissory note of the U.S. Borrowers to such Lender in
substantially the form of Schedule 2.1(e).
SECTION 2.2 SWINGLINE LOAN SUBFACILITY.
(a) Swingline Commitment. During the Commitment Period,
subject to the terms and conditions hereof, the Swingline Lender, in
its individual capacity, agrees to make certain revolving credit loans
to the U.S. Borrowers (each a "Swingline Loan" and, collectively, the
"Swingline Loans") for the purposes hereinafter set forth; provided,
however, (i) the aggregate amount of Swingline Loans outstanding at any
time shall not exceed THREE MILLION DOLLARS ($3,000,000) (the
"Swingline Committed Amount"), and (ii) the sum of the aggregate amount
of outstanding U.S. Revolving Loans plus the Dollar Equivalent of U.K.
Revolving Loans plus Swingline Loans plus LOC Obligations shall not
exceed the Revolving Committed Amount. Swingline Loans hereunder may be
repaid and reborrowed in accordance with the provisions hereof.
(B) SWINGLINE LOAN BORROWINGS.
(i) Notice of Borrowing and Disbursement. The Swingline
Lender will make Swingline Loans available to the U.S.
Borrowers on any Business Day upon request made by the U.S.
Borrowers not later than 12:00 Noon (Charlotte, North Carolina
time) on such Business Day. A notice of request for Swingline
Loan borrowing shall be made in the form of Schedule 2.1(b)(i)
with appropriate modifications. Swingline Loan borrowings
hereunder shall be made in minimum amounts of $100,000 and in
integral amounts of $100,000 in excess thereof.
(ii) Repayment of Swingline Loans. Each Swingline Loan
borrowing shall be due and payable on the Revolving Commitment
Termination Date. The Swingline Lender may, at any time, in
its sole
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discretion, by written notice to the U.S. Borrowers and the
Administrative Agent, demand repayment of its Swingline Loans
by way of a Revolving Loan borrowing, in which case the U.S.
Borrowers shall be deemed to have requested a Revolving Loan
borrowing comprised entirely of Alternate Base Rate Loans in
the amount of such Swingline Loans; provided, however, that,
in the following circumstances, any such demand shall also be
deemed to have been given one Business Day prior to each of
(i) the Revolving Commitment Termination Date, (ii) the
occurrence of any Event of Default described in Section
7.1(e), (iii) upon acceleration of the Credit Party
Obligations hereunder, whether on account of an Event of
Default described in Section 7.1(e) or any other Event of
Default, and (iv) the exercise of remedies in accordance with
the provisions of Section 7.2 hereof (each such Revolving Loan
borrowing made on account of any such deemed request therefor
as provided herein being hereinafter referred to as a
"Mandatory Borrowing"). Each Lender hereby irrevocably and
severally agrees to make such Revolving Loans promptly upon
any such request or deemed request on account of each
Mandatory Borrowing in the amount and in the manner specified
in the preceding sentence and on the same such date
notwithstanding (I) the amount of Mandatory Borrowing may not
comply with the minimum amount for borrowings of Revolving
Loans otherwise required hereunder, (II) whether any
conditions specified in Section 4.2 are then satisfied, (III)
whether a Default or an Event of Default then exists, (IV)
failure of any such request or deemed request for Revolving
Loans to be made by the time otherwise required in Section
2.1(b)(i), (V) the date of such Mandatory Borrowing, or (VI)
any reduction in the Revolving Committed Amount or termination
of the Revolving Commitments immediately prior to such
Mandatory Borrowing or contemporaneously therewith. In the
event that any Mandatory Borrowing cannot for any reason be
made on the date otherwise required above (including, without
limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to the U.S. Borrowers),
then each Lender hereby agrees that it shall forthwith
purchase (as of the date the Mandatory Borrowing would
otherwise have occurred, but adjusted for any payments
received from the U.S. Borrowers on or after such date and
prior to such purchase) from the Swingline Lender such
participations in the outstanding Swingline Loans as shall be
necessary to cause each such Lender to share in such Swingline
Loans ratably based upon its respective Revolving Commitment
Percentage (determined before giving effect to any termination
of the Commitments pursuant to Section 7.2), provided that (A)
all interest payable on the Swingline Loans shall be for the
account of the Swingline Lender until the date as of which the
respective participation is purchased, and (B) at the time any
purchase of participations pursuant to
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this sentence is actually made, the purchasing Lender shall be
required to pay to the Swingline Lender interest on the
principal amount of such participation purchased for each day
from and including the day upon which the Mandatory Borrowing
would otherwise have occurred to but excluding the date of
payment for such participation, at the rate equal to, if paid
within two (2) Business Days of the date of the Mandatory
Borrowing, the Federal Funds Effective Rate, and thereafter at
a rate equal to the Alternate Base Rate.
(c) Interest on Swingline Loans. Subject to the provisions of
Section 2.10, Swingline Loans shall bear interest at a per annum rate
equal to the Alternate Base Rate plus the Applicable Percentage for
Revolving Loans that are Alternate Base Rate Loans. Interest on
Swingline Loans shall be payable in arrears on each Interest Payment
Date.
(d) Swingline Note. The Swingline Loans shall be evidenced by
a duly executed promissory note of the U.S. Borrowers to the Swingline
Lender in the original amount of the Swingline Committed Amount and
substantially in the form of Schedule 2.3(d).
SECTION 2.3 LETTER OF CREDIT SUBFACILITY.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require, during the Commitment Period
the Issuing Lender shall issue, and the Lenders shall participate in,
Letters of Credit for the account of the U.S. Borrowers from time to
time upon request in a form acceptable to the Issuing Lender; provided,
however, that (i) the aggregate amount of LOC Obligations shall not at
any time exceed TEN MILLION DOLLARS ($10,000,000) (the "LOC Committed
Amount"), (ii) the sum of the aggregate amount of U.S. Revolving Loans
plus the Dollar Equivalent of U.K. Revolving Loans plus Swingline Loans
plus LOC Obligations shall not at any time exceed the Revolving
Committed Amount, (iii) all Letters of Credit shall be denominated in
Dollars and (iv) Letters of Credit shall be issued for the purpose of
supporting tax-advantaged variable rate demand note financing and for
other lawful corporate purposes and may be issued as standby letters of
credit, including in connection with workers' compensation and other
insurance programs, and trade letters of credit. Except as otherwise
expressly agreed upon by all the Lenders, no Letter of Credit shall
have an original expiry date more than twelve (12) months from the date
of issuance or later than March 21, 2004; provided, however, so long as
no Default or Event of Default has occurred and is continuing and
subject to the other terms and conditions to the issuance of Letters of
Credit hereunder, the expiry dates of
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Letters of Credit may be extended annually or periodically from time to
time on the request of the U.S. Borrowers or by operation of the terms
of the applicable Letter of Credit to a date not more than twelve (12)
months from the date of extension; provided, further, that no Letter of
Credit, as originally issued or as extended, shall have an expiry date
extending beyond the Revolving Commitment Termination Date. Each Letter
of Credit shall comply with the related LOC Documents. The issuance and
expiry date of each Letter of Credit shall be a Business Day. Any
Letters of Credit issued hereunder shall be in a minimum original face
amount of $150,000. There will be no more than 10 Letters of Credit
outstanding at any time. First Union shall be the Issuing Lender on all
Letters of Credit issued after the Closing Date.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Lender at least
three (3) Business Days prior to the requested date of issuance. The
Issuing Lender will promptly upon request provide to the Administrative
Agent for dissemination to the Lenders a detailed report specifying the
Letters of Credit which are then issued and outstanding and any
activity with respect thereto which may have occurred since the date of
any prior report, and including therein, among other things, the
account party, the beneficiary, the face amount, expiry date as well as
any payments or expirations which may have occurred. The Issuing Lender
will further provide to the Administrative Agent promptly upon request
copies of the Letters of Credit. The Issuing Lender will provide to the
Administrative Agent promptly upon request a summary report of the
nature and extent of LOC Obligations then outstanding.
(c) Participations. Each Lender upon issuance of a Letter of
Credit shall be deemed to have purchased without recourse a risk
participation from the Issuing Lender in such Letter of Credit and the
obligations arising thereunder and any collateral relating thereto, in
each case in an amount equal to its LOC Commitment Percentage of the
obligations under such Letter of Credit and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its LOC Commitment Percentage of the obligations
arising under such Letter of Credit. Without limiting the scope and
nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required
hereunder or under any LOC Document, each such Lender shall pay to the
Issuing Lender its LOC Commitment Percentage of such unreimbursed
drawing in same day funds on the day of notification by the Issuing
Lender of an unreimbursed drawing pursuant to the provisions of
subsection (d) hereof. The obligation of each Lender to so reimburse
the Issuing Lender shall be absolute and unconditional and shall not be
affected by the occurrence of a Default, an Event of
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Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the U.S. Borrowers to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the U.S.
Borrowers and the Administrative Agent. The U.S. Borrowers jointly and
severally shall reimburse the Issuing Lender on the day of drawing
under any Letter of Credit (either with the proceeds of a Swingline
Loan or Revolving Loan obtained hereunder or otherwise) in same day
funds as provided herein or in the LOC Documents. If the U.S. Borrowers
shall fail to reimburse the Issuing Lender as provided herein, the
unreimbursed amount of such drawing shall bear interest at a per annum
rate equal to the Alternate Base Rate plus two percent (2%). Unless the
U.S. Borrowers shall immediately notify the Issuing Lender and the
Administrative Agent of its intent to otherwise reimburse the Issuing
Lender, the U.S. Borrowers shall be deemed to have requested a
Swingline Loan, or if and to the extent Swingline Loans shall not be
available, a Revolving Loan in the amount of the drawing as provided in
subsection (e) hereof, the proceeds of which will be used to satisfy
the reimbursement obligations. The U.S. Borrowers' reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of set-off, counterclaim or
defense to payment the U.S. Borrowers may claim or have against the
Issuing Lender, the Administrative Agent, the Lenders, the beneficiary
of the Letter of Credit drawn upon or any other Person, including
without limitation any defense based on any failure of the U.S.
Borrowers to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing
Lender will promptly notify the other Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay to the
Administrative Agent for the account of the Issuing Lender in Dollars
and in immediately available funds, the amount of such Lender's LOC
Commitment Percentage of such unreimbursed drawing. Such payment shall
be made on the day such notice is received by such Lender from the
Issuing Lender if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time), otherwise such payment shall be made
at or before 12:00 Noon (Charlotte, North Carolina time) on the
Business Day next succeeding the day such notice is received. If such
Lender does not pay such amount to the Issuing Lender in full upon such
request, such Lender shall, on demand, pay to the Administrative Agent
for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Lender pays
such amount to the Issuing Lender in full at a rate per annum equal to,
if paid within two (2) Business Days of the date of drawing, the
Federal Funds Effective Rate and thereafter at a rate equal to the
Alternate Base Rate. Each Lender's obligation to make such
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payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and without regard to the
termination of this Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
Credit Party Obligations hereunder and shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) Repayment with Revolving Loans. On any day on which the
U.S. Borrowers shall have requested, or been deemed to have requested,
(i) a Swingline Loan borrowing to reimburse a drawing under a Letter of
Credit, the Swingline Lender shall make the Swingline Loan advance
pursuant to the terms of the request or deemed request in accordance
with the provisions for Swingline Loan advances hereunder, or (ii) a
Revolving Loan to reimburse a drawing under a Letter of Credit, the
Administrative Agent shall give notice to the Lenders that a Revolving
Loan has been requested or deemed requested in connection with a
drawing under a Letter of Credit, in which case a Revolving Loan
borrowing comprised entirely of Alternate Base Rate Loans (each such
borrowing, a "Mandatory Borrowing") shall be immediately made (without
giving effect to any termination of the Commitments pursuant to Section
7.2) pro rata based on each Lender's respective Revolving Commitment
Percentage (determined before giving effect to any termination of the
Commitments pursuant to Section 7.2) and in the case of both clauses
(i) and (ii) the proceeds thereof shall be paid directly to the Issuing
Lender for application to the respective LOC Obligations. Each Lender
hereby irrevocably agrees to make such Revolving Loans immediately upon
any such request or deemed request on account of each Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the same such date notwithstanding (i) the amount of
Mandatory Borrowing may not comply with the minimum amount for
borrowings of Revolving Loans otherwise required hereunder, (ii)
whether any conditions specified in Section 4.2 are then satisfied,
(iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Revolving Loan to be
made by the time otherwise required in Section 2.1(b), (v) the date of
such Mandatory Borrowing, or (vi) any reduction in the Revolving
Committed Amount after any such Letter of Credit may have been drawn
upon; provided, however, that in the event any such Mandatory Borrowing
should be less than the minimum amount for borrowings of Revolving
Loans otherwise provided in Section 2.1(b)(ii), the U.S. Borrowers
shall jointly and severally pay to the Administrative Agent for its own
account an administrative fee of $500. In the event that any Mandatory
Borrowing cannot for any reason be made on the date otherwise required
above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to the U.S.
Borrowers), then each such Lender hereby agrees that it shall forthwith
fund (as of the date the Mandatory Borrowing would
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otherwise have occurred, but adjusted for any payments received from
the U.S. Borrowers on or after such date and prior to such purchase)
its Participation Interests in the outstanding LOC Obligations;
provided, further, that in the event any Lender shall fail to fund its
Participation Interest on the day the Mandatory Borrowing would
otherwise have occurred, then the amount of such Lender's unfunded
Participation Interest therein shall bear interest payable to the
Issuing Lender upon demand, at the rate equal to, if paid within two
(2) Business Days of such date, the Federal Funds Effective Rate, and
thereafter at a rate equal to the Alternate Base Rate.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender shall
have the Letters of Credit be subject to The Uniform Customs and
Practice for Documentary Credits, as published as of the date of issue
by the International Chamber of Commerce (the "UCP"), in which case the
UCP may be incorporated therein and deemed in all respects to be a part
thereof.
SECTION 2.4 U.K. REVOLVING LOAN SUBFACILITY.
(a) U.K. Revolving Loan Commitment. During the Commitment
Period, subject to the terms and conditions hereof, the U.K. Lender, in
its individual capacity, agrees to make certain revolving credit loans
to the U.K. Borrower (each a "U.K. Revolving Loan" and, collectively,
the "U.K. Revolving Loans") for the purposes hereinafter set forth;
provided, however, (i) the aggregate amount of U.K. Revolving Loans
outstanding at any time shall not exceed the Dollar Equivalent of TEN
MILLION DOLLARS ($10,000,000) (the "U.K. Revolving Committed Amount"),
and (ii) the sum of the aggregate amount of outstanding U.S. Revolving
Loans plus the Dollar Equivalent of U.K. Revolving Loans plus Swingline
Loans plus LOC Obligations shall not exceed the Revolving Committed
Amount. U.K. Revolving Loans hereunder may be repaid and reborrowed in
accordance with the provisions hereof.
(b) U.K. Revolving Loan Borrowings.
(i) Notice of Borrowing. The U.K. Borrower shall request a
U.K. Revolving Loan borrowing by written notice (or telephone
notice promptly confirmed in writing which confirmation may be
by fax) to the Administrative Agent not later than 11:00 A.M.
(Charlotte, North Carolina
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time) on the third Business Day prior to the date of the
requested borrowing. Each such request for borrowing shall be
irrevocable and shall specify (A) that a U.K. Revolving Loan
is requested, (B) the date of the requested borrowing (which
shall be a Business Day), (C) the aggregate principal amount
to be borrowed and (D) the Interest Period(s) therefor. A form
of Notice of Borrowing (a "Notice of Borrowing") is attached
as Schedule 2.4(b)(i). If the U.K. Borrower shall fail to
specify in any such Notice of Borrowing an applicable Interest
Period, then such notice shall be deemed to be a request for
an Interest Period of one month.
(ii) Repayment of U.K. Revolving Loans. The principal
amount of all U.K. Revolving Loans shall be due and payable on
the Revolving Commitment Termination Date. Upon (A) the
occurrence of any Event of Default described in Section
7.1(e), (B) acceleration of the Credit Party Obligations
hereunder, whether on account of an Event of Default described
in Section 7.1(e) or any other Event of Default, and (C) the
exercise of remedies in accordance with the provisions of
Section 7.2 hereof, each Lender hereby irrevocably agrees to
make its Revolving Commitment Percentage of U.K. Revolving
Loans then outstanding in British Pounds Sterling to the U.K.
Lender promptly upon any such request by the Administrative
Agent on the same such date notwithstanding (I) the amount of
such U.K. Revolving Loans may not comply with the minimum
amount for borrowings of U.K. Revolving Loans otherwise
required hereunder, (II) whether any conditions specified in
Section 4.2 are then satisfied, (III) failure of any such
request or deemed request for U.K. Revolving Loans to be made
by the time otherwise required in Section 2.4(b)(i), (IV) the
date of such request for U.K. Revolving Loans, or (V) any
reduction in the Revolving Committed Amount or termination of
the Revolving Commitments immediately prior to such borrowing
or contemporaneously therewith. In the event that any U.K.
Revolving Loans cannot for any reason be made on the date
otherwise required above (including, without limitation, as a
result of the commencement of a proceeding under the
Bankruptcy Code with respect to the U.K. Borrower), then each
Lender hereby agrees that it shall forthwith purchase (as of
the date the requested U.K. Revolving Loan would otherwise
have occurred, but adjusted for any payments received from the
Borrowers on or after such date and prior to such purchase)
from the U.K. Lender such participations in the outstanding
U.K. Revolving Loans as shall be necessary to cause each such
Lender to share in such U.K. Revolving Loans ratably based
upon its respective Revolving Commitment Percentage
(determined before giving effect to any termination of the
Commitments pursuant to Section 7.2), provided that (A) all
interest payable on the U.K. Revolving Loans
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shall be for the account of the U.K. Lender until the date as
of which the respective participation is purchased, and (B) at
the time any purchase of participations pursuant to this
sentence is actually made, the Purchasing Lender shall be
required to pay to the U.K. Lender interest on the principal
amount of such participation purchased for each day from and
including the day upon which the U.K. Revolving Loans would
otherwise have occurred to but excluding the date of payment
for such participation, at the rate equal to, if paid within
two (2) Business Days of the date of the requested U.K.
Revolving Loan, the Federal Funds Effective Rate, and
thereafter at a rate equal to the Alternate Base Rate.
(c) Conversion. Notwithstanding anything herein to the
contrary, during the existence of an Event of Default, upon the request
of any Lender, all or any part of any outstanding U.K. Revolving Loans
shall be redenominated and converted into Alternate Base Rate Loans in
Dollars with effect from the last day of the Interest Period with
respect to such U.K. Revolving Loans. The Administrative Agent will
promptly notify the Borrowers and each Lender affected thereby of any
request pursuant to the foregoing sentence.
(d) Interest on U.K. Revolving Loans. Subject to the
provisions of Section 2.10, U.K. Revolving Loans shall bear interest at
a per annum rate equal to the LIBOR Rate plus the Applicable
Percentage.
(e) U.K. Revolving Note. The U.K. Revolving Loans shall be
evidenced by a duly executed promissory note of the U.K. Borrower to
the U.K. Lender in the original amount of the U.K. Revolving Committed
Amount and substantially in the form of Schedule 2.4(e).
SECTION 2.5 TERM LOAN.
(a) Term Loan. Subject to the terms and conditions hereof and
in reliance upon the representations and warranties set forth herein,
each Lender severally agrees to make available to the U.S. Borrowers on
the Closing Date such Lender's Term Loan Commitment Percentage of a
term loan in Dollars (the "Term Loan") in the aggregate principal
amount of ONE HUNDRED FIFTEEN MILLION DOLLARS ($115,000,000) (the "Term
Loan Committed Amount") for the purposes hereinafter set forth. The
Term Loan may consist of Alternate Base Rate Loans or LIBOR Rate Loans,
or a combination thereof, as the U.S. Borrowers may request; provided
that the Term Loans made on the Closing Date shall bear interest at the
Alternate Base Rate until three (3) Business Days after the Closing
Date. The U.S. Borrowers shall request the initial Term Loan borrowing
by written notice (or telephone notice promptly confirmed in writing
which
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<PAGE> 44
confirmation may be by fax) to the Administrative Agent not later than
11:00 A.M. (Charlotte, North Carolina time) on the Business Day prior
to the date of requested borrowing. Amounts repaid on the Term Loan may
not be reborrowed. LIBOR Rate Loans shall be made by each Lender at its
LIBOR Lending Office and Alternate Base Rate Loans at its Domestic
Lending Office.
(b) Repayment of Term Loan. The principal amount of the Term
Loan shall be repaid in fifteen (15) consecutive fiscal quarterly
installments as follows, unless accelerated sooner pursuant to Section
7.2:
================================ ==============================
PRINCIPAL AMORTIZATION TERM LOAN PRINCIPAL
PAYMENT DATES AMORTIZATION PAYMENT
-------------------------------- ------------------------------
June 30, 1999 $0
-------------------------------- ------------------------------
September 30, 1999 $0
-------------------------------- ------------------------------
December 31, 1999 $0
-------------------------------- ------------------------------
March 31, 2000 $0
-------------------------------- ------------------------------
June 30, 2000 $5,750,000
-------------------------------- ------------------------------
September 30, 2000 $5,750,000
-------------------------------- ------------------------------
December 31, 2000 $5,750,000
-------------------------------- ------------------------------
March 31, 2001 $5,750,000
-------------------------------- ------------------------------
June 30, 2001 $7,187,500
-------------------------------- ------------------------------
September 30, 2001 $7,187,500
-------------------------------- ------------------------------
December 31, 2001 $7,187,500
-------------------------------- ------------------------------
March 31, 2002 $7,187,500
-------------------------------- ------------------------------
June 30, 2002 $7,187,500
-------------------------------- ------------------------------
September 30, 2002 $7,187,500
-------------------------------- ------------------------------
December 31, 2002 $7,187,500
-------------------------------- ------------------------------
March 31, 2003 $7,187,500
-------------------------------- ------------------------------
June 30, 2003 $8,625,000
-------------------------------- ------------------------------
September 30, 2003 $8,625,000
-------------------------------- ------------------------------
December 31, 2003 $8,625,000
-------------------------------- ------------------------------
March 31, 2004 $8,625,000
================================ ==============================
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<PAGE> 45
(c) Interest on the Term Loan. Subject to the provisions of Section
2.10, the Term Loan shall bear interest as follows:
(i) Alternate Base Rate Loans. During such periods as the Term Loan
shall be comprised of Alternate Base Rate Loans, each such Alternate
Base Rate Loan shall bear interest at a per annum rate equal to the sum
of the Alternate Base Rate plus the Applicable Percentage; and
(ii) LIBOR Rate Loans. During such periods as the Term Loan shall
be comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear
interest at a per annum rate equal to the sum of the LIBOR Rate plus
the Applicable Percentage.
Interest on the Term Loan shall be payable in arrears on each
Interest Payment Date.
(d) Term Notes. Each Lender's Term Loan Commitment Percentage of the
Term Loan outstanding as of the Closing Date shall be evidenced by a duly
executed promissory note of the U.S. Borrowers to such Lender in substantially
the form of Schedule 2.5(d).
SECTION 2.6 FEES.
(a) Commitment Fee. In consideration of the Revolving Commitment, the
Borrowers jointly and severally agree to pay to the Administrative Agent for the
ratable benefit of the Lenders a commitment fee (the "Commitment Fee") in an
amount equal to the Applicable Percentage per annum on the average daily unused
amount of the aggregate Revolving Committed Amount. For purposes of computing
the Commitment Fee hereunder, Swingline Loans and Letters of Credit shall be
considered usage under the aggregate Revolving Committed Amount but U.K.
Revolving Loans shall not be considered usage under the Revolving Committed
Amount. The Commitment Fee shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter for the prior calendar quarter
and on the Revolving Commitment Termination Date.
(b) Letter of Credit Fees. In consideration of the LOC Commitments, the
Borrowers jointly and severally agree to pay to the Issuing Lender a fee (the
"Letter of Credit Fee") equal to the Applicable Percentage per annum on the
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<PAGE> 46
average daily maximum amount available to be drawn under each Letter of Credit
from the date of issuance to the date of expiration. In addition to such Letter
of Credit Fee, the Issuing Lender may charge, and retain for its own account
without sharing by the other Lenders, an additional facing fee of one-eighth of
one percent (1/8%) per annum on the average daily maximum amount available to be
drawn under each such Letter of Credit issued by it. The Issuing Lender shall
promptly pay over to the Administrative Agent for the ratable benefit of the
Lenders (including the Issuing Lender) the Letter of Credit Fee. The Letter of
Credit Fee shall be payable quarterly in arrears on the 15th day following the
last day of each calendar quarter for the prior calendar quarter and on the
Revolving Commitment Termination Date.
(c) Issuing Lender Fees. In addition to the Letter of Credit Fees
payable pursuant to subsection (b) hereof, the Borrowers jointly and severally
shall pay to the Issuing Lender for its own account without sharing by the other
Lenders the reasonable and customary charges from time to time of the Issuing
Lender with respect to the amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit (collectively, the
"Issuing Lender Fees").
(d) Administrative Fee. The Borrowers jointly and severally agree to
pay to the Administrative Agent the annual administrative fee as described in
the Fee Letter.
SECTION 2.7 COMMITMENT REDUCTIONS.
(a) Voluntary Reductions. The Borrowers shall have the right to
terminate or permanently reduce the unused portion of the Revolving Committed
Amount at any time or from time to time upon not less than five Business Days'
prior notice to the Administrative Agent (which shall notify the Lenders thereof
as soon as practicable) of each such termination or reduction, which notice
shall specify the effective date thereof and the amount of any such reduction
which shall be in a minimum amount of $3,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall be irrevocable and effective upon receipt
by the Administrative Agent, provided that no such reduction or termination
shall be permitted if after giving effect thereto, and to any prepayments of the
Revolving Loans made on the effective date thereof, the sum of the then
outstanding aggregate principal amount of the U.S. Revolving Loans plus the
Dollar Equivalent of U.K. Revolving Loans plus Swingline Loans plus LOC
Obligations would exceed the Revolving Committed Amount.
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<PAGE> 47
(b) Mandatory Reductions. On any date that the Revolving Loans are
required to be prepaid pursuant to the terms of Section 2.8(b) (ii), (iii) and
(iv), the Revolving Committed Amount shall be automatically permanently reduced
by the amount of such required prepayment and/or reduction.
(c) Revolving Commitment Termination Date. The Revolving Commitment,
the LOC Commitment and the Swingline Commitment shall automatically terminate on
the Revolving Commitment Termination Date.
SECTION 2.8 PREPAYMENTS.
(a) Optional Prepayments. The Borrowers shall have the right to prepay
Loans in whole or in part from time to time; provided, however, that each
partial prepayment of U.S. Revolving Loans and Term Loans shall be in a minimum
principal amount of $3,000,000 and integral multiples of $1,000,000 in excess
thereof, each partial prepayment of U.K. Revolving Loans shall be in a minimum
principal amount of $350,000 and integral multiples of $200,000 in excess
thereof, and each prepayment of Swingline Loans shall be in a minimum principal
amount of $100,000 and integral multiples of $100,000 in excess thereof. The
Borrowers shall give three Business Days' irrevocable notice (a "Notice of
Payment") in the case of LIBOR Rate Loans and one Business Day's irrevocable
notice in the case of Alternate Base Rate Loans to the Administrative Agent
(which shall notify the Lenders thereof as soon as practicable). A form of such
Notice of Prepayment is attached as Schedule 2.8. Subject to the foregoing
terms, amounts prepaid under this Section 2.8(a) shall be applied as the
Borrowers may elect; provided that if the Borrowers fail to specify the
application of an optional prepayment then such prepayment shall be applied
first to Revolving Loans and then pro rata to the remaining principal
installments of the Term Loans, in each case first to Alternate Base Rate Loans
and then to LIBOR Rate Loans in direct order of Interest Period maturities. All
prepayments under this Section 2.8(a) shall be subject to Section 2.18, but
otherwise without premium or penalty. Interest on the principal amount prepaid
shall be payable on the next occurring Interest Payment Date that would have
occurred had such loan not been prepaid or, at the request of the Administrative
Agent, interest on the principal amount prepaid shall be payable on any date
that a prepayment is made hereunder to the date of prepayment. Amounts prepaid
on the Swingline Loan and the Revolving Loans may be reborrowed in accordance
with the terms hereof. Amounts prepaid on the Term Loans may not be reborrowed.
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(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time after the Closing
Date, the sum of the aggregate principal amount of outstanding U.S.
Revolving Loans plus the Dollar Equivalent of U.K. Revolving Loans plus
Swingline Loans plus LOC Obligations shall exceed the Revolving
Committed Amount, the Borrowers immediately (except as provided for in
subsection (c) below) shall prepay the Revolving Loans and (after all
Revolving Loans have been repaid) cash collateralize the LOC
Obligations, in an amount sufficient to eliminate such excess.
(ii) Asset Dispositions. Promptly following any Asset Disposition
in excess of $1,000,000 for all such Asset Dispositions occurring
during the term of this Agreement which are not applied to repair or
replace damaged property or to purchase or otherwise acquire new assets
or property within 180 days following the receipt by a Credit Party of
such cash proceeds, the Borrowers shall prepay the Loans in an
aggregate amount equal to one hundred percent (100%) of the Net Cash
Proceeds derived from such Asset Disposition (such prepayment to be
applied as set forth in clause (vi) below).
(iii) Debt Issuances. Immediately upon receipt by any Credit Party
of proceeds from any Debt Issuance (other than the issuance of
Subordinated Debt), the Borrowers shall prepay the Loans in an
aggregate amount equal to one hundred percent (100%) of the Net Cash
Proceeds of such Debt Issuance to the Lenders (such prepayment to be
applied as set forth in clause (vi) below).
(iv) Equity Issuances. Immediately upon receipt by any Credit Party
of proceeds from any Equity Issuance (excluding capital stock issued
for acquisitions permitted under Section 6.5(b) or employee stock
programs), the Borrowers shall prepay the Loans in an aggregate amount
equal to fifty percent (50%) of such cash proceeds to the Lenders (such
prepayment to be applied as set forth in (vi) below).
(v) Recovery Event. To the extent of cash proceeds received in
connection with a Recovery Event which are in excess of $1,000,000 in
the aggregate and which are not applied to repair or replace damaged
property or to purchase or otherwise acquire new assets or property
within 180 days following the receipt by a Credit Party of such cash
proceeds, the Borrowers shall prepay the Loans in an aggregate amount
equal to one-
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<PAGE> 49
hundred percent (100%) of such cash proceeds to the Lenders (such
prepayment to be applied as set forth in clause (vi) below).
(vi) Application of Mandatory Prepayments. All amounts required to
be paid pursuant to this Section 2.8(b) shall be applied as follows:
(A) with respect to all amounts prepaid pursuant to Section 2.8(b)(i),
to Revolving Loans and (after all Revolving Loans have been repaid) to
a cash collateral account in respect of LOC Obligations and (B) with
respect to all amounts prepaid pursuant to Sections 2.8(b)(ii) through
(vi), (1) first pro rata to the Term Loans (ratably to the remaining
principal installments thereof) and (2) second to the Revolving Loans
and (after all Revolving Loans have been repaid) to a cash collateral
account in respect of LOC Obligations. Within the parameters of the
applications set forth above, prepayments shall be applied first to
Alternate Base Rate Loans and then to LIBOR Rate Loans in direct order
of Interest Period maturities. All prepayments under this Section
2.8(b) shall be subject to Section 2.18 and be accompanied by interest
on the principal amount prepaid to the date of prepayment.
(c) Currency Exchange Fluctuation. If on any date the Administrative
Agent shall have determined (it being agreed that a determination date shall
occur at least upon any U.K. Revolving Loan borrowing, any continuation of U.K.
Revolving Loans or upon the request of the Required Lenders) that the aggregate
principal amount of outstanding U.S. Revolving Loans plus the Dollar Equivalent
of U.K. Revolving Loans plus Swingline Loans plus LOC Obligations exceeds the
Revolving Committed Amount by more than U.S. $50,000 due to a change in
applicable rates of exchange between Dollars, on the one hand, and British
Pounds Sterling on the other hand, then the Administrative Agent shall give
notice to the Borrowers that a prepayment is required under this subsection, and
the Borrowers jointly and severally agree thereupon to make prepayments of the
Revolving Loans such that, after giving effect to such prepayment, the aggregate
principal amount of outstanding U.S. Revolving Loans plus the Dollar Equivalent
of U.K. Revolving Loans plus Swingline Loans plus LOC obligations does not
exceed the Revolving Committed Amount.
SECTION 2.9 MINIMUM PRINCIPAL AMOUNT OF TRANCHES.
All borrowings, payments and prepayments in respect of U.S. Revolving
Loans and Term Loans shall be in such amounts and be made pursuant to such
elections so that after giving effect thereto the aggregate principal amount of
the U.S. Revolving Loans and Term Loans comprising any Tranche shall not be less
than $3,000,000 or a whole multiple of $1,000,000 in excess thereof. All
borrowings, payments and prepayments in
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<PAGE> 50
respect of U.K. Revolving Loans shall be in such amounts and be made pursuant to
such elections that after giving effect thereto the aggregate principal amount
of the U.K. Revolving Loans comprising any Tranche shall not be less than
$350,000 or a whole multiple of $200,000 in excess thereof.
SECTION 2.10 DEFAULT RATE AND PAYMENT DATES.
Upon the occurrence, and during the continuance, of an Event of
Default, the principal of and, to the extent permitted by law, interest on the
Loans and any other amounts owing hereunder or under the other Credit Documents
shall bear interest, payable on demand, at a per annum rate 2% greater than the
Alternate Base Rate plus the Applicable Percentage then in effect, or in the
case of U.K. Revolving Loans, at a per annum rate 3% greater than the LIBOR Rate
plus the Applicable Percentage then in effect.
SECTION 2.11 CONVERSION OPTIONS.
(a) The Borrowers may, in the case of Revolving Loans and the
Term Loans, elect from time to time to convert Alternate Base Rate
Loans to LIBOR Rate Loans, by giving the Administrative Agent at least
three Business Days' prior irrevocable written notice of such election.
A form of Notice of Conversion/Extension is attached as Schedule 2.11.
If the date upon which an Alternate Base Rate Loan is to be converted
to a LIBOR Rate Loan is not a Business Day, then such conversion shall
be made on the next succeeding Business Day and during the period from
such last day of an Interest Period to such succeeding Business Day
such Loan shall bear interest as if it were an Alternate Base Rate
Loan. All or any part of outstanding Alternate Base Rate Loans may be
converted as provided herein, provided that (i) no Loan may be
converted into a LIBOR Rate Loan when any Default or Event of Default
has occurred and is continuing and (ii) partial conversions shall be in
an aggregate principal amount of (A) $3,000,000 or a whole multiple of
$1,000,000 in excess thereof with respect to U.S. Revolving Loans and
Term Loans and (B) 350,000 or a whole multiple of $200,000 in excess
thereof with respect to U.K. Revolving Loans.
(b) Any LIBOR Rate Loans which are U.S. Revolving Loans or
Term Loans may be continued as such upon the expiration of an Interest
Period with respect thereto by compliance by the Borrowers with the
notice provisions contained in Section 2.11(a); provided, that no LIBOR
Rate Loan may be continued as such when any Default or Event of Default
has occurred and is continuing, in which case such Loan shall be
automatically converted to an Alternate Base Rate Loan at the end of
the applicable Interest Period with respect thereto. If the Borrowers
shall fail to give timely notice of an election to continue a LIBOR
Rate Loan which is a U.S. Revolving Loan or Term Loan, or the
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continuation of LIBOR Rate Loans is not permitted hereunder, such LIBOR
Rate Loans shall be automatically converted to Alternate Base Rate
Loans at the end of the applicable Interest Period with respect
thereto.
SECTION 2.12 COMPUTATION OF INTEREST AND FEES.
(a) Interest payable hereunder with respect to Alternate Base
Rate Loans shall be calculated on the basis of a year of 365 days (or
366 days, as applicable) for the actual days elapsed. All other fees,
interest and all other amounts payable hereunder shall be calculated on
the basis of a 360 day year for the actual days elapsed. The
Administrative Agent shall as soon as practicable notify the Borrowers
and the Lenders of each determination of a LIBOR Rate on the Business
Day of the determination thereof. Any change in the interest rate on a
Loan resulting from a change in the Alternate Base Rate shall become
effective as of the opening of business on the day on which such change
in the Alternate Base Rate shall become effective. The Administrative
Agent shall as soon as practicable notify the Borrowers and the Lenders
of the effective date and the amount of each such change.
(b) Each determination of an interest rate by the
Administrative Agent pursuant to any provision of this Agreement shall
be conclusive and binding on the Borrowers and the Lenders in the
absence of manifest error. The Administrative Agent shall, at the
request of the Borrowers, deliver to the Borrowers a statement showing
the computations used by the Administrative Agent in determining any
interest rate.
SECTION 2.13 PRO RATA TREATMENT AND PAYMENTS.
Each borrowing of U.S. Revolving Loans and any reduction of the
Revolving Commitments shall be made pro rata according to the respective
Commitment Percentages of the Lenders. Each payment under this Agreement or any
Note shall be applied, first, to any fees then due and owing by the Borrowers
pursuant to Section 2.6 and any costs incurred in connection with the
enforcement of rights and remedies hereunder, second, to interest then due and
owing in respect of the Notes of the Borrowers and, third, to principal then due
and owing hereunder and under the Notes of the Borrowers. Each payment on
account of any fees pursuant to Section 2.6 shall be made pro rata in accordance
with the respective amounts due and owing (except as to the portion of the
Letter of Credit retained by the Issuing Lender and the Issuing Lender Fees).
Each payment (other than prepayments) by the Borrowers on account of principal
of and interest on the Revolving Loans and on the Term Loans shall be made pro
rata according to the respective amounts due and owing in accordance with
Section 2.8 hereof. Each optional prepayment on account of principal of the
Loans shall be applied,
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to such of the Loans as the Borrowers may designate (to be applied pro rata
among the Lenders); provided, that prepayments made pursuant to Section 2.16
shall be applied in accordance with such section. Each mandatory prepayment on
account of principal of the Loans shall be applied in accordance with Section
2.8(b). All payments (including prepayments) to be made by the Borrowers on
account of principal, interest and fees shall be made without defense, set-off
or counterclaim (except as provided in Section 2.19(b)) and shall be made to the
Administrative Agent for the account of the Lenders at the Agent's office
specified on Schedule 9.2 in Dollars and in immediately available funds not
later than 1:00 P.M. (Charlotte, North Carolina time) on the date when due. The
Administrative Agent shall distribute such payments to the Lenders entitled
thereto promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the LIBOR Rate Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a LIBOR Rate Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
SECTION 2.14 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT.
(a) Unless the Administrative Agent shall have been notified
in writing by a Lender prior to the date a Loan is to be made by such
Lender (which notice shall be effective upon receipt) that such Lender
does not intend to make the proceeds of such Loan available to the
Administrative Agent, the Administrative Agent may assume that such
Lender has made such proceeds available to the Administrative Agent on
such date, and the Administrative Agent may in reliance upon such
assumption (but shall not be required to) make available to the
applicable Borrowers a corresponding amount or, if applicable, to the
U.K. Lender at its office in London, England in British Pounds Sterling
on the date when due. If such corresponding amount is not in fact made
available to the Administrative Agent, the Administrative Agent shall
be able to recover such corresponding amount from such Lender. If such
Lender does not pay such corresponding amount forthwith upon the
Agent's demand therefor, the Administrative Agent will promptly notify
the Borrowers, and the Borrowers, on a joint and several basis, shall
immediately pay such corresponding amount to the Administrative Agent.
The Administrative Agent shall also be entitled to recover from the
Lender or the Borrowers, 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 Administrative Agent to
the applicable Borrower to the date such corresponding amount is
recovered by the Administrative Agent at a per annum rate equal to (i)
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<PAGE> 53
from the Borrowers at the applicable rate for the applicable borrowing
pursuant to the Notice of Borrowing and (ii) from a Lender at the
Federal Effective Funds Rate.
(b) Unless the Administrative Agent shall have been notified
in writing by the Borrowers, prior to 12:00 Noon (Charlotte, North
Carolina time) on the date on which any payment is due hereunder (which
notice shall be effective upon receipt) that the Borrowers do not
intend to make such payment, the Administrative Agent may assume that
the Borrowers have made such payment when due, and the Administrative
Agent may in reliance upon such assumption (but shall not be required
to) make available to each Lender on such payment date an amount equal
to the portion of such assumed payment to which such Lender is entitled
hereunder, and if the Borrowers have not in fact made such payment to
the Administrative Agent, such Lender shall, on demand, repay to the
Administrative Agent the amount made available to such Lender. If such
amount is repaid to the Administrative Agent on a date after the date
such amount was made available to such Lender, such Lender shall pay to
the Administrative Agent on demand interest on such amount in respect
of each day from the date such amount was made available by the
Administrative Agent to such Lender to the date such amount is
recovered by the Administrative Agent at a per annum rate equal to the
Federal Funds Effective Rate.
(c) A certificate of the Administrative Agent submitted to the
Borrowers or any Lender with respect to any amount owing under this
Section 2.14 shall be conclusive in the absence of manifest error.
SECTION 2.15 INABILITY TO DETERMINE INTEREST RATE.
Notwithstanding any other provision of this Agreement, if (i) the
Administrative Agent shall reasonably determine (which determination shall be
conclusive and binding absent manifest error) that, by reason of circumstances
affecting the relevant market, reasonable and adequate means do not exist for
ascertaining LIBOR for such Interest Period, or (ii) the Required Lenders shall
reasonably determine (which determination shall be conclusive and binding absent
manifest error) that the LIBOR Rate does not adequately and fairly reflect the
cost to such Lenders of funding LIBOR Rate Loans that the Borrowers have
requested be outstanding as a LIBOR Tranche during such Interest Period, the
Administrative Agent shall forthwith give telephone notice of such
determination, confirmed in writing, to the Borrowers and the Lenders at least
two Business Days prior to the first day of such Interest Period. Unless the
Borrowers shall have notified the Administrative Agent upon receipt of such
telephone notice that it wishes to rescind or modify its request regarding such
LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate Loans
shall be made as Alternate Base Rate Loans or with respect to U.K. Loans, such
other rate as the U.K. Borrower and the
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Administrative Agent shall agree and any Loans that were requested to be
converted into or continued as LIBOR Rate Loans shall be converted into
Alternate Base Rate Loans or with respect to U.K. Loans, such other rate as the
U.K. Borrower and the Administrative Agent shall agree. Until any such notice
has been withdrawn by the Administrative Agent, no further Loans shall be made
as, continued as, or converted into, LIBOR Rate Loans for the Interest Periods
so affected.
SECTION 2.16 ILLEGALITY.
Notwithstanding any other provision of this Agreement, if the adoption
of or any change in any Requirement of Law or in the interpretation or
application thereof by the relevant Governmental Authority to any Lender shall
make it unlawful for such Lender or its LIBOR Lending Office to make or maintain
LIBOR Rate Loans as contemplated by this Agreement or to obtain in the interbank
eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Administrative Agent and
the Borrowers thereof, (b) the commitment of such Lender hereunder to make LIBOR
Rate Loans or continue LIBOR Rate Loans as such shall forthwith be suspended
until the Administrative Agent shall give notice that the condition or situation
which gave rise to the suspension shall no longer exist, and (c) such Lender's
Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the
last day of the Interest Period for such Loans or within such earlier period as
required by law as Alternate Base Rate Loans or with respect to U.K. Loans, such
other rate as the U.K. Borrower and the Administrative Agent shall agree. The
Borrowers hereby jointly and severally agree promptly to pay any Lender, upon
its demand, any additional amounts necessary to compensate such Lender for
actual and direct costs (but not including anticipated profits) reasonably
incurred by such Lender in making any repayment in accordance with this Section
including, but not limited to, any interest or fees payable by such Lender to
lenders of funds obtained by it in order to make or maintain its LIBOR Rate
Loans hereunder. A certificate as to any additional amounts payable pursuant to
this Section submitted by such Lender, through the Administrative Agent, to the
Borrowers shall be conclusive in the absence of manifest error. Each Lender
agrees to use reasonable efforts (including reasonable efforts to change its
LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise be
payable pursuant to this Section; provided, however, that such efforts shall not
cause the imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender in its sole discretion to be material.
SECTION 2.17 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of Law
or in the interpretation or application thereof or compliance by any
Lender with any request
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or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit or any
application relating thereto, any LIBOR Rate Loan made by it,
or change the basis of taxation of payments to such Lender in
respect thereof (except for changes in the rate of tax on the
overall net income of such Lender);
(ii) shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar
requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by,
any office of such Lender which is not otherwise included in
the determination of the LIBOR Rate hereunder; or
(iii) shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining LIBOR Rate Loans or the Letters of
Credit or to reduce any amount receivable hereunder or under any Note,
then, in any such case, the Borrowers jointly and severally shall
promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such additional cost or reduced
amount receivable which such Lender reasonably deems to be material as
determined by such Lender with respect to its LIBOR Rate Loans or
Letters of Credit. A certificate as to any additional amounts payable
pursuant to this Section submitted by such Lender, through the
Administrative Agent, to the Borrowers shall be conclusive in the
absence of manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Domestic Lending Office or
LIBOR Lending Office, as the case may be) to avoid or to minimize any
amounts which might otherwise be payable pursuant to this paragraph of
this Section; provided, however, that such efforts shall not cause the
imposition on such Lender of any additional costs or legal or
regulatory burdens deemed by such Lender to be material.
(b) If any Lender shall have reasonably determined that the
adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance
by such Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or Governmental Authority made
subsequent to the date hereof does or shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital
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as a consequence of its obligations hereunder to a level below that
which such Lender or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an
amount reasonably deemed by such Lender to be material, then from time
to time, within fifteen (15) days after demand by such Lender, the
Borrowers jointly and severally shall pay to such Lender such
additional amount as shall be certified by such Lender as being
required to compensate it for such reduction. Such a certificate as to
any additional amounts payable under this Section submitted by a Lender
(which certificate shall include a description of the basis for the
computation), through the Administrative Agent, to the Borrowers shall
be conclusive absent manifest error.
(c) The agreements in this Section 2.17 shall survive the
termination of this Agreement and payment of the Notes and all other
amounts payable hereunder.
SECTION 2.18 INDEMNITY.
The Borrowers hereby jointly and severally agree to indemnify each
Lender and to hold such Lender harmless from any funding loss or expense which
such Lender may sustain or incur as a consequence of (a) default by the
Borrowers in payment of the principal amount of or interest on any Loan by such
Lender in accordance with the terms hereof, (b) default by the Borrowers in
accepting a borrowing after the Borrowers have given a notice in accordance with
the terms hereof, (c) default by the Borrowers in making any prepayment after
the Borrowers have given a notice in accordance with the terms hereof, and/or
(d) the making by the Borrowers of a prepayment of a Loan, or the conversion
thereof, on a day which is not the last day of the Interest Period with respect
thereto, in each case including, but not limited to, any such loss or expense
arising from interest or fees payable by such Lender to lenders of funds
obtained by it in order to maintain its Loans hereunder. A certificate as to any
additional amounts payable pursuant to this Section submitted by any Lender,
through the Administrative Agent, to the Borrowers (which certificate must be
delivered to the Administrative Agent within thirty days following such default,
prepayment or conversion) shall be conclusive in the absence of manifest error.
The agreements in this Section shall survive termination of this Agreement and
payment of the Notes and all other amounts payable hereunder.
SECTION 2.19 TAXES.
(a) All payments made by the Borrowers hereunder or under any
Note will be, except as provided in Section 2.19(b), made free and
clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by
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any Governmental Authority or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but
excluding any tax imposed on or measured by the net income or profits
of a Lender by the jurisdiction under the laws by which such Lender or
applicable lending office, as the case may be, is organized or its
chief executive offices are located) and all interest, penalties or
similar liabilities with respect thereto (all such non-excluded taxes,
levies, imposts, duties, fees, assessments or other charges being
referred to collectively as "Taxes"). If any Taxes are so levied or
imposed, the Borrowers jointly and severally agree to pay the full
amount of such Taxes, and such additional amounts as may be necessary
so that every payment of all amounts due under this Agreement or under
any Note, after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein or in such
Note. The Borrowers will furnish to the Administrative Agent as soon as
practicable after the date the payment of any Taxes is due pursuant to
applicable law certified copies (to the extent reasonably available and
required by law) of tax receipts evidencing such payment by the
Borrowers. The Borrowers jointly and severally agree to indemnify and
hold harmless each Lender, and reimburse such Lender upon its written
request, for the amount of any Taxes so levied or imposed and paid by
such Lender but excluding any interest or penalties caused by such
Lender's failure to pay any such taxes when due.
(b) Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) agrees to deliver
to the Borrowers and the Administrative Agent on or prior to the
Closing Date, or in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section
9.6(d) (unless the respective Lender was already a Lender hereunder
immediately prior to such assignment or transfer), on the date of such
assignment or transfer to such Lender, (i) if the Lender is a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, two accurate
and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying such Lender's entitlement
to a complete exemption from United States withholding tax with respect
to payments to be made under this Agreement and under any Note, or (ii)
if the Lender is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, either Internal Revenue Service Form 1001 or
4224 as set forth in clause (i) above, or (x) a certificate
substantially in the form of Schedule 2.19 (any such certificate, a
"2.19 Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form)
certifying such Lender's entitlement to an exemption from United States
withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Lender agrees that
it will deliver upon the Borrowers' request updated versions of the
foregoing, as applicable, whenever the previous certification has
become obsolete or inaccurate in any
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material respect, together with such other forms as may be required in
order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax
with respect to payments under this Agreement and any Note.
Notwithstanding anything to the contrary contained in Section 2.19(a),
but subject to the immediately succeeding sentence, (x) the Borrowers
shall be entitled, to the extent it is required to do so by law, to
deduct or withhold Taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, fees
or other amounts payable hereunder for the account of any Lender which
is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. Federal income tax purposes to the
extent that such Lender has not provided to the Borrowers U.S. Internal
Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrowers shall not be obligated
pursuant to Section 2.19(a) hereof to gross-up payments to be made to a
Lender in respect of Taxes imposed by the United States if (I) such
Lender has not provided to the Borrowers the Internal Revenue Service
Forms required to be provided to the Borrowers pursuant to this Section
2.19(b) or (II) in the case of a payment, other than interest, to a
Lender described in clause (ii) above, to the extent that such Forms do
not establish a complete exemption from withholding of such Taxes.
Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 2.19, the Borrowers jointly and
severally agree to pay additional amounts and to indemnify each Lender
in the manner set forth in Section 2.19(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the
Closing Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof,
relating to the deducting or withholding of Taxes.
(c) Each Lender agrees to use reasonable efforts (including
reasonable efforts to change its Domestic Lending Office or LIBOR
Lending Office, as the case may be) to avoid or to minimize any amounts
which might otherwise be payable pursuant to this Section; provided,
however, that such efforts shall not cause the imposition on such
Lender of any additional costs or legal or regulatory burdens deemed by
such Lender in its sole discretion to be material.
(d) If the Borrowers pay any additional amount pursuant to
this Section 2.19 with respect to a Lender, such Lender shall use
reasonable efforts to obtain a refund of tax or credit against its tax
liabilities on account of such payment; provided that such Lender shall
have no obligation to use such reasonable efforts if either (i) it is
in an excess foreign tax credit position or (ii) it believes in good
faith, in its sole discretion, that claiming a refund or credit would
cause adverse
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tax consequences to it. In the event that such Lender receives such a
refund or credit, such Lender shall pay to the Borrowers an amount that
such Lender reasonably determines is equal to the net tax benefit
obtained by such Lender as a result of such payment by the Borrowers.
In the event that no refund or credit is obtained with respect to the
Borrowers' payments to such Lender pursuant to this Section 2.19, then
such Lender shall upon request provide a certification that such Lender
has not received a refund or credit for such payments. Nothing
contained in this Section 2.19 shall require a Lender to disclose or
detail the basis of its calculation of the amount of any tax benefit or
any other amount or the basis of its determination referred to in the
proviso to the first sentence of this Section 2.19 to the Borrowers or
any other party.
(e) The agreements in this Section 2.19 shall survive the
termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder.
SECTION 2.20 INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES.
(a) In addition to its other obligations under Section 2.3,
the Borrowers hereby jointly and severally agree to protect, indemnify,
pay and save each Issuing Lender harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Issuing Lender
may incur or be subject to as a consequence, direct or indirect, of (i)
the issuance of any Letter of Credit or (ii) the failure of the Issuing
Lender to honor a drawing under a Letter of Credit 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").
(b) As between the Borrowers and the Issuing Lender, the
Borrowers shall assume all risks of the acts, omissions or misuse of
any Letter of Credit by the beneficiary thereof. The Issuing Lender
shall not be responsible: (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of any 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 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 a Letter of Credit to strictly comply with
conditions required in order to draw upon a Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery
of any messages, by mail, cable,
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telegraph, telex or otherwise, whether or not they be 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 a Letter of Credit or of the proceeds
thereof; and (vii) for any consequences arising from causes beyond the
control of the Issuing Lender, including, without limitation, any
Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted
by the Issuing Lender, under or in connection with any Letter of Credit
or the related certificates, if taken or omitted in good faith, shall
not put such Issuing Lender under any resulting liability to the
Borrowers. It is the intention of the parties that this Agreement shall
be construed and applied to protect and indemnify the Issuing Lender
against any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrowers,
including, without limitation, any and all risks of the acts or
omissions, whether rightful or wrongful, of any Government Authority.
The Issuing Lender shall not, in any way, be liable for any failure by
the Issuing Lender or anyone else to pay any drawing under any Letter
of Credit as a result of any Government Acts or any other cause beyond
the control of the Issuing Lender.
(d) Nothing in this Section 2.20 is intended to limit the
reimbursement obligation of the Borrowers contained in Section 2.3(d)
hereof. The obligations of the Borrowers under this Section 2.20 shall
survive the termination of this Agreement. No act or omissions of any
current or prior beneficiary of a Letter of Credit shall in any way
affect or impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Agreement.
(e) Notwithstanding anything to the contrary contained in this
Section 2.20, the Borrowers shall have no obligation to indemnify any
Issuing Lender in respect of any liability incurred by such Issuing
Lender arising out of the gross negligence or willful misconduct of the
Issuing Lender (including action not taken by an Issuing Lender), as
determined by a court of competent jurisdiction.
SECTION 2.21 JUDGMENT CURRENCY.
If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due from the U.K. Borrower hereunder in the currency expressed
to be payable herein (the "specified currency") into another currency, the
parties hereto agree, to the fullest extent that may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could
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purchase the specified currency with such other currency at the Administrative
Agent's main office on the Business Day preceding that on which final,
non-appealable judgment is given. The obligations of the U.K. Borrower in
respect of any sum due to the U.K. Lender, any other Lender or the
Administrative Agent hereunder shall, notwithstanding any judgment in a currency
other than the specified currency, be discharged only to the extent that on the
Business Day following receipt by such Lender or the Administrative Agent (as
the case may be) of any sum adjudged to be so due in such other currency such
Lender or the Administrative Agent (as the case may be) may in accordance with
normal, reasonable banking procedures purchase the specified currency with such
other currency. If the amount of the specified currency so purchased is less
than the sum originally due to such Lender or the Administrative Agent, as the
case may be, in the specified currency, the U.K. Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchase exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 9.7, such Lender or the Administrative Agent, as the case may be, agrees
to remit such excess to the U.K. Borrower.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit herein provided for, each of the Credit Parties hereby
represents and warrants to the Administrative Agent and to each Lender that:
SECTION 3.1 FINANCIAL CONDITION.
The consolidated balance sheets and the related statements of income
and of cash flows of the Company for the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998 audited by Arthur Andersen LLP are
complete and correct and present fairly the financial condition of the Company
and its Subsidiaries as of such dates and, to the knowledge the Company and its
Subsidiaries, the consolidated balance sheet and the related statements of
income and of cash flows of the Acquired Company for the fiscal years ended
September 30, 1996, September 30, 1997 and September 30, 1998 audited by Ernst &
Young LLP are complete and correct and present fairly the financial condition of
the Acquired Company and its Subsidiaries as of such dates. All such financial
statements, including the related schedules and notes thereto, have been
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prepared in accordance with GAAP applied consistently throughout the periods
involved (except as disclosed therein).
SECTION 3.2 NO CHANGE.
Since December 31, 1998 (and after delivery of annual audited financial
statements in accordance Section 5.1(a), from the date of the most recently
delivered annual audited financial statements) there has been no development or
event which has had or could reasonably be expected to have a Material Adverse
Effect.
SECTION 3.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW.
Each of the Company and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the requisite power and authority and the legal right to
own and operate all its material property, to lease the material property it
operates as lessee and to conduct the business in which it is currently engaged,
(c) is duly qualified to conduct business and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification except to the extent that
the failure to so qualify or be in good standing could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect and (d) is in
compliance with all Requirements of Law except to the extent that the failure to
comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
Each of the Company and the other Credit Parties has full power and
authority and the legal right to make, deliver and perform the Credit Documents
to which it is party and has taken all necessary limited liability company or
corporate action to authorize the execution, delivery and performance by it of
the Credit Documents to which it is party. No consent or authorization of,
filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery or performance of any Credit Document
by the Borrowers or the other Credit Parties (other than those which have been
obtained) or with the validity or enforceability of any Credit Document against
the Borrowers or the other Credit Parties (except such filings as are necessary
in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which it is a party has been duly executed
and delivered on behalf of the Borrowers or the other Credit Parties, as the
case may be. Each Credit Document to which it is a party constitutes a legal,
valid and binding obligation of the Borrowers or the other Credit Parties, as
the case may be, enforceable against each Borrower or other Credit Party, as the
case may be, in accordance with its terms, except as enforceability
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may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
SECTION 3.5 NO LEGAL BAR; NO DEFAULT.
The execution, delivery and performance of the Credit Documents, the
borrowings thereunder and the use of the proceeds of the Loans will not violate
any material Requirement of Law or any material Contractual Obligation of the
Company or its Subsidiaries (except those as to which waivers or consents have
been obtained), and will not result in, or require, the creation or imposition
of any Lien on any of its or their respective properties or revenues pursuant to
any Requirement of Law or Contractual Obligation other than the Liens arising
under or contemplated in connection with the Credit Documents. Neither the
Company nor any of its Subsidiaries is in default under or with respect to any
of its Contractual Obligations in any respect which could reasonably be expected
to have a Material Adverse Effect. No Default or Event of Default has occurred
and is continuing.
SECTION 3.6 NO MATERIAL LITIGATION.
Except as set forth in Schedule 3.6, no litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the best knowledge of the Borrowers and the Company, threatened by or against
the Company or any of its Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to the Credit Documents or any Loan or
any of the transactions contemplated hereby, or (b) which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect.
SECTION 3.7 INVESTMENT COMPANY ACT.
Neither the Borrowers nor any of the other Credit Parties is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 3.8 MARGIN REGULATIONS.
No part of the proceeds of any Loan hereunder will be used directly or
indirectly for any purpose which violates, or which would be inconsistent with,
the provisions of Regulation T, U or X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. The Company and
its Subsidiaries taken as a group do not own "margin stock" except as identified
in the financial statements referred
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to in Section 3.1 and the aggregate value of all "margin stock" owned by the
Company and its Subsidiaries taken as a group does not exceed 25% of the value
of their assets.
SECTION 3.9 ERISA.
Except as set forth in Schedule 3.9, neither a Reportable Event nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed made with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code, except to the extent that any such occurrence
or failure to comply would not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.9, no termination of a Single Employer
Plan has occurred resulting in any liability that has remained underfunded, and
no Lien in favor of the PBGC or a Plan has arisen, during such five-year period
which could reasonably be expected to have a Material Adverse Effect. Except as
set forth in Schedule 3.9, the present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits by an amount which, as determined in
accordance with GAAP, could reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.9, neither the Company, the Borrowers
nor any Commonly Controlled Entity is currently subject to any liability for a
complete or partial withdrawal from a Multiemployer Plan which could reasonably
be expected to have a Material Adverse Effect.
SECTION 3.10 ENVIRONMENTAL MATTERS.
Except as could not reasonably be expected to have a Material Adverse
Effect,
(a) the facilities and properties owned, leased or operated by
the Company or any of its Subsidiaries (the "Properties") do not
contain any Materials of Environmental Concern in amounts or
concentrations which (i) constitute a violation of, or (ii) could give
rise to liability under, any Environmental Law;
(b) the Properties and all operations of the Company and/or
its Subsidiaries at the Properties are in compliance, and have in the
last five years been in compliance with all applicable Environmental
Laws, and there is no contamination at, under or about the Properties
or violation of any Environmental Law with respect to the Properties or
the business operated by the Company or any of its Subsidiaries (the
"Business");
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(c) neither the Company nor any of its Subsidiaries has
received any written or actual notice of violation, alleged violation,
non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard
to any of the Properties or the Business, nor does the Company or any
of its Subsidiaries have knowledge or reason to believe that any such
notice will be received or is being threatened;
(d) Materials of Environmental Concern have not been
transported or disposed of from the Properties in violation of, or in a
manner or to a location which could give rise to liability under any
Environmental Law, nor have any Materials of Environmental Concern been
generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could give rise to
liability under, any applicable Environmental Law;
(e) no judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Company and the
Borrowers, threatened, under any Environmental Law to which the Company
or any Subsidiary is or will be named as a party with respect to the
Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business; and
(f) there has been no release or threat of release of
Materials of Environmental Concern at or from the Properties, or
arising from or related to the operations of the Company or any
Subsidiary in connection with the Properties or otherwise in connection
with the Business, in violation of or in amounts or in a manner that
could give rise to liability under Environmental Laws.
SECTION 3.11 PURPOSE OF LOANS.
The proceeds of the Loans hereunder shall be used solely by the
Borrowers to (i) finance a portion of the purchase price of the Acquired Company
and to pay certain fees and expenses related thereto, (ii) refinance existing
Indebtedness and (iii) provide for working capital, permitted acquisitions,
open-market stock repurchases and other general corporate purposes. The Letters
of Credit shall be used only for or in connection with appeal bonds,
reimbursement obligations arising in connection with surety and reclamation
bonds, reinsurance, domestic or international trade transactions and obligations
not otherwise aforementioned relating to transactions entered into by the
applicable account party in the ordinary course of business.
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SECTION 3.12 SUBSIDIARIES.
Set forth on Schedule 3.12 is a complete and accurate list of all
Subsidiaries of the Company. Information on the attached Schedule includes state
of incorporation; the number of shares of each class of Capital Stock or other
equity interests outstanding; the number and percentage of outstanding shares of
each class of stock; and the number and effect, if exercised, of all outstanding
options, warrants, rights of conversion or purchase and similar rights. The
outstanding Capital Stock and other equity interests of all such Subsidiaries is
validly issued, fully paid and non-assessable and is owned, free and clear of
all Liens (other than those arising under or contemplated in connection with the
Credit Documents).
SECTION 3.13 OWNERSHIP.
Each of the Company and its Subsidiaries is the owner of, and has good
and marketable title to, all of its respective assets, except as may be
permitted pursuant Section 6.13 hereof, and none of such assets is subject to
any Lien other than Permitted Liens.
SECTION 3.14 INDEBTEDNESS.
Except as otherwise permitted under Section 6.1, the Company and its
Subsidiaries have no Indebtedness.
SECTION 3.15 TAXES.
Each of the Company and its Subsidiaries has filed, or caused to be
filed, all tax returns (federal, state, local and foreign) required, to the best
of its knowledge, to be filed and paid (a) all amounts of taxes shown thereon to
be due (including interest and penalties) and (b) all other taxes, fees,
assessments and other governmental charges (including mortgage recording taxes,
documentary stamp taxes and intangibles taxes) owing by it, except for such
taxes (i) which are not yet delinquent or (ii) that are being contested in good
faith and by proper proceedings, and against which adequate reserves are being
maintained in accordance with GAAP. Neither the Company nor any of its
Subsidiaries is aware as of the Closing Date of any proposed tax assessments
against it or any of its Subsidiaries which could reasonably be expected to have
a Material Adverse Effect.
SECTION 3.16 INTELLECTUAL PROPERTY.
Each of the Company and its Subsidiaries owns, or has the legal right
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes necessary for
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each of them to conduct its business as currently conducted. Set forth on
Schedule 3.16 is a list of all Intellectual Property owned by each of the
Company and its Subsidiaries or that the Company or any of its Subsidiaries has
the right to use. Except as provided on Schedule 3.16, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Company or any of its Subsidiaries know of
any such claim, and, to the knowledge of the Company or any of its Subsidiaries,
the use of such Intellectual Property by the Company or any of its Subsidiaries
does not infringe on the rights of any Person, except for such claims and
infringements that in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Schedule 3.16 may be updated from time to time by the
Company and the Borrowers to include new Intellectual Property by giving written
notice thereof to the Administrative Agent.
SECTION 3.17 SOLVENCY.
The fair saleable value of each Credit Party's assets, measured on a
going concern basis, exceeds all probable liabilities, including those to be
incurred pursuant to this Credit Agreement. None of the Credit Parties (a) has
unreasonably small capital in relation to the business in which it is or
proposes to be engaged or (b) has incurred, or believes that it will incur after
giving effect to the transactions contemplated by this Credit Agreement, debts
beyond its ability to pay such debts as they become due.
SECTION 3.18 INVESTMENTS.
All Investments of each of the Company and its Subsidiaries are
Permitted Investments.
SECTION 3.19 LOCATION OF PROPERTY.
Set forth on Schedule 3.19(a) is a list of the Properties of the
Company and its Subsidiaries with street address, county and state where
located. Set forth on Schedule 3.19(b) is a list of all locations where any
tangible personal property of the Company and its Subsidiaries is located,
including county and state where located. Set forth on Schedule 3.19(c) is the
chief executive office and principal place of business of each of the Company
and its Subsidiaries. Schedule 3.19(a), 3.19(b) and 3.19(c) may be updated from
time to time by the Borrowers to include new properties or locations by giving
written notice thereof to the Administrative Agent.
SECTION 3.20 NO BURDENSOME RESTRICTIONS.
None of the Company or any of its Subsidiaries is a party to any
agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any
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provision of any applicable law, rule or regulation which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
SECTION 3.21 BROKERS' FEES.
None of the Company or any of its Subsidiaries has any obligation to
any Person in respect of any finder's, broker's, investment banking or other
similar fee in connection with any of the transactions contemplated under the
Credit Documents other than the closing and other fees payable pursuant to this
Credit Agreement.
SECTION 3.22 LABOR MATTERS.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Company or any of its Subsidiaries as of the
Closing Date, other than as set forth in Schedule 3.22 hereto, and none of the
Company or any of its Subsidiaries (i) has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years, other
than as set forth in Schedule 3.22 hereto or (ii) has knowledge of any potential
or pending strike, walkout or work stoppage.
SECTION 3.23 ACCURACY AND COMPLETENESS OF INFORMATION.
All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Company or any of its Subsidiaries to the
Administrative Agent or any Lender for purposes of or in connection with this
Agreement or any other Credit Document, or any transaction contemplated hereby
or thereby, is or will be true and accurate in all material respects and not
incomplete by omitting to state any material fact necessary to make such
information not misleading. There is no fact now known to the Company or any of
its Subsidiaries which has, or could reasonably be expected to have, a Material
Adverse Effect which fact has not been set forth herein, in the financial
statements of the Company and its Subsidiaries furnished to the Administrative
Agent and/or the Lenders, or in any certificate, opinion or other written
statement made or furnished by the Company and the Borrowers to the
Administrative Agent and/or the Lenders.
SECTION 3.24 YEAR 2000 ISSUE.
Except as could not reasonably be expected to have a Material Adverse
Effect, any reprogramming and related testing required to permit the proper
functioning of the Credit Parties' computer systems in and following the year
2000 will be completed in all material respects prior to September 1, 1999 (that
is, the Credit Parties will be "Year 2000 Compliant"), and the cost to the
Credit Parties of such reprogramming and testing will not result in a Default or
Event of Default or a Material Adverse Effect. Except for
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such reprogramming referred to in the preceding sentence as may be necessary,
the computer and management information systems of the Credit Parties and their
Subsidiaries are and, with ordinary course upgrading and maintenance, will
continue for the term of this Agreement to be, adequate for the conduct of its
business.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 CONDITIONS TO CLOSING DATE AND INITIAL REVOLVING LOANS
AND TERM LOANS.
This Agreement shall become effective upon, and the obligation of each
Lender to make the initial Revolving Loans and Term Loans on the Closing Date is
subject to, the satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Administrative Agent shall
have received (i) counterparts of this Agreement, executed by a duly
authorized officer of each party hereto, (ii) for the account of each
Lender, U.S. Revolving Notes and Term Notes, for the account of the
U.K. Lender, a U.K. Revolving Note and for the account of the Swingline
Lender, a Swingline Note and (iii) counterparts of the Pledge
Agreement, in each case conforming to the requirements of this
Agreement and executed by duly authorized officers of the Credit
Parties.
(b) Authority Documents. The Administrative Agent shall have
received the following:
(i) Articles of Incorporation. Copies of
the articles of incorporation or other charter documents, as
applicable, of each Credit Party certified to be true and
complete as of a recent date by the appropriate governmental
authority of the state of its incorporation.
(ii) Resolutions. Copies of resolutions of
the board of directors of each Credit Party approving and
adopting the Credit Documents, the transactions contemplated
therein and authorizing execution and delivery thereof,
certified by an officer of such Credit Party as of the Closing
Date to be true and correct and in force and effect as of such
date.
(iii) Bylaws. A copy of the bylaws of each
Credit Party certified by an officer of such Credit Party as
of the Closing Date to be true and correct and in force and
effect as of such date.
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(iv) Good Standing. Copies of (i) certificates of
good standing, existence or its equivalent with respect to the
each Credit Party certified as of a recent date by the
appropriate governmental authorities of the state or other
jurisdiction of incorporation and each other state in which
the failure to so qualify and be in good standing could
reasonably be expected to have a Material Adverse Effect on
the business or operations of the Company and its Subsidiaries
in such state and (ii) a certificate indicating payment of all
corporate franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate
of each Credit Party certified by a secretary or assistant
secretary to be true and correct as of the Closing Date.
(c) Legal Opinions of Counsel. The Administrative Agent
shall have received an opinion of Reinhart, Boerner, Van Deuren, Norris
& Rieselbach, S.C., counsel for the Credit Parties, dated the Closing
Date and addressed to the Administrative Agent and the Lenders, in form
and substance acceptable to the Administrative Agent.
(d) Personal Property Collateral. The Administrative Agent
shall have received, in form and substance satisfactory to the
Administrative Agent:
(i) searches of Uniform Commercial Code
filings in the jurisdiction of the chief executive office of
each Credit Party and each jurisdiction where any Collateral
is located or where a filing would need to be made in order to
perfect the Administrative Agent's security interest in the
Collateral, copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than
Permitted Liens; and
(ii) duly executed UCC financing statements
for each appropriate jurisdiction as is necessary, in the
Administrative Agent's sole discretion, to perfect the
Administrative Agent's security interest in the Collateral;
(e) Fees. The Administrative Agent shall have received all
fees, if any, owing pursuant to the Fee Letter and Section 2.6.
(f) Litigation. There shall not exist any pending
litigation or investigation affecting or relating to the Company or any
of its Subsidiaries, this Agreement and the other Credit Documents that
in the reasonable judgment of the
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Administrative Agent could materially adversely affect the Company or
any of its Subsidiaries, this Agreement and the other Credit Documents,
that has not been settled, dismissed, vacated, discharged or terminated
prior to the Closing Date.
(g) Solvency Evidence. The Administrative Agent shall have
received an officer's certificate for each Credit Party prepared by the
executive vice president of finance and operations of each such Credit
Party as to the financial condition, solvency and related matters of
each such Credit Party, in each case after giving effect to the
Acquisition and the initial borrowings under the Credit Documents, in
substantially the form of Schedule 4.1(g) hereto.
(h) Account Designation Letter. The Administrative Agent
shall have received the executed Account Designation Letter in the form
of Schedule 1.1(a) hereto.
(i) Corporate Structure. The corporate capital and
ownership structure of the Company and its Subsidiaries (after giving
effect to the purchase of the Acquired Company) shall be as described
in Schedule 3.12. The Administrative Agent shall be satisfied with
management structure, legal structure, voting control, liquidity and
capitalization of the Company as of the Closing Date.
(j) Acquisition Documents. There shall not have been any
material modification, amendment, supplement or waiver to the
Acquisition Documents without the prior written consent of the Agent,
including, but not limited to, any modification, amendment, supplement
or waiver relating to the amount or type of consideration to be paid in
connection with the acquisition of the Acquired Company and the
contents of all disclosure schedules and exhibits, and the acquisition
of the Acquired Company shall have been consummated in accordance with
the terms of the Acquisition Documents (without waiver of any material
conditions precedent to the obligations of the buyer thereunder) with
the purchase price including transaction costs and the repayment in
full of any and all Funded Debt of the Acquired Company not to exceed
$120,000,000. The Agent shall have received final copies of the
Acquisition Documents, together with all exhibits and schedules
thereto, certified by an officer of the Company.
(k) Government Consent. The Administrative Agent shall have
received evidence that all governmental, shareholder and material third
party consents and approvals necessary in connection with the
financings and other transactions contemplated hereby have been
obtained and all applicable waiting periods have expired without any
action being taken by any authority that could restrain, prevent or
impose any material adverse conditions on such transactions or that
could seek or threaten any of the foregoing.
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(l) Compliance with Laws. The financings and other
transactions contemplated hereby shall be in compliance with all
applicable laws and regulations (including all applicable securities
and banking laws, rules and regulations).
(m) Bankruptcy. There shall be no bankruptcy or insolvency
proceedings with respect to the Company or any of its Subsidiaries.
(n) Financial Statements. The Administrative Agent shall
have received copies of the financial statements referred to in Section
3.1 hereof, interim monthly financial statement of the Acquired Company
together with a working capital detail for the trailing twelve months
and first projected year, and a pro forma balance sheet of the Company
and its Subsidiaries after giving effect to the Acquisition reflecting
estimated purchase price accounting adjustments, internally prepared in
accordance with GAAP, each in form and substance satisfactory to the
Administrative Agent.
(o) Year 2000 Plan. The Administrative Agent shall have
received the Company's plan for becoming Year 2000 Compliant, which
plan shall be in form and substance satisfactory to the Administrative
Agent.
(p) Environmental Reports. The Administrative Agent shall
have received satisfactory environmental reviews of all real property
owned by the Company and its Subsidiaries.
(q) Due Diligence Report. The Administrative Agent shall
have received a due diligence report on the Acquired Company prepared
by Ernst & Young the results of which shall be in form and substance
satisfactory to the Agent.
(r) Fairness Opinion. The Administrative Agent shall have
received a fairness opinion issued by Robert W. Baird & Co.,
Incorporated issued in connection with the Acquisition which shall be
in form and substance satisfactory to the Agent.
(s) Termination of Existing Indebtedness. All existing
Indebtedness for borrowed money of the Company and its Subsidiaries
(other than the existing Subordinated Debt and the Indebtedness listed
on Schedule 6.1(b)) and the Acquired Company and its Subsidiaries shall
have been repaid in full and terminated.
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(t) Material Adverse Change. There shall not have occurred
a material adverse change since September 30, 1998 in the combined
business, assets, liabilities (actual or contingent), operations,
condition (financial or otherwise) or prospects of the Company and the
Acquired Company, in each case together with their subsidiaries taken
as a whole, or in the facts and information regarding such entities as
represented to date.
(u) Management Contracts. The Borrowers shall have entered
into management contracts satisfactory to the Administrative Agent with
Robert E. Dods through April, 2001 and Boyd L. Meyer through April,
2000 and Racing Champions Limited shall have entered into a management
contract satisfactory to the Administrative Agent with Peter K. K.
Chung through April, 2001.
(v) Officer's Certificates. The Administrative Agent shall
have received a certificate or certificates executed by a responsible
officer of each of the Borrowers as of the Closing Date stating that
(A) no action, suit, investigation or proceeding is pending or
threatened in any court or before any arbitrator or governmental
instrumentality that purports to affect any Credit Party or any
transaction contemplated by the Credit Documents, if such action, suit,
investigation or proceeding could reasonably be expected to have a
Material Adverse Effect, (B) after receipt of proceeds of the Loans
hereunder, the transactions contemplated by the Stock and Asset
Purchase Agreement shall be consummated on the Closing Date in
accordance with the terms thereof and (C) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all the
transactions contemplated therein to occur on such date, (1) each of
the Credit Parties is solvent, (2) no Default or Event of Default
exists, (3) all representations and warranties contained herein and in
the other Credit Documents are true and correct in all material
respects, and (4) the Credit Parties are in compliance with each of the
financial covenants set forth in Section 5.9.
(w) Additional Matters. All other documents and legal
matters in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in form and substance to the
Administrative Agent and its counsel.
SECTION 4.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT.
The obligation of each Lender to make any Extension of Credit hereunder
is subject to the satisfaction of the following conditions precedent on the date
of making such Extension of Credit:
(a) Representations and Warranties. The representations and
warranties made by the Credit Parties herein, in the Security Documents
or which are
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contained in any certificate furnished at any time under or in connection
herewith shall be true and correct in all material respects on and as of the
date of such Extension of Credit as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after
giving effect to the Extension of Credit to be made on such date unless
such Default or Event of Default shall have been waived in accordance
with this Agreement.
(c) Compliance with Commitments. Immediately after giving
effect to the making of any such Extension of Credit (and the
application of the proceeds thereof), (i) the sum of the aggregate
principal amount of outstanding U.S. Revolving Loans plus the Dollar
Equivalent of U.K. Revolving Loans plus Swingline Loans plus LOC
Obligations shall not exceed the Revolving Committed Amount, (ii) the
LOC Obligations shall not exceed the LOC Committed Amount, (iii) the
U.K. Revolving Loans shall not exceed the U.K. Revolving Commitment,
and (iv) the Swingline Loans shall not exceed the Swingline Commitment.
(d) Additional Conditions to U.S. Revolving Loans. If such
Loan is made pursuant to Section 2.1, all conditions set forth in such
Section shall have been satisfied.
(e) Additional Conditions to Swingline Loan. If such Loan
is made pursuant to Section 2.3, all conditions set forth in such
Section shall have been satisfied.
(f) Additional Conditions to Letters of Credit. If such
Extension of Credit is made pursuant to Section 2.3, all conditions set
forth in such Section shall have been satisfied.
(g) Additional Conditions to U.K. Revolving Loans. If such
Loan is made pursuant to Section 2.4, all conditions set forth in such
Section shall have been satisfied.
(h) Additional Conditions to Term Loans. If such Loan is
made pursuant to Section 2.5, all conditions set forth in such Section
shall have been satisfied.
Each request for an Extension of Credit and each acceptance by any
Borrower of any such Extension of Credit shall be deemed to constitute a
representation and warranty by the Borrowers as of the date of such Extension of
Credit that the applicable conditions in paragraphs (a) through (g) of this
Section have been satisfied.
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ARTICLE V
AFFIRMATIVE COVENANTS
Each Credit Party hereby 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, no Note remains outstanding and unpaid and the
Credit Party Obligations, together with interest, Commitment Fees and all other
amounts owing to the Administrative Agent or any Lender hereunder, are paid in
full, the Company shall, and shall cause each of its Subsidiaries (other than in
the case of Sections 5.1, 5.2 or 5.7 hereof), to:
SECTION 5.1 FINANCIAL STATEMENTS.
Furnish to the Administrative Agent and each of the Lenders:
(a) Annual Financial Statements. As soon as available, but
in any event within ninety (90) days after the end of each fiscal year
of the Company, a copy of the consolidated balance sheet of the Company
and its consolidated Subsidiaries as at the end of such fiscal year and
the related consolidated statements of income and retained earnings and
of cash flows of the Company and its consolidated Subsidiaries for such
year, audited by a firm of independent certified public accountants of
nationally recognized standing reasonably acceptable to the Required
Lenders, setting forth in each case in comparative form the figures for
the previous year, reported on without a "going concern" or like
qualification or exception, or qualification indicating that the scope
of the audit was inadequate to permit such independent certified public
accountants to certify such financial statements without such
qualification;
(b) Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) days after the end of each of
the first three fiscal quarters of the Company, a company-prepared
consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of such period and related company-prepared
statements of income and retained earnings and of cash flows for the
Company and its consolidated Subsidiaries for such quarterly period and
for the portion of the fiscal year ending with such period, in each
case setting forth in comparative form consolidated figures for the
corresponding period or periods of the preceding fiscal year (subject
to normal recurring year-end audit adjustments); and
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(c) Annual Budget Plan. As soon as available, but in any
event within thirty (30) days after the end of each fiscal year (or
promptly, at such other time with respect to updates showing material
changes to a previously submitted budget or plan), a copy of the
detailed annual budget or plan of the Company for the next fiscal year,
in form and detail reasonably acceptable to the Administrative Agent
and the Required Lenders, together with a summary of the material
assumptions made in the preparation of such annual budget or plan;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal recurring
year-end audit adjustments) and to be prepared in reasonable detail and, in the
case of the annual and quarterly financial statements provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein and further accompanied by a
description of, and an estimation of the effect on the financial statements on
account of, a change, if any, in the application of accounting principles as
provided in Section 1.3.
SECTION 5.2 CERTIFICATES; OTHER INFORMATION.
Furnish to the Administrative Agent and each of the Lenders:
(a) concurrently with the delivery of the financial
statements referred to in Section 5.1(a) above, a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in Sections 5.1(a) and 5.1(b) above, a
certificate of a Responsible Officer stating that, to the best of such
Responsible Officer's knowledge, each of the Credit Parties during such
period observed or performed in all material respects all of its
covenants and other agreements, and satisfied in all material respects
every condition, contained in this Agreement to be observed, performed
or satisfied by it, and that such Responsible Officer has obtained no
knowledge of any Default or Event of Default except as specified in
such certificate and such certificate shall include the calculations in
reasonable detail required to indicate compliance with Section 5.9 as
of the last day of such period;
(c) within thirty (30) days after the same are sent, copies
of all reports (other than those otherwise provided pursuant to Section
5.1 and those which are of a promotional nature) and other financial
information which the Company sends to its shareholders, and within
thirty days after the same are filed, copies of all
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financial statements and non-confidential reports which the Company may
make to, or file with the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(d) within ninety (90) days after the end of each fiscal
year of the Company, a certificate containing information regarding the
amount of all Asset Dispositions, Debt Issuances, and Equity Issuances
that were made during the prior fiscal year and amounts received in
connection with any Recovery Event during the prior fiscal year;
(e) promptly upon receipt thereof, a copy of any
"management letter" submitted by independent accountants to the Company
or any of its Subsidiaries in connection with any annual, interim or
special audit of the books of such Person; and
(f) promptly, such additional financial and other
information as the Administrative Agent, on behalf of any Lender, may
from time to time reasonably request.
SECTION 5.3 PAYMENT OF OBLIGATIONS.
Pay, discharge or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, in accordance with industry practice
(subject, where applicable, to specified grace periods) all its material
obligations of whatever nature and any additional costs that are imposed as a
result of any failure to so pay, discharge or otherwise satisfy such
obligations, except when the amount or validity of such obligations and costs is
currently being contested in good faith by appropriate proceedings and reserves,
if applicable, in conformity with GAAP with respect thereto have been provided
on the books of the Company or its Subsidiaries, as the case may be.
SECTION 5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.
Continue to engage in business of the same general type as now
conducted by it on the Closing Date and preserve, renew and keep in full force
and effect its corporate existence (except as otherwise permitted hereunder) and
take all reasonable action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business; comply with all
Contractual Obligations and Requirements of Law applicable to it except to the
extent that failure to comply therewith could not, in the aggregate, reasonably
be expected to have a Material Adverse Effect.
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SECTION 5.5 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Keep all material property useful and necessary in its
business in good working order and condition (ordinary wear and tear
and obsolescence excepted);
(b) Maintain with financially sound and reputable insurance
companies insurance on all its material property (including without
limitation its material tangible Collateral) in at least such amounts
and against at least such risks as are usually insured against in the
same general area by companies engaged in the same or a similar
business; and furnish to the Administrative Agent, upon written
request, full information as to the insurance carried; provided,
however, that the Company and its Subsidiaries may maintain self
insurance plans to the extent companies of similar size and in similar
businesses do so. The Administrative Agent shall be named as loss payee
or mortgagee, as its interest may appear, and/or additional insured
with respect to any such insurance providing coverage in respect of any
Collateral, and each provider of any such insurance shall agree, by
endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Administrative Agent, that it will give
the Administrative Agent thirty (30) days prior written notice before
any such policy or policies shall be altered or canceled, and that no
act or default of the Company or any of its Subsidiaries or any other
Person shall affect the rights of the Administrative Agent or the
Lenders under such policy or policies. The present insurance coverage
of the Company and its Subsidiaries is outlined as to carrier, policy
number, expiration date, type and amount on Schedule 5.5(b); and
(c) In case of any material loss, damage to or destruction
of the Collateral of any Credit Party or any part thereof, such Credit
Party shall promptly give written notice thereof to the Administrative
Agent generally describing the nature and extent of such damage or
destruction. In case of any loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party,
whether or not the insurance proceeds, if any, received on account of
such damage or destruction shall be sufficient for that purpose, at
such Credit Party's cost and expense, will promptly repair or replace
the Collateral of such Credit Party so lost, damaged or destroyed.
SECTION 5.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS.
Keep proper books of records and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its businesses and
activities; and permit, during regular business hours and upon reasonable notice
by the Administrative Agent or any Lender, the Administrative Agent or any
Lender to visit and inspect any of its properties and examine
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and make abstracts from any of its books and records (other than materials
protected by the attorney-client privilege and materials which the Company or
the Borrowers may not disclose without violation of a confidentiality obligation
binding upon it) at any reasonable time and as often as may reasonably be
desired, and to discuss the business, operations, properties and financial and
other condition of the Company and its Subsidiaries with officers of the Company
and its Subsidiaries and with its independent certified public accountants.
SECTION 5.7 NOTICES.
Give notice in writing to the Administrative Agent (which shall
promptly transmit such notice to each Lender) of:
(a) Immediately after the Company or any Borrower knows or
has reason to know thereof, the occurrence of any Default or Event of
Default;
(b) promptly, any default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect;
(c) promptly, any litigation, or any investigation or
proceeding known to the Company or any Borrower, affecting the Company
or any of its Subsidiaries which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect;
(d) as soon as possible and in any event within thirty (30)
days after the Company or any Borrower knows or has reason to know
thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make any required
contribution to a Plan, the creation of any Lien in favor of the PBGC
(other than a Permitted Lien) or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action
by the PBGC or the Company or any Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from,
or the terminating, Reorganization or Insolvency of, any Plan; and
(e) promptly, any other development or event which could
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company and the Borrowers propose to take with
respect thereto. In the
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case of any notice of a Default or Event of Default, the Company and the
Borrowers shall specify that such notice is a Default or Event of Default notice
on the face thereof.
SECTION 5.8 ENVIRONMENTAL LAWS.
(a) Comply with, and ensure compliance in all material
respects by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply in all material respects with
and maintain, and ensure that all tenants and subtenants obtain and
comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required
by applicable Environmental Laws except to the extent that failure to
do so could not reasonably be expected to have a Material Adverse
Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply with all lawful
orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being
contested in good faith by appropriate proceedings and the pendency of
such proceedings could not reasonably be expected to have a Material
Adverse Effect; and
(c) Defend, indemnify and hold harmless the Administrative
Agent and the Lenders, and their respective employees, agents, officers
and directors, from and against any and all claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable
to the operations of the Company any of its Subsidiaries or the
Properties, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the
extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
agreements in this paragraph shall survive repayment of the Notes and
all other amounts payable hereunder.
SECTION 5.9 FINANCIAL COVENANTS.
Commencing on the day immediately following the Closing Date, the
Company shall, and shall cause each of its Subsidiaries to, comply with the
following financial covenants:
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(a) Leverage Ratio. The Leverage Ratio, as of the last day
of each fiscal quarter of the Company and its Subsidiaries occurring
during each of the periods set forth below shall be less than or equal
to the following:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C> <C>
Closing Date until June 29, 2000 3.00 to 1.0
June 30, 2000 until December 30, 2001 2.50 to 1.0
December 31, 2001 until December 30, 2002 2.25 to 1.0
December 31, 2002 and thereafter 2.00 to 1.0
</TABLE>
(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio, as of the last day of each fiscal quarter of the Company and its
Subsidiaries shall be greater than or equal to 1.25 to 1.0.
(c) Interest Coverage Ratio. The Interest Coverage Ratio,
as of the last day of each fiscal quarter of the Company and its
Subsidiaries occurring during the periods set forth below shall be
greater than or equal to the following:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C> <C>
Closing Date until June 29, 2000 3.50 to 1.0
June 30, 2000 and thereafter 4.00 to 1.0
</TABLE>
SECTION 5.10 ADDITIONAL SUBSIDIARY GUARANTORS.
The Credit Parties will cause each of their Domestic Subsidiaries,
whether newly formed, after acquired or otherwise existing, to promptly become a
Guarantor hereunder by way of execution of a Joinder Agreement. The guaranty
obligations of any such Additional Credit Party shall be secured by, among other
things, the Collateral of the Additional Credit Party.
SECTION 5.11 COMPLIANCE WITH LAW.
Each Credit Party will, and will cause each of its Subsidiaries to,
comply with all laws, rules, regulations and orders, and all applicable
restrictions imposed by all Governmental Authorities, applicable to it and its
Property if noncompliance with any such law, rule, regulation, order or
restriction could reasonably be expected to have a Material Adverse Effect.
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SECTION 5.12 PLEDGED ASSETS.
Each Credit Party will cause 100% of the Capital Stock of each of the
direct or indirect Domestic Subsidiaries of the Company and 65% of the Capital
Stock in each of the direct Foreign Subsidiaries of the Company and its Domestic
Subsidiaries to be subject at all times to a first priority, perfected Lien in
favor of the Administrative Agent pursuant to the terms and conditions of the
Security Documents or such other security documents as the Administrative Agent
shall reasonably request.
SECTION 5.13 ADDITIONAL CREDIT PARTIES.
As soon as practicable and in any event within 30 days after any Person
becomes a Subsidiary of any Credit Party, the Borrowers shall provide the
Administrative Agent with written notice thereof setting forth information in
reasonable detail describing all of the assets of such Person and shall (a) if
such Person is a Domestic Subsidiary of a Credit Party, cause such Person to
execute a Joinder Agreement in substantially the same form as Schedule 5.13, and
(b) cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or
65% (if such Person is a direct Foreign Subsidiary of the Company or a Domestic
Subsidiary) of the Capital Stock of such Person to be delivered to the Agent
(together with undated stock powers signed in blank (unless, with respect to a
Foreign Subsidiary, such stock powers are deemed unnecessary by the Agent in its
reasonable discretion under the law of the jurisdiction of incorporation of such
Person)) and pledged to the Agent pursuant to an appropriate pledge agreement(s)
in substantially the form of the Pledge Agreement and otherwise in form
acceptable to the Agent.
SECTION 5.14 YEAR 2000 COMPLIANCE.
The Credit Parties will promptly notify the Administrative Agent in the
event any Credit Party discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
Compliant, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 5.15 INTEREST RATE PROTECTION AGREEMENTS.
The Borrowers shall, within 60 days of the Closing Date, enter into
interest rate protection agreements protecting against fluctuations in interest
rates, in amounts and for periods of time satisfactory to the Administrative
Agent, which agreements shall provide for coverage in a minimum amount of at
least 25% of the funded initial facility for a period of at least three (3)
years.
SECTION 5.16 FURTHER ASSURANCES.
As soon as practicable, but in any event within (i) 30 days after the
Closing Date, the Borrowers shall have delivered (A) all certificates
representing the shares pledged pursuant to the Pledge Agreement with respect to
Racing Champions Worldwide Limited, Racing Champions Limited, RCNA Holdings,
Inc. and The Ertl Company, Inc. and (B) a satisfactory legal opinion addressed
to the Administrative Agent and the Lenders with respect to the pledge of the
certificates representing the pledged shares of The Ertl Company, Inc., (ii) 45
days after the Closing Date, the Borrowers shall have delivered all certificates
representing the shares pledged pursuant to the Pledge Agreement with respect to
Ertl de Mexico S.A. de C.V. and (iii) 15 days after the Closing Date, the
Borrowers shall have delivered an appropriate good standing certificate from the
Commonwealth of Virginia with respect to Green's Racing Souvenirs, Inc. and from
the State of North Carolina with respect to Racing Champions South, Inc.
ARTICLE VI
NEGATIVE COVENANTS
The Credit Parties hereby covenant and agree that on the Closing Date,
and thereafter for so long as this Agreement is in effect and until the
Commitments have terminated, no Note remains outstanding and unpaid and the
Credit Party Obligations, together with interest, Commitment Fees and all other
amounts owing to the Administrative Agent or any Lender hereunder, are paid in
full, the Company shall, and shall cause each of its Subsidiaries, to act in
accordance with the following:
SECTION 6.1 INDEBTEDNESS.
The Company will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising or existing under this Agreement
and the other Credit Documents;
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(b) Indebtedness of the Company and its Subsidiaries
existing as of the Closing Date as referenced in the financial
statements referenced in Section 3.1 (and set out more specifically in
Schedule 6.1(b)) hereto and renewals, refinancings or extensions
thereof in a principal amount not in excess of that outstanding as of
the date of such renewal, refinancing or extension;
(c) Indebtedness of the Company and its Subsidiaries
incurred after the Closing Date consisting of Capital Leases or
Indebtedness incurred to provide all or a portion of the purchase price
or cost of construction of an asset provided that (i) such Indebtedness
when incurred shall not exceed the purchase price or cost of
construction of such asset; (ii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing; and (iii) the
total amount of all such Indebtedness shall not exceed $500,000 at any
time outstanding;
(d) Unsecured intercompany Indebtedness among the Company
and its Subsidiaries, provided that any such Indebtedness shall be
fully subordinated to the Credit Party Obligations hereunder on terms
reasonably satisfactory to the Administrative Agent;
(e) Indebtedness and obligations owing under Hedging
Agreements relating to the Loans hereunder and other Hedging Agreements
entered into in order to manage existing or anticipated interest rate,
exchange rate or commodity price risks and not for speculative
purposes;
(f) Indebtedness in respect of Guaranty Obligations (other
than Guaranty Obligations permitted pursuant to Section 6.1(a)) in an
aggregate amount not to exceed $1,000,000 at any time outstanding;
(g) in addition to the Indebtedness otherwise permitted by
this Section 6.1, additional Subordinated Debt hereafter incurred by
the Company or any of its Subsidiaries provided that (A) the loan
documentation with respect to such Indebtedness shall be on terms and
conditions satisfactory to the Required Lenders, (B) such Subordinated
Debt shall be subordinated to the Credit Party Obligations and shall
not contain covenants or default provisions relating to any Credit
Party that are more restrictive than the covenants and default
provisions contained in the Credit Documents and (C) the Company shall
have demonstrated to the Agent that, upon giving effect on a pro forma
basis to the incurrence of such Indebtedness and to the
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concurrent retirement of any other Indebtedness of any Credit Party,
no Default or Event of Default would exist hereunder; and
(h) Unsecured Indebtedness of Racing Champions Limited in
an aggregate amount not to exceed $5,000,000.
SECTION 6.2 LIENS.
The Company will not, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or hereafter acquired, except for Permitted
Liens.
SECTION 6.3 GUARANTY OBLIGATIONS.
The Company will not, nor will it permit any Subsidiary to, enter into
or otherwise become or be liable in respect of any Guaranty Obligations
(excluding specifically therefrom endorsements in the ordinary course of
business of negotiable instruments for deposit or collection) other than (i)
those in favor of the Lenders in connection herewith and (ii) Guaranty
Obligations by the Company or its Subsidiaries of Indebtedness permitted under
Section 6.1(f) (except, as regards Indebtedness under subsection (b) thereof,
only if and to the extent such Indebtedness was guaranteed on the Closing Date).
SECTION 6.4 NATURE OF BUSINESS.
The Company will not, nor will it permit any Subsidiary to, alter the
character of its business in any material respect from that conducted as of the
Closing Date.
SECTION 6.5 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
The Company will not, nor will it permit any Subsidiary to,
(a) dissolve, liquidate or wind up its affairs, sell,
transfer, lease or otherwise dispose of its property or assets or agree
to do so at a future time except the following, without duplication,
shall be expressly permitted:
(i) Specified Sales; and
(ii) the sale, transfer, lease or other disposition
of property or assets (a) to an unrelated party not in the
ordinary course of business (other than Specified Sales),
where and to the extent that they are the result of a Recovery
Event or (b) the sale, lease, transfer or other disposition of
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machinery, parts and equipment no longer used or useful in the
conduct of the business of the Company or any of its
Subsidiaries, as appropriate, in its reasonable discretion, so
long as and the net proceeds therefrom are used to repair or
replace damaged property or to purchase or otherwise acquire
new assets or property, provided that such purchase or
acquisition is committed to within 90 days of receipt of the
net proceeds and such purchase or acquisition is consummated
within 120 days of receipt of such proceeds;
(iii) the sale, lease or transfer of property or
assets (at fair value) between the Borrowers and any
Guarantor;
(iv) the sale, lease or transfer of property or
assets from a Credit Party other than the Borrowers to another
Credit Party; and
(v) the sale, lease or transfer of property or
assets at fair value in an amount not to exceed $1,000,000 in
the aggregate in any fiscal year;
provided, that in each case at least 75% of the consideration received
therefor by the Company or any such Subsidiary is in the form of cash
or Cash Equivalents; or
(b) (i) purchase, lease or otherwise acquire (in a single
transaction or a series of related transactions) the property or assets
of any Person (other than purchases or other acquisitions of inventory,
leases, materials, property and equipment in the ordinary course of
business, except as otherwise limited or prohibited herein) provided
that so long as no Default or Event of Default shall have occurred and
be continuing or would result therefrom on an actual or pro forma
basis, the Company or any other Borrower may acquire all or a majority
of the Capital Stock or other ownership interest in any Person (in a
similar or related line of business provided that such acquisition
shall not have been rejected initially or thereafter by such Person's
board of directors) or all or a substantial portion of the assets,
property and/or operations of a Person (in a similar or related line of
business) in an aggregate amount for all such acquisitions not to
exceed $20,000,000 in any fiscal year, or (ii) enter into any
transaction of merger or consolidation, except for (A) investments or
acquisitions permitted pursuant to Section 6.6, and (B) the merger or
consolidation of a Credit Party with and into another Credit Party,
provided that if the Company or any Borrower is a party thereto, the
Company or such Borrower will be the surviving corporation.
SECTION 6.6 ADVANCES, INVESTMENTS AND LOANS.
The Company will not, nor will it permit any Subsidiary to, lend money
or extend credit or make advances to any Person, or purchase or acquire any
stock, obligations or
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securities of, or any other interest in, or make any capital contribution to,
any Person except for Permitted Investments.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES.
Except as permitted in subsection (iv) of the definition of Permitted
Investments and otherwise to an extent not judged material by the Required
Lenders in their discretion, the Company will not, nor will it permit any
Subsidiary to, enter into any transaction or series of transactions, whether or
not in the ordinary course of business, with any officer, director, shareholder
or Affiliate other than on terms and conditions substantially as favorable as
would be obtainable in a comparable arm's-length transaction with a Person other
than an officer, director, shareholder or Affiliate.
SECTION 6.8 OWNERSHIP OF SUBSIDIARIES; RESTRICTIONS.
The Company will not, nor will it permit any Subsidiary to, create,
form or acquire any Subsidiaries, except for Domestic Subsidiaries which are
joined as Additional Credit Parties in accordance with the terms hereof. The
Company will not sell, transfer, pledge or otherwise dispose of any Capital
Stock or other equity interests in any of its Subsidiaries, nor will it permit
any of its Subsidiaries to issue, sell, transfer, pledge or otherwise dispose of
any of their Capital Stock or other equity interests, except in a transaction
permitted by Section 6.5.
SECTION 6.9 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS; MATERIAL
CONTRACTS.
The Company will not, nor will it permit any of its Subsidiaries to,
change its fiscal year except in the event that any such change could not
reasonably be expected to have a Material Adverse Effect. The Company will not,
nor will it permit any Subsidiary to, amend, modify or change its articles of
incorporation (or corporate charter or other similar organizational document) or
bylaws (or other similar document) without the prior written consent of the
Required Lenders. The Company will not, nor will it permit any of its
Subsidiaries to, without the prior written consent of the Administrative Agent,
amend, modify, cancel or terminate or fail to renew or extend or permit the
amendment, modification, cancellation or termination of any of the Material
Contracts, except in the event that such amendments, modifications,
cancellations or terminations could not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.10 LIMITATION ON ACTIONS.
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other
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distributions to any Credit Party on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, (b) pay any
Indebtedness or other obligation owed to any Credit Party, (c) make loans or
advances to any Credit Party, (d) sell, lease or transfer any of its properties
or assets to any Credit Party, or (e) act as a Guarantor and pledge its assets
pursuant to the Credit Documents or any renewals, refinancings, exchanges,
refundings or extension thereof, except (in respect of any of the matters
referred to in clauses (a)-(d) above) for such encumbrances or restrictions
existing under or by reason of (i) this Agreement and the other Credit
Documents, (ii) the Subordinated Debt, (iii) applicable law, (iv) any document
or instrument governing Indebtedness incurred pursuant to Section 6.1(c),
provided that any such restriction contained therein relates only to the asset
or assets constructed or acquired in connection therewith or (v) any Permitted
Lien or any document or instrument governing any Permitted Lien, provided that
any such restriction contained therein relates only to the asset or assets
subject to such Permitted Lien.
SECTION 6.11 RESTRICTED PAYMENTS.
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, declare, order, make or set apart any sum for or pay any Restricted
Payment, except (a) to make dividends payable solely in the same class of
Capital Stock of such Person, (b) to make dividends or other distributions
payable to any Credit Party (directly or indirectly through Subsidiaries), (c)
as permitted by Section 6.12 and (d) provided that no Default or Event of
Default has occurred and is continuing at such time or would be directly or
indirectly caused as a result thereof on an actual or pro forma basis, the
Company may repurchase shares of its Capital Stock on the open market in an
aggregate amount not to exceed (i) $10,000,000 in the aggregate from the Closing
Date until April 15, 2000 and (ii) $20,000,000 in the aggregate during the term
of this Agreement.
SECTION 6.12 PREPAYMENTS OF INDEBTEDNESS, ETC.
The Company will not, nor will it permit any Subsidiary to, (a) after
the issuance thereof, amend or modify (or permit the amendment or modification
of) any of the terms of any Indebtedness in excess of $3,000,000 if such
amendment or modification would add or change any terms in a manner adverse to
the issuer of such Indebtedness, or shorten the final maturity or average life
to maturity or require any payment to be made sooner than originally scheduled
or increase the interest rate applicable thereto or change any subordination
provision thereof, or (b) make (or give any notice with respect thereto) any
voluntary or optional payment or prepayment, redemption, acquisition for value
or defeasance of (including without limitation, by way of depositing money or
securities with the trustee with respect thereto before due for the purpose of
paying when due), refund, refinance or exchange of any Subordinated Debt, except
that so long as there is no Default or Event of Default then in existence or
would result from the making of such
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payments and subject to the terms and provisions of the document evidencing such
Subordinated Debt, the Company shall be entitled to pay interest and scheduled
principal payments thereon in accordance with the terms of such Subordinated
Debt.
SECTION 6.13 SALE LEASEBACKS.
The Company will not, nor will it permit any Subsidiary to, directly or
indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired in excess of $1,000,000 in the aggregate on an annual basis, (a) which
the Company or any Subsidiary has sold or transferred or is to sell or transfer
to a Person which is not the Company or any Subsidiary or (b) which the Company
or any Subsidiary intends to use for substantially the same purpose as any other
property which has been sold or is to be sold or transferred by the Company or
any Subsidiary to another Person which is not the Company or any Subsidiary in
connection with such lease.
SECTION 6.14 NO FURTHER NEGATIVE PLEDGES.
The Company will not, nor will it permit any Subsidiary to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation, except (a) pursuant
to this Agreement and the other Credit Documents, (b) pursuant to any document
or instrument governing Indebtedness incurred pursuant to Section 6.1(c),
provided that any such restriction contained therein relates only to the asset
or assets constructed or acquired in connection therewith and (c) in connection
with any Permitted Lien or any document or instrument governing any Permitted
Lien, provided that any such restriction contained therein relates only to the
asset or assets subject to such Permitted Lien.
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ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) The Borrowers shall fail to pay any principal on any Note
when due in accordance with the terms thereof or hereof; or the
Borrowers shall fail to reimburse the Issuing Lender for any LOC
Obligations when due in accordance with the terms hereof; or the
Borrowers shall fail to pay any interest on any Note or any fee or
other amount payable hereunder when due in accordance with the terms
thereof or hereof and such failure shall continue unremedied for three
(3) Business Days (or any Guarantor shall fail to pay on the Guaranty
in respect of any of the foregoing or in respect of any other Guaranty
Obligations thereunder); or
(b) Any representation or warranty made or deemed made herein,
in the Security Documents or in any of the other Credit Documents or
which is contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement shall prove to have been incorrect, false or misleading in
any material respect on or as of the date made or deemed made; or
(c) (i) Any Credit Party shall fail to perform, comply with or
observe any term, covenant or agreement applicable to it contained in
Section 5.7(a), Section 5.9 or Article VI hereof ; or (ii) any Credit
Party shall fail to comply with any other covenant, contained in this
Credit Agreement or the other Credit Documents or any other agreement,
document or instrument among any Credit Party, the Administrative Agent
and the Lenders or executed by any Credit Party in favor of the
Administrative Agent or the Lenders (other than as described in
Sections 7.1(a) or 7.1(c)(i) above), and in the event such breach or
failure to comply is capable of cure, is not cured within thirty (30)
days of its occurrence; or
(d) The Company or any of its Subsidiaries shall (i) default
in any payment of principal of or interest on any Indebtedness (other
than the Notes) in a principal amount outstanding of at least
$1,000,000 in the aggregate for the Company and any of its Subsidiaries
beyond the period of grace (not to exceed 30 days), if any, provided in
the instrument or agreement under which such Indebtedness was created;
or (ii) default in the observance or performance of any
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other agreement or condition relating to any Indebtedness in a
principal amount outstanding of at least $1,000,000 in the aggregate
for the Company and its Subsidiaries 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 beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity;
or
(e) (i) The Company or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for
it or for all or any substantial part of its assets, or the Company or
any Subsidiary shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company or any
Subsidiary any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Company or any Subsidiary any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Company or any Subsidiary shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Company or any Subsidiary shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(f) One or more judgments or decrees shall be entered against
the Company or any of its Subsidiaries involving in the aggregate a
liability (to the extent not paid when due or covered by insurance) of
$1,000,000 or more and all such judgments or decrees shall not have
been paid and satisfied, vacated, discharged, stayed or bonded pending
appeal within 30 days from the entry thereof; or
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(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
(other than a Permitted Lien) shall arise on the assets of the Company
and the Borrowers or any Commonly Controlled Entity, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a Trustee is, in
the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the Company, the Borrowers, any of their Subsidiaries or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, any
Multiemployer Plan or (vi) any other similar event or condition shall
occur or exist with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other
such events or conditions, if any, could have a Material Adverse
Effect; or
(h) Either (i) any Person or two or more Persons acting in
concert shall have acquired "beneficial ownership," directly or
indirectly, of, or shall have acquired by contract or otherwise, or
shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of, control over,
Voting Stock of the Company (or other securities convertible into such
Voting Stock) representing 33% or more of the combined voting power of
all Voting Stock of the Company, or (ii) during any period of up to 24
consecutive months, commencing after the Closing Date, individuals who
at the beginning of such 24 month period were directors of the Company
(together with any new director whose election by the Company's Board
of Directors or whose nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a
majority of the directors of the Company then in office. As used
herein, "beneficial ownership" shall have the meaning provided in Rule
13d-3 of the Securities and Exchange Commission under the Securities
Act of 1934; or
(i) The Guaranty or any provision thereof shall cease to be in
full force and effect or any Guarantor or any Person acting by or on
behalf of any Guarantor shall deny or disaffirm any Guarantor's
obligations under the Guaranty; or
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(j) Any other Credit Document shall fail to be in full force
and effect or to give the Administrative Agent and/or the Lenders the
security interests, liens, rights, powers and privileges purported to
be created thereby (except as such documents may be terminated or no
longer in force and effect in accordance with the terms thereof, other
than those indemnities and provisions which by their terms shall
survive); or
(k) There shall occur and be continuing any Event of Default
under and as defined in the indenture or other document evidencing any
Subordinated Debt in excess of $1,000,000 permitted hereunder or any of
the Credit Party Obligations for any reason shall cease to be
designated as senior indebtedness thereunder.
SECTION 7.2 ACCELERATION; REMEDIES.
Upon the occurrence of an Event of Default, then, and in any such
event, (a) if such event is an Event of Default specified in Section 7.1(e)
above, automatically the Commitments shall immediately terminate and the Loans
(with accrued interest thereon), and all other amounts under the Credit
Documents (including without limitation the maximum amount of all contingent
liabilities under Letters of Credit) shall immediately become due and payable,
and (b) if such event is any other Event of Default, either or both of the
following actions may be taken: (i) with the written consent of the Required
Lenders, the Administrative Agent may, or upon the written request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrowers
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the written consent of the Required
Lenders, the Administrative Agent may, or upon the written request of the
Required Lenders, the Administrative Agent shall, by notice of default to the
Borrowers, declare the Loans (with accrued interest thereon) and all other
amounts owing under this Agreement and the Notes to be due and payable forthwith
and direct the Borrowers jointly and severally to pay to the Administrative
Agent cash collateral as security for the LOC Obligations for subsequent
drawings under then outstanding Letters of Credit an amount equal to the maximum
amount of which may be drawn under Letters of Credit then outstanding, whereupon
the same shall immediately become due and payable.
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ARTICLE VIII
THE AGENT
SECTION 8.1 APPOINTMENT.
Each Lender hereby irrevocably designates and appoints First Union
National Bank as the Administrative Agent of such Lender under this Agreement,
and each such Lender irrevocably authorizes First Union National Bank, as the
Administrative Agent for such Lender, to take such action on its behalf under
the provisions of this Agreement and to exercise such powers and perform such
duties as are expressly delegated to the Administrative Agent by the terms of
this Agreement, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or otherwise exist against the Administrative Agent.
SECTION 8.2 DELEGATION OF DUTIES.
The Administrative Agent may execute any of its duties under this
Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care. Without
limiting the foregoing, the Administrative Agent may appoint one of its
affiliates as its agent to perform the functions of the Administrative Agent
hereunder relating to the advancing of funds to the Borrowers and distribution
of funds to the Lenders and to perform such other related functions of the
Administrative Agent hereunder as are reasonably incidental to such functions.
SECTION 8.3 EXCULPATORY PROVISIONS.
Neither the Administrative 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 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 Lenders for any recitals, statements, representations or warranties made by
the Company, any Borrower or any officer thereof contained in this Agreement or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or for the value, validity, effectiveness, genuineness,
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enforceability or sufficiency of any of the Credit Documents or for any failure
of any Credit Party to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance by the Credit
Parties of any of the agreements contained in, or conditions of, this Agreement,
or to inspect the properties, books or records of the Credit Parties.
SECTION 8.4 RELIANCE BY ADMINISTRATIVE AGENT.
The Administrative 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 in
good faith to be genuine and correct 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 Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless (a) a written notice of assignment, negotiation
or transfer thereof shall have been filed with the Administrative Agent and (b)
the Administrative Agent shall have received the written agreement of such
assignee to be bound hereby as fully and to the same extent as if such assignee
were an original Lender party hereto, in each case in form satisfactory to the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
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 Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
any of the Credit Documents in accordance with a request of the Required Lenders
or all of the Lenders, as may be required under this Agreement, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Notes.
SECTION 8.5 NOTICE OF DEFAULT.
The Administrative Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the
Administrative Agent has received notice from a Lender or the Borrowers
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
Administrative Agent receives such a notice, the Administrative Agent shall give
prompt notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; provided, however, that
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unless and until the Administrative Agent shall have received such directions,
the Administrative 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 Lenders except
to the extent that this Credit Agreement expressly requires that such action be
taken, or not taken, only with the consent or upon the authorization of the
Required Lenders, or all of the Lenders, as the case may be.
SECTION 8.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representation or warranty to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of the Credit Parties, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Credit Parties and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit 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, operations, property, financial and other condition
and creditworthiness of the Credit Parties. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Credit Parties which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 8.7 INDEMNIFICATION.
The Lenders agree to indemnify the Administrative Agent in its capacity
hereunder (to the extent not reimbursed by the Borrowers and without limiting
the obligation of the Borrowers to do so), ratably according to their respective
Commitment Percentages in effect on the date on which indemnification is sought
under this Section, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time
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(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of any Credit Document or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided,
however, that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Agent's gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction. The agreements in this Section 8.7 shall survive the termination
of this Agreement and payment of the Notes and all other amounts payable
hereunder.
SECTION 8.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrowers as
though the Administrative Agent were not the Administrative Agent hereunder.
With respect to its Loans made or renewed by it and any Note issued to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Lender and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
SECTION 8.9 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign as Administrative Agent upon 30
days' prior notice to the Borrowers and the Lenders. If the Administrative Agent
shall resign as Administrative Agent under this Agreement and the Notes, then
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders, which successor agent shall be approved by the Borrowers, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Agent's rights, powers and duties as Administrative Agent shall be terminated,
without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement or any holders of
the Notes. After any retiring Agent's resignation as Administrative Agent, the
provisions of this Section 8.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
SECTION 8.10 CO-AGENTS, ETC.
None of the Lenders identified in this Agreement as a "co-agent" shall
have any right, power, obligation, liability, responsibility or duty under this
Agreement other than
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those applicable to all Lenders as such. Without limiting the foregoing, none of
such Lenders shall have or be deemed to have a fiduciary relationship with any
Lender. Each Lender hereby makes the same acknowledgments with respect to such
Lenders as it makes with respect to the Administrative Agent in Section 8.6.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 AMENDMENTS, WAIVERS AND RELEASE OF COLLATERAL.
Neither this Agreement, nor any of the Notes, nor any of the other
Credit Documents, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this Section nor
may be released except as specifically provided herein or in the Security
Documents or in accordance with the provisions of this Section 9.1. The Required
Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Credit
Parties written amendments, supplements or modifications hereto and to the other
Credit Documents for the purpose of adding any provisions to this Agreement or
the other Credit Documents or changing in any manner the rights of the Lenders
or of the Credit Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders may specify in such instrument, any of the
requirements of this Agreement or the other Credit Documents or any Default or
Event of Default and its consequences or (c) release collateral in accordance
with the terms hereof or of any Security Document or on such other terms and
conditions as the Required Lenders may agree; provided, however, that no such
waiver and no such amendment, waiver, supplement, modification or release shall:
(i) reduce the amount or extend the scheduled date of
maturity of any Loan or Note or any installment thereon, or
reduce the stated rate of any interest or fee payable
hereunder (other than interest at the increased post-default
rate) or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any
Lender's Commitment, in each case without the written consent
of each Lender directly affected thereby, or
(ii) amend, modify or waive any provision of this
Section 9.1 or reduce the percentage specified in the
definition of Required Lenders, without the written consent of
all the Lenders, or
(iii) amend, modify or waive any provision of Article
VIII without the written consent of the then Administrative
Agent, or
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(iv) release any of the Guarantors from their
obligations under the Guaranty, without the written consent of
all of the Lenders, or
(v) release all or substantially all of the
Collateral, without the written consent of all of the Lenders,
or
(vi) without the consent of Lenders holding
in the aggregate more than 50% of the outstanding Term Loans,
extend the time for or the amount or the manner of application
of proceeds of any mandatory prepayment required by Section
2.8(b)(ii), (iii), (iv), (v) or (vi) hereof, or
(vii) amend, modify or waive any provision of the
Credit Documents requiring consent, approval or request of the
Required Lenders or all Lenders, without the written consent
of all of the Lenders and, provided, further, that no
amendment, waiver or consent affecting the rights or duties of
the Administrative Agent or the Issuing Lender under any
Credit Document shall in any event be effective, unless in
writing and signed by the Administrative Agent and/or the
Issuing Lender, as applicable, in addition to the Lenders
required hereinabove to take such action.
Any such waiver, any such amendment, supplement or modification and any
such release shall apply equally to each of the Lenders and shall be binding
upon the Borrowers, the other Credit Parties, the Lenders, the Administrative
Agent and all future holders of the Notes. In the case of any waiver, the
Borrowers, the other Credit Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
outstanding Loans and Notes and other Credit Documents, and any Default or Event
of Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
Notwithstanding any of the foregoing to the contrary, the consent of
the Borrowers shall not be required for any amendment, modification or waiver of
the provisions of Article VIII (other than the provisions of Section 8.9);
provided, however, that the Administrative Agent will provide written notice to
the Borrowers of any such amendment, modification or waiver. In addition, the
Credit Parties and the Lenders hereby authorize the Administrative Agent to
modify this Credit Agreement by unilaterally amending or supplementing Schedule
2.1(a) from time to time in the manner requested by the Borrowers, the
Administrative Agent or any Lender in order to reflect any assignments or
transfers of the Loans as provided for hereunder; provided, however,
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that the Administrative Agent shall promptly deliver a copy of any such
modification to the Borrowers and each Lender.
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender is
entitled to vote as such Lender sees fit on any bankruptcy reorganization plan
that affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
SECTION 9.2 NOTICES.
Except as otherwise provided in Article II, all notices, requests and
demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made (a) when delivered by
hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d)
the fifth Business Day following the day on which the same is sent by certified
or registered mail, postage prepaid, in each case, addressed as follows in the
case of the Borrowers, the other Credit Parties and the Administrative Agent,
and as set forth on Schedule 9.2 in the case of the Lenders, or to such other
address as may be hereafter notified by the respective parties hereto and any
future holders of the Notes:
The Borrowers Racing Champions Corporation
and the other Mr. Curt Stoelting
Credit Parties: Executive Vice President-
Finance and Operations
Racing Champions, Inc.
800 Roosevelt Road, Building C-320
Glen Ellyn, Illinois 60137
with a copy to:
James M. Bedore, Esq.
Reinhart, Boerner, Van Deuren, Norris &
Rieselbach, S.C.
1000 North Water Street
Milwaukee, Wisconsin 53202-0900
Telephone: (414) 298-8196
Facsimile: (414) 298-8097
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The Administrative First Union National Bank
Agent: One First Union Center, TW4
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telecopier: (704) 383-3721
Telephone: (704) 383-6537
with a copy to:
First Union National Bank
One First Union Center, DC-5
Charlotte, North Carolina 28288-0737
Attention: Kent Davis
Telecopier: (704) 374-4793
Telephone: (704) 715-1302
SECTION 9.3 NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
SECTION 9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans, provided that all such representations and warranties shall
terminate on the date upon which the Commitments have been terminated and all
amounts owing hereunder and under any Notes have been paid in full.
SECTION 9.5 PAYMENT OF EXPENSES AND TAXES.
The Borrowers jointly and severally agree (a) to pay or reimburse the
Administrative Agent for all its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation, negotiation, printing
and execution of, and any amendment, supplement or modification to, this
Agreement and the other Credit Documents and any other documents prepared in
connection herewith or therewith, and
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the consummation and administration of the transactions contemplated hereby and
thereby, together with the reasonable fees and disbursements of counsel to the
Administrative Agent, (b) to pay or reimburse each Lender and the Administrative
Agent for all its costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the Notes and any such other
documents, including, without limitation, the reasonable fees and disbursements
of counsel to the Administrative Agent and to the Lenders (including reasonable
allocated costs of in-house legal counsel), and (c) on demand, to pay,
indemnify, and hold each Lender and the Administrative Agent harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, the Credit Documents and any
such other documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent and their Affiliates harmless from and against, any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and administration
of the Credit Documents and any such other documents and the use, or proposed
use, of proceeds of the Loans (all of the foregoing, collectively, the
"indemnified liabilities"); provided, however, that the Borrowers shall not have
any obligation hereunder to the Administrative Agent or any Lender with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of the Administrative Agent or any such Lender, as determined by a
court of competent jurisdiction. The agreements in this Section 9.5 shall
survive repayment of the Loans, Notes and all other amounts payable hereunder.
SECTION 9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING
LENDERS.
(a) This Agreement shall be binding upon and inure to the
benefit of the Credit Parties, the Lenders, the Administrative Agent,
all future holders of the Notes and their respective successors and
assigns, except that the Credit Parties may not assign or transfer any
of their rights or obligations under this Agreement or the other Credit
Documents without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time
sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held
by such Lender, any Commitment of such Lender, or any other interest of
such Lender hereunder. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such
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Lender shall remain the holder of any such Note for all purposes under
this Agreement, and the Borrowers and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement. No
Lender shall transfer or grant any participation under which the
Participant 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 (i) extend the scheduled maturity of any Loan
or Note or any installment thereon in which such Participant is
participating, or reduce the stated rate or extend the time of payment
of interest or fees thereon (except in connection with a waiver of
interest at the increased post-default rate) or reduce the principal
amount thereof, or increase the amount of the Participant's
participation over the amount thereof then in effect (it being
understood that a waiver of any Default or Event of Default shall not
constitute a change in the terms of such participation, and that an
increase in any Commitment or Loan shall be permitted without consent
of any participant if the Participant's participation is not increased
as a result thereof) or (ii) consent to the assignment or transfer by
the Credit Parties of any of its rights and obligations under this
Agreement. 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 such Lender in respect of
such participation to be those set forth in the agreement executed by
such Lender in favor of the Participant relating thereto) and all
amounts payable by the Borrowers hereunder shall be determined as if
such Lender had not sold such participation, provided that each
Participant shall be entitled to the benefits of Sections 2.17, 2.18,
2.19 and 9.5 with respect to its participation in the Commitments and
the Loans outstanding from time to time; provided, that no Participant
shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Lender would have been entitled to receive
in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time,
sell or assign to any Lender or any affiliate thereof and with the
consent of the Administrative Agent and, so long as no Event of Default
has occurred and is continuing, the Borrowers (in each case, which
consent shall not be unreasonably withheld or delayed), to one or more
additional banks or financial institutions ("Purchasing Lenders"), all
or any part of its rights and obligations under this Agreement and the
Notes in minimum amounts of $5,000,000 with respect to its Revolving
Commitment, its Revolving Loans and its Term Loans (or, if less, the
entire amount of such Lender's obligations), pursuant to a Commitment
Transfer Supplement, executed by such Purchasing Lender and such
transferor Lender (and, in the case of a
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Purchasing Lender that is not then a Lender or an affiliate thereof,
the Administrative Agent and, so long as no Event of Default has
occurred and is continuing, the Borrowers), and delivered to the
Administrative Agent for its acceptance and recording in the Register;
provided, however, that any sale or assignment to an existing Lender or
an affiliate thereof shall not require the consent of the
Administrative Agent or the Borrowers nor shall any such sale or
assignment be subject to the minimum assignment amounts specified
herein. Upon such execution, delivery, acceptance and recording, from
and after the Transfer Effective Date specified in such Commitment
Transfer Supplement, (x) the Purchasing Lender thereunder shall be a
party hereto and, to the extent provided in such Commitment Transfer
Supplement, have the rights and obligations of a Lender hereunder with
a Commitment as set forth therein, and (y) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer
Supplement, be released from its obligations under this Agreement (and,
in the case of a Commitment Transfer Supplement covering all or the
remaining portion of a transferor Lender's rights and obligations under
this Agreement, such transferor Lender shall cease to be a party
hereto). Such Commitment Transfer Supplement shall be deemed to amend
this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting
adjustment of Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of
such transferor Lender under this Agreement and the Notes. On or prior
to the Transfer Effective Date specified in such Commitment Transfer
Supplement, the Borrowers, at their own expense, shall execute and
deliver to the Administrative Agent in exchange for the Notes delivered
to the Administrative Agent pursuant to such Commitment Transfer
Supplement new Notes to the order of such Purchasing Lender in an
amount equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and, unless the transferor Lender has
not retained a Commitment hereunder, new Notes to the order of the
transferor Lender in an amount equal to the Commitment retained by it
hereunder. Such new Notes shall be dated the Closing Date and shall
otherwise be in the form of the Notes replaced thereby. The Notes
surrendered by the transferor Lender shall be returned by the
Administrative Agent to the Borrowers marked "canceled".
(d) The Administrative Agent shall maintain at its address
referred to in Section 9.2 a copy of each Commitment Transfer
Supplement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrowers, the Administrative
Agent and the Lenders may treat each Person whose name is recorded in
the Register as the owner of the Loan recorded therein for all purposes
of this Agreement. The
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Register shall be available for inspection by the Borrowers or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of a duly executed Commitment Transfer
Supplement, together with payment to the Administrative Agent by the
transferor Lender or the Purchasing Lender, as agreed between them, of
a registration and processing fee of $3,500 for each Purchasing Lender
listed in such Commitment Transfer Supplement and the Notes subject to
such Commitment Transfer Supplement, the Administrative Agent shall (i)
accept such Commitment Transfer Supplement, (ii) record the information
contained therein in the Register and (iii) give prompt notice of such
acceptance and recordation to the Lenders and the Borrowers.
(f) The Borrowers authorize each Lender to disclose to any
Participant or Purchasing Lender (each, a "Transferee") and any
prospective Transferee any and all financial information in such
Lender's possession concerning the Borrowers and their Affiliates which
has been delivered to such Lender by or on behalf of the Borrowers
pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrowers in connection with such Lender's
credit evaluation of the Borrowers and their Affiliates prior to
becoming a party to this Agreement, in each case subject to Section
9.16.
(g) At the time of each assignment pursuant to this Section
9.6 to a Person which is not already a Lender hereunder and which is
not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for Federal income tax purposes, the
respective assignee Lender shall provide to the Borrowers and the
Administrative Agent the appropriate Internal Revenue Service Forms
(and, if applicable, a 2.19 Certificate) described in Section 2.19.
(h) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under this Agreement (including, without
limitation, any right to payment of principal and interest under any
Note) to any Federal Reserve Bank in accordance with applicable laws.
SECTION 9.7 ADJUSTMENTS; SET-OFF.
(a) Each Lender agrees that if any Lender (a "benefited
Lender") shall at any time receive any payment of all or part of its
Loans, or interest thereon, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in Section 7.1(e), or
otherwise) in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such
other Lender's Loans, or
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interest thereon, such benefited Lender shall purchase for cash from
the other Lenders a participating interest in such portion of each such
other Lender's Loan, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefited Lender,
such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. The
Credit Parties agree that each Lender so purchasing a portion of
another Lender's Loans may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders
provided by law (including, without limitation, other rights of
set-off), each Lender shall have the right, without prior notice to the
Credit Parties, any such notice being expressly waived by the Credit
Parties to the extent permitted by applicable law, upon the occurrence
of any Event of Default, to setoff and appropriate and apply any and
all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims,
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof to or for the credit or the
account of the Borrowers, or any part thereof in such amounts as such
Lender may elect, against and on account of the obligations and
liabilities of the Credit Parties to such Lender hereunder and claims
of every nature and description of such Lender against the Credit
Parties, in any currency, whether arising hereunder, under the Notes or
under any documents contemplated by or referred to herein or therein,
as such Lender may elect, whether or not such Lender has made any
demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The aforesaid right of set-off
may be exercised by such Lender against the Credit Parties or against
any trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver or execution, judgment or attachment
creditor of the Credit Parties, or against anyone else claiming through
or against the Credit Parties or any such trustee in bankruptcy, debtor
in possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the fact
that such right of set-off shall not have been exercised by such Lender
prior to the occurrence of any Event of Default. Each Lender agrees
promptly to notify the Borrowers and the Administrative Agent after any
such set-off and application made by such Lender; provided, however,
that the failure to give such notice shall not affect the validity of
such set-off and application.
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SECTION 9.8 TABLE OF CONTENTS AND SECTION HEADINGS.
The table of contents and the Section and subsection headings herein
are intended for convenience only and shall be ignored in construing this
Agreement.
SECTION 9.9 COUNTERPARTS.
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the copies of this Agreement signed by all the parties shall be lodged with
the Borrowers and the Administrative Agent.
SECTION 9.10 EFFECTIVENESS.
This Credit Agreement shall become effective on the date on which all
of the parties have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Administrative Agent pursuant to
Section 9.2 or, in the case of the Lenders, shall have given to the
Administrative Agent written, telecopied or telex notice (actually received) at
such office that the same has been signed and mailed to it.
SECTION 9.11 SEVERABILITY.
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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.12 INTEGRATION.
This Agreement and the Notes represent the agreement of the Borrowers,
the Administrative Agent and the Lenders with respect to the subject matter
hereof, and there are no promises, undertakings, representations or warranties
by the Administrative Agent, the Borrowers or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the Notes.
SECTION 9.13 GOVERNING LAW.
This Agreement and the Notes and the rights and obligations of the
parties under this Agreement and the Notes shall be governed by, and construed
and interpreted in accordance with, the law of the State of North Carolina.
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SECTION 9.14 CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
All judicial proceedings brought against the Borrowers and/or any other
Credit Party with respect to this Agreement, any Note or any of the other Credit
Documents may be brought in any state or federal court of competent jurisdiction
in the State of Illinois, and, by execution and delivery of this Agreement, each
of the Borrowers and the other Credit Parties accepts, for itself and in
connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
final judgment rendered thereby in connection with this Agreement from which no
appeal has been taken or is available. Each of the Borrowers and the other
Credit Parties irrevocably agrees that all service of process in any such
proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to it at its address set forth in Section 9.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto, such service being hereby acknowledged by the each of the Borrowers and
the other Credit Parties to be effective and binding service in every respect.
Each of the Borrowers, the other Credit Parties, the Administrative Agent and
the Lenders irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non conveniens
which it may now or hereafter have to the bringing of any such action or
proceeding in any such jurisdiction. Nothing herein shall affect the right to
serve process in any other manner permitted by law or shall limit the right of
any Lender to bring proceedings against the Borrowers or the other Credit
Parties in the court of any other jurisdiction.
SECTION 9.15 ARBITRATION.
(a) Notwithstanding the provisions of Section 9.14 to the
contrary, upon demand of any party hereto, whether made before or
within three (3) months after institution of any judicial proceeding,
any dispute, claim or controversy arising out of, connected with or
relating to this Agreement and other Credit Documents ("Disputes")
between or among parties to this Agreement shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims,
counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from
Credit Documents executed in the future, or claims arising out of or
connected with the transaction reflected by this Agreement.
Arbitration shall be conducted under and governed by the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration
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Association (the "AAA") and Title 9 of the U.S. Code. All arbitration
hearings shall be conducted in Charlotte, North Carolina. A hearing
shall begin within 90 days of demand for arbitration and all hearings
shall be concluded within 120 days of demand for arbitration. These
time limitations may not be extended unless a party shows cause for
extension and then no more than a total extension of 60 days. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000. All
applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having
jurisdiction. Arbitrators shall be licensed attorneys selected from the
Commercial Financial Dispute Arbitration Panel of the AAA. The parties
hereto do not waive applicable Federal or state substantive law except
as provided herein. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to Hedging
Agreements.
(b) Notwithstanding the preceding binding arbitration
provisions, the Administrative Agent, the Lenders, the Borrowers and
the other Credit Parties agree to preserve, without diminution, certain
remedies that the Administrative Agent on behalf of the Lenders may
employ or exercise freely, independently or in connection with an
arbitration proceeding or after an arbitration action is brought. The
Administrative Agent on behalf of the Lenders shall have the right to
proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable (i) all rights to
foreclose against any real or personal property or other security by
exercising a power of sale granted under Credit Documents or under
applicable law or by judicial foreclosure and sale, including a
proceeding to confirm the sale; (ii) all rights of self-help including
peaceful occupation of real property and collection of rents, set-off,
and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and
filing an involuntary bankruptcy proceeding; and (iv) when applicable,
a judgment by confession of judgment. Preservation of these remedies
does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.
(c) The parties hereto agree that they shall not have a remedy
of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they
have now or which may arise in the future in connection with any
Dispute whether the Dispute is resolved by arbitration or judicially.
(d) By execution and delivery of this Agreement, each of the
parties hereto accepts, for itself and in connection with its
properties, generally and unconditionally, the non-exclusive
jurisdiction relating to any arbitration
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proceedings conducted under the Arbitration Rules in Charlotte, North
Carolina and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Agreement from which no appeal
has been taken or is available.
SECTION 9.16 CONFIDENTIALITY.
The Administrative Agent and each of the Lenders agrees that it will
use its best efforts not to disclose without the prior consent of the Borrowers
(other than to its employees, affiliates, auditors or counsel or to another
Lender) any information with respect to the Borrowers and their Subsidiaries
which is furnished pursuant to this Agreement, any other Credit Document or any
documents contemplated by or referred to herein or therein and which is
designated by the Borrowers to the Lenders in writing as confidential or as to
which it is otherwise reasonably clear such information is not public, except
that any Lender may disclose any such information (a) as has become generally
available to the public other than by a breach of this Section 9.16, (b) as may
be required or appropriate in any report, statement or testimony submitted to
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Lender or to the Federal Reserve Board or the Federal
Deposit Insurance Corporation or the OCC or the NAIC or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be
required or appropriate in response to any summons or subpoena or any law,
order, regulation or ruling applicable to such Lender, (d) to any prospective
Participant or assignee in connection with any contemplated transfer pursuant to
Section 9.6, provided that such prospective transferee shall have been made
aware of this Section 9.16 and shall have agreed to be bound by its provisions
as if it were a party to this Agreement or (e) to Gold Sheets and other similar
bank trade publications; such information to consist of deal terms and other
information regarding the credit facilities evidenced by this Credit Agreement
customarily found in such publications.
SECTION 9.17 ACKNOWLEDGMENTS.
The Borrowers and the other Credit Parties each hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of each Credit Document;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrowers or any other
Credit Party arising out of or in connection with this Agreement and
the relationship between Administrative Agent and Lenders, on one hand,
and the Borrowers and the other Credit Parties, on the other hand, in
connection herewith is solely that of debtor and creditor; and
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(c) no joint venture exists among the Lenders or among the
Borrowers or the other Credit Parties and the Lenders.
SECTION 9.18 WAIVERS OF JURY TRIAL.
THE BORROWERS, THE OTHER CREDIT PARTIES, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 9.19 JOINT AND SEVERAL LIABILITY; MAXIMUM LIABILITY; WAIVER OF
SUBROGATION.
(A) Each U.S. Borrower shall be liable for all amounts due to the
Lenders under this Agreement, regardless of which Borrower actually receives the
Loans or other Extensions of Credit hereunder (including, without limitation,
U.K. Revolving Loans made to the U.K. Borrower), or the amount of such Loans
received or the manner in which any Lender accounts for such Loans or other
Extensions of Credit on its books and records. Each U.S. Borrower's liabilities
with respect to Loans and Extensions of Credit made to it or to the U.K.
Borrower, as applicable, and each U.S. Borrower's liabilities arising as a
result of the joint and several liability of such U.S. Borrower hereunder and
under the other Credit Documents with respect to Loans or other Extensions of
Credit made to any other Borrower hereunder, shall be separate and distinct
obligations, but all such liabilities shall be primary obligations of each U.S.
Borrower. The joint and several liability of each U.S. Borrower shall in all
respects be continuing, absolute, unconditional and irrevocable, and shall
continue in full force and effect until all Obligations have been paid in full
and all Commitments shall have terminated, and will be paid strictly in
accordance with the terms of this Agreement and each other Credit Document under
which they arise, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of Lender
or any holder of any Note with respect thereto. The joint and several liability
of each Borrower shall be absolute, unconditional and irrevocable irrespective
of:
any lack of validity, legality or enforceability of this Agreement, any
Note or any other Credit Document;
the failure of Lender or any holder of any Note to assert any claim or
demand or to enforce any right or remedy against any Borrower, any
other Credit Party or any other Person (including any other guarantor)
under the provisions of this Agreement, any Note, any other Credit
Document or otherwise, or to exercise any right or remedy against any
other guarantor of, or collateral securing, any Obligations of any
Borrower or any other Credit Party;
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any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations of any Borrower or any other
Credit Party, or any other extension, compromise or renewal of any such
Liability;
any reduction, limitation, impairment or termination of any Credit
Party of any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and each
Borrower hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, any of
the Liabilities or otherwise;
any amendment to, rescission, waiver, or other modification of, or any
consent to departure from, any of the terms of this Agreement, any Note
or any other Credit Document;
any addition, exchange, release, surrender or non-perfection of any
Collateral, or any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Lender or
any holder of any Note securing any of the Obligations; or
any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any
other Credit Party, any surety or any guarantor.
(B) Notwithstanding any other provision of this Agreement, each U.S.
Borrower shall be liable under this Agreement only for the maximum amount of
such liability that can be hereby or hereunder incurred by such U.S. Borrower
without rendering this Agreement, as it relates to such U.S. Borrower, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer,
and not for any greater amount.
(C) Each U.S. Borrower (herein, the "Waiving Borrower") hereby agrees
that it will not exercise any rights which it may acquire by reason of any
payment made hereunder, whether by way of subrogation, reimbursement or
otherwise, until the prior payment, in full and in cash, of all Obligations. Any
amount paid to the Waiving Borrower on account of any payment made hereunder
prior to the payment in full of all Obligations shall be held in trust for the
benefit of any Lender and such holder of a Note and shall immediately be paid to
such Lender and such holder of a Note and credited and applied against the
Obligations of Waiving Borrower and the other Credit Parties, whether matured or
unmatured, in accordance with the terms of this Agreement; provided, however,
that if
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(1) Waiving Borrower has made payment to such Lender and such
holder of a Note of all or any part of the Obligations of any other
Obligor, and
(2) all Obligations have been paid in full and all Commitments
have been permanently terminated,
each Lender and each holder of a Note agrees that, at Waiving Borrower's
request, such Lender and the holders of such Notes will execute and deliver to
Waiving Borrower appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
Waiving Borrower of an interest in the Obligations of each other Credit Party
resulting from such payment by Waiving Borrower. In furtherance of the
foregoing, for so long as any Obligations or Commitments remain outstanding,
Waiving Borrower shall refrain from taking any action or commencing any
proceeding against any other Credit Party (or its successors or assigns, whether
in connection with a bankruptcy proceeding or otherwise) to recover any amounts
in respect of payments made under this Agreement or the other Credit Documents
in respect of Obligations of any other Credit Party to any Lender or any holder
of a Note. Each U.S. Borrower acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Agreement
and that the provisions of this Section are knowingly agreed to in contemplation
of such benefits.
ARTICLE X
GUARANTY
SECTION 10.1 THE GUARANTY.
In order to induce the Lenders to enter into this Agreement and to
extend credit hereunder and in recognition of the direct benefits to be received
by the Guarantors from the Extensions of Credit hereunder, each of the
Guarantors hereby agrees with the Administrative Agent and the Lenders as
follows: the Guarantor hereby unconditionally and irrevocably jointly and
severally guarantees as primary obligor and not merely as surety the full and
prompt payment when due, whether upon maturity, by acceleration or otherwise, of
any and all Credit Party Obligations. If any or all of the Credit Party
Obligations becomes due and payable hereunder, each Guarantor unconditionally
promises to pay all of such Indebtedness to the Administrative Agent and the
Lenders, or order, on demand, together with any and all reasonable expenses
which may be incurred by the Administrative Agent or the Lenders in collecting
any of the Credit Party Obligations.
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Credit Party Obligations is used in this Article X in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of the Borrowers arising in connection with this Agreement, in each
case, heretofore, now, or hereafter made, incurred or created, whether
voluntarily or involuntarily, absolute or contingent, liquidated or
unliquidated, determined or undetermined, whether or not such indebtedness is
from time to time reduced, or extinguished and thereafter increased or incurred,
whether the Borrowers may be liable individually or jointly with others, whether
or not recovery upon such indebtedness may be or hereafter become barred by any
statute of limitations, and whether or not such Indebtedness may be or hereafter
become otherwise unenforceable.
Notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, to the extent the obligations of a Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each such Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including, without limitation, the
Bankruptcy Code).
SECTION 10.2 BANKRUPTCY.
Additionally, each of the Guarantors unconditionally and irrevocably
guarantees jointly and severally the payment of any and all indebtedness of the
Borrowers to the Lenders whether or not due or payable by the Borrowers upon the
occurrence of any of the events specified in Section 7.1(e), and unconditionally
promises to pay such Indebtedness to the Administrative Agent for the account of
the Lenders, or order, on demand, in lawful money of the United States. Each of
the Guarantors further agrees that to the extent that the Borrowers or a
Guarantor shall make a payment or a transfer of an interest in any property to
the Administrative Agent or any Lender, which payment or transfer or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
or otherwise is avoided, and/or required to be repaid to the Borrowers or a
Guarantor, the estate of the Borrowers or a Guarantor, a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such avoidance or repayment, the
obligation or part thereof intended to be satisfied shall be revived and
continued in full force and effect as if said payment had not been made.
SECTION 10.3 NATURE OF LIABILITY.
The liability of each Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the Indebtedness of the Borrowers
whether executed by any such Guarantor, any other guarantor or by any other
party, and no Guarantor's
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liability hereunder shall be affected or impaired by (a) any direction as to
application of payment by the Borrowers or by any other party, or (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the indebtedness of the Borrowers, or (c) any payment
on or in reduction of any such other guaranty or undertaking, or (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrowers, or (e) any payment made to the Administrative Agent or the Lenders on
the indebtedness which the Administrative Agent or such Lenders repay the
Borrowers pursuant to court order in any bankruptcy, reorganization,
arrangement, moratorium or other debtor relief proceeding, and each of the
Guarantors waives any right to the deferral or modification of its obligations
hereunder by reason of any such proceeding.
SECTION 10.4 INDEPENDENT OBLIGATION.
The obligations of each Guarantor hereunder are independent of the
obligations of any other guarantor or the Borrowers, and a separate action or
actions may be brought and prosecuted against each Guarantor whether or not
action is brought against any other guarantor or the Borrowers and whether or
not any other Guarantor or the Borrowers is joined in any such action or
actions.
SECTION 10.5 AUTHORIZATION.
Each of the Guarantors authorizes the Administrative Agent and each
Lender without notice or demand (except as shall be required by applicable
statute and cannot be waived), and without affecting or impairing its liability
hereunder, from time to time to (a) renew, compromise, extend, increase,
accelerate or otherwise change the time for payment of, or otherwise change the
terms of the indebtedness or any part thereof in accordance with this Agreement,
including any increase or decrease of the rate of interest thereon, (b) take and
hold security from any guarantor or any other party for the payment of this
Guaranty or the indebtedness and exchange, enforce waive and release any such
security, (c) apply such security and direct the order or manner of sale thereof
as the Administrative Agent and the Lenders in their discretion may determine
and (d) release or substitute any one or more endorsers, guarantors, the
Borrowers or other obligors.
SECTION 10.6 RELIANCE.
It is not necessary for the Administrative Agent or the Lenders to
inquire into the capacity or powers of the Borrowers or the officers, directors,
partners or agents acting or purporting to act on its behalf, and any
indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.
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SECTION 10.7 WAIVER.
(a) Each of the Guarantors waives any right (except as shall
be required by applicable statute and cannot be waived) to require the
Administrative Agent or any Lender to (i) proceed against the
Borrowers, any other guarantor or any other party, (ii) proceed against
or exhaust any security held from the Borrowers, any other guarantor or
any other party, or (iii) pursue any other remedy in the Agent's or any
Lender's power whatsoever. Each of the Guarantors waives any defense
based on or arising out of any defense of the Borrowers, any other
guarantor or any other party other than payment in full of the
indebtedness, including without limitation any defense based on or
arising out of the disability of the Borrowers, any other guarantor or
any other party, or the unenforceability of the indebtedness or any
part thereof from any cause, or the cessation from any cause of the
liability of the Borrowers other than payment in full of the Credit
Party Obligations. Without limiting the generality of the provisions of
this Article X, each of the Guarantors hereby specifically waives the
benefits of N.C. Gen. Stat. ss. 26-7 through 26-9, inclusive. The
Administrative Agent or any of the Lenders may, at their election,
foreclose on any security held by the Administrative Agent or a Lender
by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or
remedy the Administrative Agent and any Lender may have against the
Borrowers or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to
the extent the indebtedness has been paid. Each of the Guarantors
waives any defense arising out of any such election by the
Administrative Agent and each of the Lenders, even though such election
operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Guarantors against the
Borrowers or any other party or any security.
(b) Each of the Guarantors waives all presentments, demands
for performance, protests and notices, including without limitation
notices of nonperformance, notice of protest, notices of dishonor,
notices of acceptance of this Guaranty, and notices of the existence,
creation or incurring of new or additional Indebtedness. Each Guarantor
assumes all responsibility for being and keeping itself informed of the
Borrowers' financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the indebtedness
and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that neither the
Administrative Agent nor any Lender shall have any duty to advise such
Guarantor of information known to it regarding such circumstances or
risks.
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(c) Each of the Guarantors hereby agrees it will not exercise
any rights of subrogation which it may at any time otherwise have as a
result of this Guaranty (whether contractual, under Section 509 of the
U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders
against the Borrowers or any other guarantor of the indebtedness of the
Borrowers owing to the Lenders (collectively, the "Other Parties") and
all contractual, statutory or common law rights of reimbursement,
contribution or indemnity from any Other Party which it may at any time
otherwise have as a result of this Guaranty until such time as the
Loans hereunder shall have been paid and the Commitments have been
terminated. Each of the Guarantors hereby further agrees not to
exercise any right to enforce any other remedy which the Administrative
Agent and the Lenders now have or may hereafter have against any other
party, any endorser or any other guarantor of all or any part of the
Indebtedness of the Borrowers and any benefit of, and any right to
participate in, any security or collateral given to or for the benefit
of the Lenders to secure payment of the Indebtedness of the Borrowers
hereunder until such time as the Loans hereunder shall have been paid
and the Commitments have been terminated.
SECTION 10.8 LIMITATION ON ENFORCEMENT.
The Lenders agree that this Guaranty may be enforced only by the action
of the Administrative Agent acting upon the instructions of the Required Lenders
and that no Lender shall have any right individually to seek to enforce or to
enforce this Guaranty, it being understood and agreed that such rights and
remedies may be exercised by the Administrative Agent for the benefit of the
Lenders upon the terms of this Agreement. The Lenders further agree that this
Guaranty may not be enforced against any director, officer, employee or
stockholder of the Guarantors.
SECTION 10.9 CONFIRMATION OF PAYMENT.
The Administrative Agent and the Lenders will, upon request after
payment of the indebtedness and obligations which are the subject of this
Guaranty and termination of the commitments relating thereto, confirm to the
Borrowers, the Guarantors or any other Person that the Credit Party Obligations
have been paid and the commitments relating thereto terminated, subject to the
provisions of Section 10.2.
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IN WITNESS WHEREOF, each of the parties hereto have caused this
Agreement to be duly executed and delivered by its proper and duly authorized
officers as of the day and year first above written.
U.S. BORROWERS: RACING CHAMPIONS, INC.,
an Illinois corporation
By: /s/ Robert E. Dods
------------------------------
Name: Robert E. Dods
----------------------------
Title: Chief Executive Officer
---------------------------
RACING CHAMPIONS SOUTH, INC.,
a North Carolina corporation
By: /s/ Curtis Stoelting
------------------------------
Name: Curtis Stoelting
----------------------------
Title: Executive Vice President &
---------------------------
Secretary
--------------------------
U.K. BORROWER: RACING CHAMPIONS WORLDWIDE LIMITED,
a United Kingdom corporation
By: /s/ Robert E. Dods
------------------------------
Name: Robert E. Dods
----------------------------
Title: Director
---------------------------
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GUARANTORS: RACING CHAMPIONS CORPORATION,
a Delaware corporation
GREEN'S RACING SOUVENIRS, INC.,
a Virginia corporation
RCNA HOLDINGS, INC.,
a Delaware corporation
THE ERTL COMPANY, INC.,
a Delaware corporation
By: /s/ Robert E. Dods
-----------------------------
Name: Robert E. Dods
---------------------------
Title: Chief Executive Officer
--------------------------
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AGENT AND LENDERS: FIRST UNION NATIONAL BANK,
as Administrative Agent and as a Lender
By: /s/ Kent Davis
-------------------------
Name: Kent Davis
-----------------------
Title: Vice President
----------------------
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HARRIS TRUST AND SAVINGS BANK
By: /s/ Mark W. Piekos
-------------------------
Name: Mark W. Piekos
-----------------------
Title: Vice President
----------------------
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THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Barry P. Litwin
--------------------------
Name: Barry P. Litwin
------------------------
Title: Senior Vice President
-----------------------
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NORTHERN TRUST COMPANY
By: /s/ J.E. Clark Delanois
----------------------------
Name: J.E. Clark Delanois
--------------------------
Title: Vice President
-------------------------
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BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By: /s/ Steven Standbridge
---------------------------
Name: Steven Standbridge
-------------------------
Title: Senior Vice President
------------------------
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<PAGE> 125
COMERICA BANK
By: /s/ Andrew R. Craig
------------------------
Name: Andrew R. Craig
----------------------
Title: Vice President
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119
<PAGE> 126
NATIONAL CITY BANK
By: /s/ Frank F. Pagura
-----------------------
Name: Frank F. Pagura
---------------------
Title: Vice President
--------------------
120
<PAGE> 127
MICHIGAN NATIONAL BANK
By: /s/ Eric Haege
-------------------------
Name: Eric Haege
-----------------------
Title: Commercial Relationship Manager
--------------------------------
121
