UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to____________
Commission File Number: 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 Milwaukee Avenue, Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
(708)391-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of April 28, 1995, there were 46,977,323 shares of Common Stock, par
value $1 per share, outstanding.
<PAGE>
ZENITH ELECTRONICS CORPORATION
FORM 10-Q
INDEX
Page
Number
--------
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations --
Three months ended April 1, 1995 and April 2, 1994 3
Condensed Consolidated Balance Sheets --
April 1, 1995, December 31, 1994 and April 2, 1994 4
Condensed Consolidated Statements of Cash Flows --
Three months ended April 1, 1995 and April 2, 1994 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Operations 8
Liquidity and Capital Resources 8
Outlook 9
Part II. Other Information:
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 12
Index to Exhibits 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
In Millions, Except Per Share Amounts
Three Months Ended
----------------------
April 1, April 2,
1995 1994
---------- ----------
Net sales $ 262.1 $ 297.1
---------- ----------
Costs, expenses and other:
Cost of products sold 248.5 276.3
Selling, general and administrative 26.6 23.8
Engineering and research 11.9 11.4
Other operating expense
(income), net (Note 2) (4.5) (4.9)
---------- ----------
Operating income (loss) (20.4) (9.5)
Gain on asset sales, net - 1.0
Interest expense (4.1) (3.4)
Interest income .2 -
---------- ----------
Income (loss) before income taxes (24.3) (11.9)
Income taxes (credit) (Note 3) - -
---------- ----------
Net Income (loss) $ (24.3) $ (11.9)
========== ==========
Net income (loss) per share of
common stock (Note 4) $ (.53) $ (.32)
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
In Millions
April 1, December 31, April 2,
1995 1994 1994
-------- ------------ --------
ASSETS
- ------
Current assets:
Cash $ - $ 8.9 $ -
Receivables, net of allowance for
doubtful accounts of $2.4, $3.1
and $2.7, respectively 179.4 206.9 164.3
Inventories (Note 6) 298.7 245.2 236.4
Other 8.5 9.9 6.4
-------- ------------ --------
Total current assets 486.6 470.9 407.1
Property, plant and equipment, net 178.9 168.1 154.9
Other 14.6 14.6 13.3
-------- ------------ --------
Total assets $ 680.1 $ 653.6 $ 575.3
======== ============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term debt (Note 6) $ 60.2 $ - $ -
Accounts payable 103.6 114.1 95.0
Income taxes payable .9 1.2 1.5
Accrued expenses 120.6 128.0 115.6
-------- ------------ --------
Total current liabilities 285.3 243.3 212.1
Long-term debt 182.0 182.0 182.0
Stockholders' equity:
Preferred stock - - -
Common stock (Note 7) 46.8 45.7 40.2
Additional paid-in capital 293.1 285.4 241.5
Retained earnings (deficit) (126.6) (102.3) (100.0)
Treasury stock (.5) (.5) (.5)
-------- ------------ --------
Total stockholders' equity 212.8 228.3 181.2
-------- ------------ --------
Total liabilities and
stockholders' equity $ 680.1 $ 653.6 $ 575.3
======== ============ ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
In Millions
Increase (Decrease) in Cash
Three Months Ended
---------------------------
April 1, April 2,
1995 1994
----------- -----------
Cash flows from operating activities:
Income (loss) from operations $ (24.3) $ (11.9)
Adjustments to reconcile income (loss) to
net cash used by operations:
Depreciation 7.8 7.3
Gain on asset sales, net - (1.0)
Changes in assets and liabilities:
Current accounts (42.8) (23.3)
Other assets - (.1)
----------- -----------
Net cash used by operating activities (59.3) (29.0)
----------- -----------
Cash flows from investing activities:
Capital additions (18.6) (11.9)
Proceeds from asset sales - 1.9
----------- -----------
Net cash used by investing activities (18.6) (10.0)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net 60.2 -
Proceeds from issuance of long-term debt - 12.0
Proceeds from issuance of common stock, net 8.8 40.7
Principal payments on long-term debt - (34.5)
----------- -----------
Net cash provided by financing activities 69.0 18.2
----------- -----------
Decrease in cash (8.9) (20.8)
Cash at beginning of period 8.9 20.8
----------- -----------
Cash at end of period $ - $ -
=========== ===========
Increase (decrease) in cash attributable to
changes in current accounts:
Receivables, net $ 27.5 $ (1.8)
Income taxes, net (.3) .4
Inventories (53.5) (30.2)
Other assets 1.4 (.3)
Accounts payable and accrued expenses (17.9) 8.6
----------- -----------
Net change in current accounts $ (42.8) $ (23.3)
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ .9 $ 6.0
Income taxes - .1
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
ZENITH ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1 - Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations of
the Securities and Exchange Commission. The accuracy of the amounts in the
financial statements is in some respects dependent upon facts that will exist,
and procedures that will be performed by the Company, later in the year. In
the opinion of management, all adjustments necessary for a fair presentation
of the financial statements have been included and are of a normal, recurring
nature. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the
year ended December 31, 1994.
Note 2 - Other operating expense (income)
Royalty income accrued in relation to tuning system patents (after deducting
legal expenses) was $3.9 million and $5.1 million for the three months ended
April 1, 1995 and April 2, 1994, respectively. These amounts are included
in Other Operating Expense (Income).
Note 3 - Income taxes
As of April 1, 1995, the Company had $410.8 million of net operating loss
carryforwards (NOLs) available for financial statement purposes. For Federal
income tax purposes, the Company had NOLs of $420.1 million (which expire
from 2004-2010) and unused tax credits of $5.9 million (which expire from
1995-2002).
Note 4 - Earnings per share
Primary earnings per share are based upon the weighted average number of shares
outstanding and common stock equivalents, if dilutive. Fully diluted
earnings per share, assuming conversion of the 6-1/4% convertible subordinated
debentures and the 8.5% convertible senior subordinated debentures, are not
presented because the effect of the assumed conversion is antidilutive. The
weighted average number of shares was 46.0 million and 37.7 million for the
three months ended April 1, 1995 and April 2, 1994, respectively.
Note 5 - Inventories
Inventories consisted of the following (in millions):
April 1, December 31, April 2,
1995 1994 1994
---------- ------------ ----------
Raw materials and work-in-process $ 183.4 $ 156.2 $ 147.6
Finished goods 124.1 97.8 97.9
---------- ------------ ----------
307.5 254.0 245.5
Excess of FIFO cost over LIFO cost (8.8) (8.8) (9.1)
---------- ------------ ----------
Total $ 298.7 $ 245.2 $ 236.4
========== ============ ==========
As of April 1, 1995, December 31, 1994 and April 2, 1994, $46.0 million,
$25.0 million and $27.3 million, respectively, of inventories were valued
using the LIFO method.
An actual determination of inventory under the LIFO method can only be
made at the end of each year based on the inventory levels and costs at that
time. Accordingly, interim LIFO calculations are based on management's
estimates of expected year-end inventory levels and costs. Since these
estimates are subject to many factors beyond management's control, interim
results are subject to the final year-end LIFO inventory determination.
<PAGE>
Note 6 - Short-term debt and credit arrangements
In May of 1993, the Company entered into a $90 million revolving
credit agreement (dated as of May 21, 1993) with a lending group
led by General Electric Capital Corporation, for working capital
purposes. As of April 1, 1995, the Company had borrowings of
$60.2 million under the credit agreement. The credit agreement
contains restrictive financial covenants that must be maintained
as of the end of each fiscal quarter, including a minimum net
worth amount and a liabilities to net worth ratio. As of April 1,
1995, the ratio of liabilities to net worth was required to be not
greater than 4.20 to 1.0 and was actually 2.20 to 1.0, and net
worth was required to be equal to or greater than
$148.0 million and was actually $212.8 million.
The Company has entered into a First Amended and Restated Credit
Agreement dated as of May 10, 1995 (the "Credit Agreement") among
the Company, General Electric Capital Corporation, as agent for
itself and the other lenders named therein, replacing a similar
credit agreement with the same agent and group of lenders. The
maximum commitment of funds available for borrowing under the
Credit Agreement is $110 million, increased from $90 million,
based upon a borrowing base formula related to eligible accounts
and eligible inventory (each as defined in the Credit Agreement).
On the same date, the Company entered into a Term Loan Agreement
(the "Term Loan") with the same agent and group of lenders. The
Term Loan is in the initial principal amount of $40 million,
requiring scheduled quarterly principal payments over the life of
the Term Loan and additional mandatory prepayment in certain
events.
Both the Credit Agreement and Term Loan are scheduled to expire
on June 30, 1998. Borrowings under the Credit Agreement, similar
to the former credit agreement, are secured by accounts receivable,
inventory, general intangibles and trademarks of the Company
and certain of its domestic subsidiaries. The borrowing under the
Term Loan is secured by the tuning system patent license agree
ments of the Company and a second security interest in the accounts
receivable, inventory, general intangibles and trademarks
of the Company and certain of its domestic subsidiaries. The
Credit Agreement and the Term Loan prohibit dividend payments on
the Company's common stock and restrict dividend payments on any
of its preferred stock, if issued. In addition, both agreements
provide for identical restrictions regarding investments, acquisitions,
guaranties, transactions with affiliates, sales of assets,
mergers and additional borrowings, along with limitations on
liens. Certain material asset transactions are permitted under
both agreements. The Credit Agreement and Term Loan also contain
identical financial covenants that include: (i) restrictions on
capital expenditures for each fiscal year ranging from a high of
$142.0 million to a low of $60.0 million; (ii) a quarterly minimum
net worth test at various amounts ranging from a high of $166.0
million to a low of $143.0 million; and (iii) a quarterly liabilities
to net worth ratio at various levels ranging from a high of 4.4
to 1.0 to a low of 3.5 to 1.0.
Note 7 - Stockholders' equity
During the first three months of 1995, the Company sold 1.1 million
shares of authorized but unissued shares of common stock to
investors under a shelf registration statement registering 6.5
million shares of common stock. The result of these stock sales
was to increase equity by $8.8 million.
At the Company's Annual Meeting on April 25, 1995, the stockholder's
of the Company voted to amend the Company's Restated Certificate
of Incorporation to increase the authorized common stock
of the Company from 100,000,000 shares to 150,000,000 shares.
Note 8 - Reclassifications
Certain prior period amounts have been reclassified to conform
with the current period presentation.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Analysis of Operations
- ----------------------
The Company incurred a net loss of $24.3 million, or 53 cents per
share for the first quarter of 1995, as compared with a first-
quarter 1994 net loss of $11.9 million, or 32 cents per share. Net
sales in the quarter declined by $35 million to $262.1 million from
$297.1 million in 1994.
First-quarter 1995 results were affected by lower color television
shipments to customers in the United States and in Mexico.
First-quarter results also were affected by selling price reductions
of $9 million as compared with the same period a year ago.
Domestic industry color TV sales to dealers were flat in the quarter
versus a year ago. The Company's U.S. color TV shipments were slowed by
higher than normal year end 1994 retail inventories and by start-
up problems early in the quarter associated with a new finished-
goods warehouse (problems that have since been resolved). In
Mexico, the Company's and industry TV sales to dealers were curtailed
in the quarter due to the devaluation of the peso. The
value of the peso appears to have stabilized, and the Company's
sales in Mexico have recently begun to improve, but management
expects a slow recovery. For the full year 1995, the Company
expects to benefit from lower costs on those expenditures made in
pesos, such as wages and salaries, utilities, supplies and materials.
These savings are expected to more than offset the effect of
reduced sales in Mexico.
Sales of Network Systems products -- including set-top boxes,
cable modems and other equipment primarily for cable TV operators
- -- were up almost 50 percent compared with the first quarter of
1994, reflecting the continuing strength of the industry and the
Company's high-performance analog set-top units.
Sales for non-core businesses dropped to $2 million from $7
million as production of power supplies is being phased out and
production of computer monitors ceased in 1994.
Selling, general and administrative expenses were $26.6 million
in the first quarter of 1995 as compared to $23.8 million in the
previous year. The increase was largely due to non-recurring
charges recorded for the retirement of an executive, along with higher
staffing related to expanded Network Systems sales efforts.
Results for the first quarter include $3.9 million of accrued
royalty revenues from tuning system licenses. These revenues were
$5.1 million in the first quarter of 1994.
Liquidity and Capital Resources
- -------------------------------
Cash decreased $8.9 million during the three months ended April 1,
1995. The decrease consisted of $59.3 million of cash used by
operating activities and $18.6 million used to purchase fixed
assets. These uses of cash were offset by $69.0 million of cash
provided from financing activities which included $60.2 million of
borrowings under the Company's $90 million credit agreement and
$8.8 million of sales of the Company's common stock.
During the three months ended April 1, 1995, the $59.3 million
of cash used by operating activities funded a $42.8 million change
in current accounts and $16.5 million of net loss from operations
as adjusted for depreciation. The change in current accounts was
mainly composed of a $53.5 million increase in inventories (due
mainly to reduced shipments of color televisions as discussed
above) and a $17.9 million decrease in accounts payable and
accrued expenses partially offset by a $27.5 million decrease in
receivables (due to lower sales).
During the three months ended April 1, 1995, investing activities
used $18.6 million of cash for capital additions, compared to
$11.9 million for the first quarter of 1994. Capital additions
for the full year 1995 are expected to be about $70 million,
including a portion due to planned capital investment projects in
the Company's picture tube operations (subject to financing).
<PAGE>
As of April 1, 1995, total interest-bearing obligations of the
Company consisted of $182.0 million of long-term debt, $60.2
million of borrowings under the $90 million credit agreement and
$9.5 million of extended-term payables with a foreign supplier.
The Company's long-term debt is composed of $115.0 million of 6-1/4%
convertible subordinated debentures due 2011 that require
annual sinking fund payments of $5.8 million beginning in 1997,
$55.0 million aggregate principal amount of 8.5% senior subordinated
convertible debentures due 2000 and $12.0 million aggregate
principal amount of 8.5% senior subordinated convertible debentures
due 2001.
The Company's Credit Agreement and Term Loan contain identical
financial covenants that must be maintained as of the end of each
fiscal quarter, including a liabilities to net worth ratio and a
minimum net worth amount. In addition, the Credit Agreement and
the Term Loan restrict the amount of capital expenditures by the
Company in each fiscal year. (See Note 6 to Condensed Consolidated
Financial Statements for further discussion on the financial
covenants.)
The Company believes that its Credit Agreement and Term Loan,
together with extended-term payables expected to be available from
a foreign supplier and its continuing efforts to obtain other
financing sources, will be adequate to meet its seasonal working
capital, capital expenditure and other requirements in 1995.
However, there can be no assurance that the Company will not
experience liquidity problems in the future because of adverse
market conditions or other unfavorable events. In such event, the
Company would be required to seek other sources of liquidity, if
available. In addition, the Company is reviewing possible significant
capital investment projects over the next three years and
options for additional financing that would be required to support
these projects. If undertaken, the projects are expected to reduce
the costs and increase production capacity primarily in the Company's
picture tube operations.
Outlook
The overall outlook for the Company (including its competitive
condition and business strategy) is essentially the same as
described in the "Outlook" section of "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Form 10-K for the year ended
December 31, 1994. In addition, the second quarter of 1995 is
expected to be affected by many of the same pricing and market
factors that were described in the above referenced "Outlook"
section of the Company's Form 10-K for the year ended December 31,
1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994,
for a description of a lawsuit filed by a Portland, Oregon
distributor, Electrical Distributing, Inc. (EDI), in connection with
the Company's announcement that it is changing to one-step distribution.
Another suit arising in connection with this change in
distribution was filed in April, 1995, in the U.S. District Court
in Madison, Wisconsin by the Morley-Murphy Company of Green Bay,
Wisconsin, another independent distributor. The case seeks in
junctive relief and unspecified damages under the Wisconsin Fair
Dealership Law and other theories. The Company believes it has
the right to change its method of distribution and has met all of
its legal obligations to EDI and Morley-Murphy. Accordingly, the
Company intends to defend itself vigorously.
During the three months ended April 1, 1995, no other reportable
events or material developments occurred with respect to the legal
proceedings described under Item 3 in the Company's Annual Report
on Form 10-K for the year ended December 31, 1994.
<PAGE>
Item 2. Changes in Securities
(b) The Credit Agreement and the Term Loan prohibit dividend
payments on the Company's common stock, restrict dividend payments
on any of its preferred stock, if issued, and prohibit the redemption
or repurchase of stock.
Item 5. Other Information
1. On April 25, 1995, the Board of Directors of the Company
elected Albin F. Moschner as the Company's Chief Executive Officer
(CEO). Mr. Moschner continues as President of the Company, a
position he has held since August 1993. Mr. Moschner succeeds the
Company's Chairman, Jerry K. Pearlman, as CEO. In February 1995,
Mr.Pearlman announced plans to retire and to step down as CEO
after the Company's 1995 annual meeting (which was held on April
25, 1995). Mr. Pearlman, who has been the Company's CEO since
July 1983, will continue as Chairman of the Board of Directors
until the end of 1995, at which time he will cease being a Board
member.
2. The Company has entered into a First Amended and Restated Credit
Agreement dated as of May 10, 1995 (the "Credit Agreement") among
the Company, General Electric Capital Corporation, as agent for
itself and the other lenders named therein, replacing a similar
secured credit agreement with the same agent and group of lenders. The
maximum commitment of funds available for borrowing under the Credit
Agreement is $110 million, increased from $90 million, based upon
a borrowing base formula related to eligible accounts and eligible
inventory (each as defined in the Credit Agreement). On the same date,
the Company entered into a Term Loan Agreement, similarly secured,
(the "Term Loan") with the same agent and group of Lenders. The
Term Loan is in the initial principal amount of $40 million, requiring
scheduled quarterly principal payments over the life of the Term
Loan and additional mandatory prepayment in certain events. See Note 6
to Condensed Consolidated Financial Statements for discussion of the
financial covenants and security interest granted under the Credit
Agreement and Term Loan.
On May 11, 1995, the Company used the $40 million Term Loan to repay
amounts outstanding under the former credit agreement. After such
repayment, $27 million was outstanding under the Credit Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4a) Indenture dated as of April 1, 1986, between Zenith Electronics
Corporation and The First National Bank of Boston as Trustee with
respect to the 6-1/4% Convertible Subordinated Debentures due 2011
(incorporated by reference to Exhibit 1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 30, 1991)
(4b) Debenture Purchase Agreement dated as of November 19, 1993, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
November 19, 1993)
(4c) Amendment No. 1 dated November 24, 1993, to the Debenture Purchase
Agreement dated as of November 19, 1993, with the institutional investor
named therein (incorporated by reference to Exhibit 4(a) of the
Company's Current Report on Form 8-K dated November 24, 1993)
(4d) Amendment No. 2 dated January 11, 1994, to the Debenture Purchase
Agreement dated as of November 19, 1993, (incorporated by reference
to Exhibit 4(c) of the Company's Current Report on Form 8-K dated
January 11, 1994)
<PAGE>
(4e) Debenture Purchase Agreement dated as of January 11, 1994, with the
institutional investors named therein (incorporated by reference to
Exhibit 4(a) of the Company's Current Report on Form 8-K dated
January 11, 1994)
(4f) First Amended and Restated Credit Agreement, dated as of May 10, 1995,
with General Electric Capital Corporation, as agent and lender, and the
other lenders named therein
(4g) Term Loan Agreement, dated as of May 10, 1995, with General Electric
Capital Corporation, as agent and lender, and the other lenders named
therein
(4h) Stockholder Rights Agreement, dated as of October 3, 1986 (incorporated
by reference to Exhibit 4(c) of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 28, 1991)
(4i) Amendment, dated April 26, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(d) of the Company's Quarterly
Report on Form 10-Q for the quarter ended April 3, 1993)
(4j) Amended and Restated Summary of Rights to Purchase Common Stock
(incorporated by reference to Exhibit 4(e) of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4k) Amendment, dated July 7, 1988, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 4(f) of the Company's Quarterly
Report on Form 10-Q for the quarter ended July 3, 1993)
(4l) Agreement, dated May 23, 1991, among Zenith Electronics Corporation,
The First National Bank of Boston and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8, dated May 30, 1991)
(4m) Amendment, dated May 24, 1991, to Stockholder Rights Agreement
(incorporated by reference to Exhibit 2 of Form 8, dated May 30, 1991)
(4n) Agreement, dated as of February 1, 1993, among Zenith Electronics
Corporation, The Bank of New York and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 1 of Form 8 dated March 25, 1993)
(10a) Retirement and Consulting Agreement, dated as of April 10, 1995, with
Jerry K. Pearlman
(10b) Addendum Number Two to Supplemental Letter Agreement, dated as of April
4, 1995, with Albin F. Moschner
(10c) Addendum Number Two to Supplemental Letter Agreement, dated as of April
4, 1995, with Gerald M. McCarthy
(10d) Form of Addendum Number Two to Supplemental Letter Agreement with Kell
B. Benson and Michael J. Kaplan
(10e) Form of Employee Stock Option Agreement
(10f) Amendment to Employee Stock Option Agreement between the Company and
Jerry K. Pearlman
(27) Financial Data Schedule for the Quarter ended April 1, 1995
<PAGE>
(b) Reports on Form 8-K:
A report on Form 8-K dated February 9, 1995, was filed by the Company
stating under Item 5 that on December 27, 1994, the Company notified
its 15 independent distributors of its intent to change to direct-to-retail
distribution on a nationwide basis during the first half of 1995. On or
about February 7, 1995, one of the independent distributors filed suit
challenging the Company's right to discontinue the distributorship
relationship and alleging that it has been damaged by certain of the
Company's practices. The lawsuit seeks injunctive relief, actual damages
of $8 million, and punitive damages of $20 million.
A report on Form 8-K dated February 15, 1995, was filed by the Company
stating under Item 5 that on February 15, 1995, the Company issued
a press release announcing fourth quarter and full year financial results
for 1994.
A report on Form 8-K dated February 23, 1995, was filed by the Company
stating under Item 5 that on February 23, 1995, the Company issued a press
release announcing that Jerry K. Pearlman, Chairman and Chief Executive
Officer, plans to retire at the end of 1995 and that the Company's Board
of Directors plans to elect Albin F. Moschner, current President and Chief
Operating Officer, as Chief Executive Officer after the Company's April 25,
1995 annual meeting.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
(Registrant)
Date: May 16, 1995 By: /s/ Kell B. Benson
-------------------------
Kell B. Benson
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit:
(4f) First Amended and Restated Credit Agreement, dated as of May 10,
1995, with General Electric Capital Corporation, as agent and
lender, and the other lenders named therein
(4g) Term Loan Agreement, dated as of May 10, 1995, with General Electric
Capital Corporation, as agent and lender, and the other lenders named
therein
(10a) Retirement and Consulting Agreement, dated as of April 10, 1995, with
Jerry K. Pearlman
(10b) Addendum Number Two to Supplemental Letter Agreement, dated as of
April 4, 1995, with Albin F. Moschner
(10c) Addendum Number Two to Supplemental Letter Agreement, dated as of
April 4, 1995, with Gerald M. McCarthy
(10d) Form of Addendum Number Two to Supplemental Letter Agreement with
Kell B. Benson and Michael J. Kaplan
(10e) Form of Employee Stock Option Agreement
(10f) Amendment to Employee Stock Option Agreement between the Company
and Jerry K. Pearlman
(27) Financial Data Schedule for the Quarter ended April 1, 1995
EXHIBIT (4f)
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of May 10, 1995
among
ZENITH ELECTRONICS CORPORATION,
as Borrower,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender,
THE BANK OF NEW YORK COMMERCIAL CORPORATION,
as Lender,
and
CONGRESS FINANCIAL CORPORATION,
as Lender
TABLE OF CONTENTS
-----------------
PAGE
1. AMOUNT AND TERMS OF CREDIT 1
1.1 Revolving Credit Advances 1
1.2 Prepayment 2
1.3 Required Annual Reduction 5
1.4 Letters of Credit 6
1.5 Use of Proceeds 6
1.6 Single Loan 6
1.7 Interest on Revolving Credit Loan 6
1.8 Eligible Accounts 9
1.9 Eligible Inventory 10
1.10 Fees 10
1.11 Cash Management Systems 10
1.12 Receipt of Payments 10
1.13 Application and Allocation of Payments 11
1.14 Borrower's Loan Account and Accounting 11
1.15 Indemnity 12
1.16 Access 13
1.17 Taxes 15
1.18 Capital Adequacy and Other Adjustments. 16
1.19 Amendment and Restatement 17
2. CONDITIONS PRECEDENT 18
2.1 Conditions to the Initial Revolving Credit Advance
and Initial Letter of Credit Obligations 18
2.2 Further Conditions to Each Revolving Credit Advance
and Each of the Letter of Credit Obligations 20
2.3 Deliveries By Agent and Lenders 20
3. REPRESENTATIONS AND WARRANTIES 21
3.1 Corporate Existence; Compliance with Law 21
3.2 Executive Offices 21
3.3 Corporate Power; Authorization; Enforceable
Obligations 21
3.4 Financial Statements 22
3.5 Collateral Reports 22
3.6 Material Adverse Effect 22
3.7 Ownership of Property; Liens 23
3.8 Restrictions; No Default 24
3.9 Labor Matters 24
3.10 Joint Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness 25
3.11 Government Regulation 25
3.12 Margin Regulations 25
3.13 Taxes 26
3.14 ERISA 27
3.15 No Litigation 28
3.16 Brokers 28
3.17 Patents, Trademarks, Copyrights and Licenses 28
3.18 Full Disclosure 29
3.19 Hazardous Materials 29
3.20 Insurance Policies 29
3.21 Deposit and Disbursement Accounts 29
3.22 Government Contracts 30
3.23 Customer and Trade Relations 30
3.24 Non-Material Subsidiaries 30
4. FINANCIAL STATEMENTS AND INFORMATION 31
4.1 Reports and Notices 31
4.2 Communication with Accountants 31
5. AFFIRMATIVE COVENANTS 31
5.1 Maintenance of Existence and Conduct of Business 31
5.2 Payment of Obligations 32
5.3 Books and Records 32
5.4 Litigation 32
5.5 Insurance 33
5.6 Compliance with Laws 34
5.7 Agreements 34
5.8 Supplemental Disclosure 34
5.9 Employee Plans 35
5.10 Environmental Matters 35
5.11 Landlords' Agreements and Bailee Letters 35
5.12 Public Offering Proceeds 36
5.13 Notice of Labor Matters 36
5.14 Government Contracts 36
6. NEGATIVE COVENANTS 36
6.1 Mergers, Etc. 36
6.2 Investments, Loans and Advances. 37
6.3 Indebtedness 39
6.4 Employee Loans and Transactions 39
6.5 Capital Structure and Business 40
6.6 Guaranteed Indebtedness 40
6.7 Liens 41
6.8 Sale of Assets 41
6.9 Events of Default 42
6.10 ERISA 42
6.11 Financial Covenants 42
6.12 Hazardous Materials 42
6.13 SaleLeasebacks 43
6.14 Cancellation of Indebtedness 43
6.15 Restricted Payments 43
6.16 Fiscal Year 44
6.17 Change of Corporate Name 44
6.18 Sale of Stock 44
6.19 Bank Accounts 44
6.20 Cash Management 44
6.21 Non-Material Subsidiaries 45
6.22 Foreign Subsidiaries 45
6.23 No Impairment of Upstreaming 46
6.24 Amendment of Other Debt 46
6.25 Prepayments of Other Debt 46
7. TERM 46
7.1 Termination 46
7.2 Survival of Obligations Upon Termination of
Financing Arrangement 47
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 47
8.1 Events of Default 47
8.2 Remedies 49
8.3 Waivers by Borrower 50
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT 50
9.1 Assignment and Participations 50
9.2 Appointment of Agent 52
9.3 Set Off and Sharing of Payments 53
9.4 Disbursement of Funds 54
9.5 Disbursements of Advances, Payments and
Information 54
10. SUCCESSORS AND ASSIGNS 57
10.1 Successors and Assigns 57
11. MISCELLANEOUS 57
11.1 Complete Agreement; Modification of Agreement 57
11.2 Amendments and Waivers 58
11.3 Fees and Expenses 59
11.4 No Waiver 60
11.5 Remedies 61
11.6 Severability 61
11.7 Conflict of Terms 61
11.8 Authorized Signature 61
11.9 GOVERNING LAW; CONSENT TO JURISDICTION 62
11.10 Notices 62
11.11 Section Titles 63
11.12 Counterparts 63
11.13 WAIVER OF JURY TRIAL 63
11.14 Confidentiality 63
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A-1 - Form of Notice of Revolving Credit Advance
Exhibit A-2 - Form of Conversion/Continuation Notice
Exhibit B - Form of Borrowing Base Certificate
Exhibit C - Form of Amended Revolving Credit Note
Schedule 1.1(a) - Responsible Individual of Agent
Schedule 1.2(b) - Material Assets
Schedule 1.8 - Eligible Accounts
Schedule 1.9A - Eligible Inventory
Schedule 1.9B - Locations of Eligible Inventory
Schedule 1.11 - List of Lock Box and Collection Account Banks
Schedule 3.2 - Executive Offices
Schedule 3.4 - Financial Statements
Schedule 3.5 - Collateral Reports
Schedule 3.7 - Real Estate and Leases
Schedule 3.9 - Labor Matters
Schedule 3.10 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.13 - Tax Matters
Schedule 3.14 - ERISA Plans
Schedule 3.17 - Patents, Trademarks and Copyrights
Schedule 3.20, I - Insurance Standards
Schedule 3.20, II - Insurance Policies
Schedule 3.21 - Deposit and Disbursement Accounts
Schedule 3.22 - Government Contracts
Schedule 4.1(A) - Financial Statements and Notices -- Reporting
Schedule 4.1(B) - Collateral Reports -- Reporting
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.7 - Liens
Schedule 6.11 - Financial Covenants
Schedule 9.5(A)(3) - Lenders' Accounts
Schedule 11.8 - Authorized Signatures
Schedule 11.10 - Notice Addresses
Schedule A - Definitions
Schedule B - Letters of Credit
Schedule C - Cash Management Systems
Schedule D - Schedule of Documents
Schedule E - Tuning System Patents
Schedule F - Revolving Loan Commitments
Schedule G - Fiscal Periods
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of May 10, 1995 among ZENITH ELECTRONICS CORPORATION, a Delaware
corporation ("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation (in its individual capacity, "GE Capital"),
for itself, as Lender, and as Agent for Lenders (the "Agent"), THE
BANK OF NEW YORK COMMERCIAL CORPORATION, a New York corporation
("BNYCC"), as Lender, and CONGRESS FINANCIAL CORPORATION, a
California corporation ("Congress"), as Lender.
RECITALS
--------
A. The parties hereto are parties to a Credit
Agreement dated as of May 21, 1993, as amended (the "Prior Credit
Agreement") pursuant to which the Lenders provided aggregate
Commitments of up to $90,000,000.
B. The parties hereto desire to amend and restate the
Prior Credit Agreement to incorporate in the Credit Agreement, the
amendments to the Prior Credit Agreement entered into since May 21,
1993 and such further amendments as the parties have mutually
agreed upon.
C. Capitalized terms used in this Agreement shall have
the meanings ascribed to them in Schedule A. All Schedules,
Exhibits and other attachments hereto, or expressly identified to
this Agreement, are incorporated herein by reference and, taken
together, shall constitute but a single agreement. These Recitals
shall be construed as part of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree as
follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Revolving Credit Advances. (a) Upon and subject
to the terms and conditions hereof, each Lender agrees to make
available, from time to time, until the Commitment Termination
Date, for Borrower's use and upon the request of Borrower therefor,
its Pro Rata Share of advances (each, a "Revolving Credit Advance")
against Eligible Accounts and Eligible Inventory in an aggregate
amount outstanding which, pursuant to Section 1.1(b) below, shall
not at any given time exceed the lesser at such time of (i) the
Maximum Revolving Credit Loan ($110,000,000 as of the Closing Date,
as such amount may be reduced from time to time pursuant to the
terms of this Agreement) minus the Letter of Credit Obligations,
and (ii) an amount equal to the Borrowing Base minus the Letter of
Credit Obligations (collectively, "Borrowing Availability"), in any
case less such reserves, including, without limitation, all or any
portion of the Interest Reserve, as Agent in its reasonable credit
judgment may deem appropriate from time to time. In addition, the
aggregate of the Revolving Credit Advances and Letter of Credit
Obligations outstanding hereunder from time to time, plus the
principal balance of the Term Loan from time to time outstanding
shall not exceed the lesser of (i) $150,000,000 and (ii) the
Borrowing Base, in any case less such reserves, including, without
limitation, all or any portion of the Interest Reserve, as Agent in
its reasonable credit judgment may deem appropriate from time to
time. To the extent reasonably practicable Agent shall notify
Borrower before implementing any such reserve; provided, that, so
long as no Default or Event of Default has occurred and is
continuing, Agent shall provide Borrower with not less than fifteen
(15) days written notice prior to implementing any Interest
Reserve. Until all amounts outstanding in respect of the Revolving
Credit Loan shall become due and payable on the Commitment
Termination Date, Borrower may, subject to the terms and conditions
hereof, from time to time borrow, repay and reborrow under this
Section 1.1(a). Each Revolving Credit Advance that is a Base Rate
Loan shall be made on notice by Borrower to the individual
responsible for Borrower as identified on Schedule 1.1(a) at the
address specified thereon, given no later than 12:00 noon (New York
time) on the Business Day of the proposed Revolving Credit Advance;
each such notice (a "Notice of Revolving Credit Advance") shall be
in the form of Exhibit A-1 hereto, specifying therein the requested
date, the amount of such Revolving Credit Advance, and such other
information as may be reasonably requested by Agent and shall be
given in writing (by telecopy, telex or cable) or by telephone
confirmed immediately in writing in the form of Exhibit A-1. Each
Revolving Credit Advance that is a LIBOR Loan shall be made on
delivery by Borrower to Agent of a Notice of Revolving Credit
Advance or a Conversion/Continuation Notice in the form of Exhibit
A-2 in accordance with Section 1.7(g) hereof. Agent shall be
entitled to rely upon, and shall be fully protected under this
Agreement in relying upon, any Notice of Revolving Credit Advance
and Conversion/Continuation Notice believed by Agent to be genuine
and to assume that each Person executing and delivering the same
was duly authorized unless the responsible individual acting
thereon for Agent shall have, at the time of reliance thereon,
actual knowledge to the contrary.
(b) Borrower shall execute and deliver to each Lender
an amended note to evidence the Revolving Credit Loan, such note to
be in the principal amount of the Revolving Loan Commitment of such
Lender, dated the Closing Date and substantially in the form of
Exhibit C hereto (each an "Amended Revolving Credit Note" and,
collectively, the "Amended Revolving Credit Notes"). The Amended
Revolving Credit Notes shall represent, in the aggregate, the
obligation of Borrower to pay the amount of the Maximum Revolving
Credit Loan or, if less, the aggregate unpaid principal amount of
all Revolving Credit Advances made by Lenders to Borrower and all
other Obligations with interest thereon as prescribed in Section
1.7. The entire unpaid balance of the Revolving Credit Loan shall
be immediately due and payable on June 30, 1998, or, if earlier,
upon any acceleration of the Obligations.
1.2 Prepayment. (a) If the outstanding balance of the
Revolving Credit Loan shall, at any time, exceed the lesser at such
time of (i) the Maximum Revolving Credit Loan minus the Letter of
Credit Obligations, and (ii) the Borrowing Base minus the Letter of
Credit Obligations, Borrower shall immediately prepay the Revolving
Credit Loan in the amount of such excess. In addition, if the
outstanding balance of the Revolving Credit Loan shall at any time
exceed the lesser at such time of (i) $150,000,000 minus the sum of
the then outstanding balance of the Term Loan and Letter of Credit
Obligations and (ii) the Borrowing Base minus the sum of the then
outstanding balance of the Term Loan and the Letter of Credit
Obligations, Borrower shall immediately prepay the Revolving Credit
Loan in the amount of such excess.
(b) Notwithstanding any provision herein contained to
the contrary, so long as no Default or Event of Default has
occurred and is continuing or would result after giving effect
thereto, Borrower may or may cause its Subsidiaries, as applicable,
to (i) sell those Material Assets listed on Schedule 1.2(b)
consisting of vacant or unused land or buildings; (ii) sell or sell
and lease back those Material Assets designated as "Sale-Lease-Back
Properties" on Schedule 1.2(b); provided, however, that in the case
of a sale and lease back of real property at which Collateral is or
may be kept, Borrower or such Subsidiary shall have obtained a
landlord waiver and consent from the proposed owner of such
property, in form and substance satisfactory to Agent, in its sole
discretion, prior to consummation of such transaction; (iii)
pledge, mortgage or otherwise encumber those Material Assets and
incur Indebtedness secured by those Material Assets (other than the
Tuning System Patent Licenses) designated as "Pledge Assets" on
Schedule 1.2(b) and (iv) so long as the Term Loan has been
indefeasibly paid in full in cash and all commitments to make the
Term Loan have been terminated, pledge or otherwise encumber
Material Assets consisting of the Tuning System Patent Licenses
and/or the General Intangibles constituting rights to receive
royalty payments thereunder and incur Indebtedness secured thereby,
subject to the following conditions:
(A) Any Material Assets sold in accordance herewith
shall be offered and sold on an arms' length basis to a Person that
is not an Affiliate of Borrower or any of its Subsidiaries; the
structure of any such Material Asset sale may be through a stock
sale, asset sale or any similar structure or combination thereof;
Borrower shall fully disclose the terms of any such sale to Agent
in writing not less than fifteen (15) Business Days prior to
becoming legally bound or committed thereto; all sales shall be
either for cash consideration only or for a combination of cash
consideration and non-cash consideration such that no more than
thirty-five percent (35%) of the total consideration shall consist
of non-cash consideration, unless Agent shall otherwise consent,
which consent shall not be unreasonably withheld, and all non-cash
consideration, if any, shall be pledged to Agent for the benefit of
the Lenders;
(B) In the case of sale-lease-back transactions of
Material Assets permitted hereby, Borrower shall fully disclose the
terms of any such transaction to Agent in writing not less than
fifteen (15) Business Days prior to becoming legally bound or
committed thereto; the terms of any such sale-lease-back
transaction shall be reasonably acceptable to Agent; and, in the
case of any such transaction involving lease or other payments by
Borrower and/or any of its Subsidiaries in excess of $5,000,000 in
the aggregate over the life of any such lease, the purchaser/lessor
shall have entered into an intercreditor agreement with Agent and
Lenders on terms reasonably satisfactory to Agent; and
(C) In the case of Indebtedness incurred pursuant to
clause (iii) above with respect to Pledge Assets, Borrower shall
fully disclose the terms of any transaction involving Pledge Assets
to Agent in writing not less than fifteen (15) Business Days prior
to becoming legally bound or committed thereto; the terms of any
such transaction involving Pledge Assets, including the terms of
any Indebtedness incurred in connection therewith, shall be
reasonably acceptable to Agent; and, in the case of any such
Indebtedness in excess of $5,000,000, the creditor holding the same
shall have entered into an intercreditor agreement with Agent and
Lenders on terms reasonably satisfactory to Agent.
(D) Except for the Term Loan, in the case of
Indebtedness secured by the Tuning System Patent Licenses, Tuning
System Patents and/or General Intangibles constituting rights to
receive royalty payments under the Tuning System Patent Licenses
(for purposes hereof, the "Tuning System Assets") (1) the gross
proceeds of such Indebtedness prior to deduction of expenses shall
be not less than $20,000,000, (2) Borrower shall fully disclose the
terms of any such transaction involving the Tuning System Assets to
Agent in writing not less than fifteen (15) Business Days prior to
becoming legally bound or committed thereto, (3) except as set
forth in the immediately succeeding paragraph, such Indebtedness
shall have no scheduled payments of principal due sooner than the
second anniversary of the closing date thereof and shall bear
interest at a rate not to exceed the Base Rate (or any similarly
established prime rate or base rate) plus 1% per annum (absent a
default and without regard to any imputed interest related to any
warrant issued in connection with such Indebtedness), (4) such
Indebtedness shall be secured solely by the Tuning System Assets
and (5) such Indebtedness shall be subject to an intercreditor
agreement between the holder of such Indebtedness and Agent and
Lenders on terms reasonably satisfactory to Agent (such
Indebtedness being hereinafter referred to as the "Royalty
Financing").
In connection with any Royalty Financing permitted
pursuant to this Section 1.2(b)(D), (i) Borrower or any of its
Subsidiaries may sell, assign or otherwise transfer the Tuning
System Assets to any wholly-owned Subsidiary of Borrower and (ii)
any transaction in which Borrower or any of its Subsidiaries sells,
assigns or otherwise transfers the Tuning System Assets or
undivided percentage interests therein to any trust, special-
purpose entity or other financial institution, which transaction is
accounted for federal tax purposes as indebtedness of Borrower
and/or its Subsidiaries, shall be deemed to be a pledge and not a
sale of such assets and shall be deemed to be Indebtedness within
the meaning of this Section 1.2(b)(D); provided, that, with respect
to clauses (i) and (ii) above, (a) all such Indebtedness is non-
recourse to Borrower and each Subsidiary of Borrower other than any
Subsidiary formed solely for the purpose of consummating a Royalty
Financing and which has no material assets other than the Tuning
System Assets, (b) the aggregate payments, whether scheduled or
otherwise, made in any period with respect to all such Indebtedness
shall not exceed the revenues generated by the Tuning System Assets
for such period and (c) no such Indebtedness shall terminate,
whether such termination is optional, voluntary or mandatory, on or
prior to June 30, 1998.
No provision herein shall be deemed to prohibit, and the
Lenders hereby consent to, the Term Loan secured by a first
priority security interest in the Tuning System Patent Licenses
and/or General Intangibles constituting rights to receive royalty
payments under the Tuning System Patent Licenses and a second
priority security interest in Accounts, Inventory, other General
Intangibles and Instruments, all in accordance with the Term Loan
Agreement.
Immediately upon the receipt by Borrower of the Net
Proceeds of any Material Asset Disposition (including cash payments
with respect to promissory notes or installment or other deferred
payments received in connection therewith), Borrower shall prepay
the Revolving Credit Loan in an amount equal to such Net Proceeds
or, if less, the then outstanding balance of the Revolving Credit
Loan, but any such prepayment shall not result in a reduction of
the Maximum Revolving Credit Loan. Any prepayment of LIBOR Loans
shall be accompanied by any payment of any payment required under
the terms of Section 1.15(c) hereof.
(c) Borrower shall have the right, subject to the terms
and conditions of the Loan Documents and without premium or
penalty, except as set forth in Section 1.15(c) hereof with respect
to LIBOR Loans, on at least thirty (30) days' prior written notice
to Agent to voluntarily prepay the entire Revolving Credit Loan and
terminate the Revolving Loan Commitments. Upon such a prepayment
and termination, Borrower's right to request and receive Revolving
Credit Advances, and to request the incurrence of Letter of Credit
Obligations, shall simultaneously terminate. Any such prepayment
and termination shall be accompanied by the payment of all accrued
and unpaid interest and all Fees and other Obligations.
1.3 Required Annual Reduction. Borrower shall reduce
the outstanding principal balance of the Revolving Credit Loan plus
Letter of Credit Obligations in excess of $6,500,000, other than
Letter of Credit Obligations relating to that certain letter of
credit identified in the Disclosure Letter, to $50,000,000 or less
in the aggregate, annually, for at least twenty-one (21)
consecutive days at any time during each period commencing on the
first day of December in each year and ending on the 28th day of
February in the following year.
1.4 Letters of Credit. Subject to the terms and
conditions of this Agreement, including Schedule B, Borrower shall
have the right to request, and each Lender agrees to incur its Pro
Rata Share of, the Letter of Credit Obligations in accordance with
Schedule B.
1.5 Use of Proceeds. Borrower shall utilize the
proceeds of the Revolving Credit Advances solely for (i) the
payment of Fees and expenses in connection with the transactions
contemplated hereby, (ii) the financing of Borrower's and its
Material Subsidiaries' ordinary working capital needs and Capital
Expenditures to the extent permitted hereunder, (iii) the working
capital needs of the following Non-Material Subsidiaries:
Interocean Advertising Corporation, Interocean Advertising
Corporation of California and Interocean Advertising Corporation of
Illinois which shall not exceed $15,000,000 in the aggregate during
any Fiscal Year, and (iv) so long as no Event of Default shall have
occurred and be continuing, the funding of mandatory sinking fund
payments required under the terms of Section 3.04 of the indenture
governing the Subordinated Debt.
1.6 Single Loan. All Revolving Credit Advances, all
Letter of Credit Obligations and all of the other Obligations of
Borrower arising under this Agreement and the other Loan Documents
shall constitute one general Obligation of Borrower secured, until
repaid in full, by all of the Collateral.
1.7 Interest on Revolving Credit Loan. (a) Borrower
shall pay interest to Agent, for the ratable benefit of Lenders, in
arrears (i) (x) with respect to all Loans for the preceding
calendar month, on the first day of each calendar month, commencing
on June 1, 1995, and (y) with respect to LIBOR Loans on the last
Business Day of each LIBOR Period, (ii) on the Commitment
Termination Date and (iii) if any interest accrues or remains
payable after the Commitment Termination Date, upon demand by
Agent.
(b) If any interest or other payment on the Revolving
Credit 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 (except as otherwise provided in the definition of
LIBOR Period) and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such
extension.
(c) Borrower shall be obligated to pay interest to
Agent, for the ratable benefit of Lenders, on the outstanding
balance of the Revolving Credit Loan, at a floating rate equal to
the Base Rate plus one and one-half percent (1.5%) per annum,
subject to adjustments as provided in clauses (d), (e) and (f)
below (the "Stated Rate").
(d) The Stated Rate will be reduced to the Base Rate
plus one and one-quarter percent (1.25%) per annum if EBITDA for
the Fiscal Year ending December 31, 1995 equals or exceeds
$51,000,000. Such reduction shall be effective from and after the
first day of the first Fiscal Quarter following delivery to the
Lenders of Borrower's audited financial statements for Fiscal Year
1995.
(e) The Stated Rate will be reduced to the Base Rate
plus one percent (1%) per annum at any time when the Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter for the
consecutive four Fiscal Quarters then ended equals or exceeds
1.0:1.0 and no Event of Default shall have occurred and be
continuing. Subsequent to any reduction in accordance with this
clause (e), if the Fixed Charge Coverage Ratio as of the last day
of any Fiscal Quarter for the consecutive four Fiscal Quarters then
ended is less than 1.0:l.0, the Stated Rate shall be increased to
the Base Rate plus one and one-quarter percent (1.25%) per annum or
the Base Rate plus one and one-half percent (1.50%) per annum, as
applicable pursuant to clauses (c) and (d) above. Any reduction or
increase in the Stated Rate in accordance with this clause (e)
shall be effective from and after the first day of the first
Fiscal Quarter following delivery to the Lenders of Borrower's
unaudited financial statements for the preceding Fiscal Quarter
evidencing that the criteria set forth above for a reduction or
increase in the Stated Rate have been met.
(f) If the Fixed Charge Coverage Ratio as of the last
day of any Fiscal Quarter for the consecutive four Fiscal Quarters
then ended is equal to or greater than 1.10:1.0 and no Default or
Event of Default shall have occurred and be continuing, Borrower
may, upon delivery of a Notice of Revolving Credit Advance or
Conversion/Continuation Notice to Agent not less than three
Business Days prior to the intended commencement of a LIBOR Period,
elect to have the Loans or a portion thereof bear interest at a per
annum rate equal to the LIBOR Rate plus three percent (3%) per
annum (the "Adjusted LIBOR Rate"). Subsequent to the conversion of
the Stated Rate to the Adjusted LIBOR Rate, if the Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter for the
four Fiscal Quarters then ended is less than 1.10:1.00, but equal
to greater than 1.0:1.0, the Stated Rate shall be the Base Rate
plus one percent (1.0%) per annum. Subsequent to any conversion of
the Stated Rate to the Adjusted LIBOR Rate, if the Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter for the
four Fiscal Quarters then ended is less than 1.0:1.0, the Stated
Rate shall be increased to the Base Rate plus one and one-quarter
percent (1.25%) per annum or the Base Rate plus one and one-half
percent (1.50%) per annum, as applicable pursuant to clauses (c)
and (d) above. Any reduction or increase in the Stated Rate in
accordance with this clause (f) shall be effective (i) in the case
of a conversion of Base Rate Loans to LIBOR Loans, on the date
specified in the applicable Conversion/Continuation Notice which
shall be a Business Day and (ii) in the case of a conversion of
LIBOR Loans to Base Rate Loans, on the first day following the
expiration of the applicable LIBOR Period(s) and (iii) in each
case, such date shall be after delivery to the Lenders of
Borrower's unaudited financial statements for any Fiscal Quarter
evidencing that the criteria set forth above for a reduction or
increase in the Stated Rate have been met.
(g) Subject to the terms of Section 1.7(f) above,
Borrower may elect by 11:00 A.M. (New York time) on, the third
(3rd) Business Day prior to (i) the end of each LIBOR Period with
respect to any LIBOR Loans, or (ii) the date on which Borrower
wishes to convert any Base Rate Loan to a LIBOR Loan, with respect
to a Base Rate Loan, to have all or some portion of the Revolving
Credit Loan bear interest at a LIBOR Rate for one or more
succeeding LIBOR Periods (and to specify that portion of the
Revolving Credit Loan to which such LIBOR Rate shall apply) as
designated by Borrower in a Conversion/Continuation Notice. If no
election is received with respect to a LIBOR Loan by 11:00 A.M.
(New York time) on the third (3rd) Business Day prior to the end of
the applicable LIBOR Period with respect to such LIBOR Loan (or a
Default or Event of Default shall have occurred and is continuing),
such LIBOR Loan shall be converted to a Base Rate Loan at the end
of the LIBOR Period. Borrower shall make such election by
irrevocable notice to Agent and each Lender in writing, by
telecopy. Subject to the terms of Section 1.7(f) above, Borrower
shall have the option to (1) convert at any time all or any part of
the outstanding Revolving Credit Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount from Base
Rate Loans to LIBOR Loans or (2) upon the expiration of any LIBOR
Period applicable to a LIBOR Loan, to continue all or any portion
of such Loan equal to $5,000,000 and integral multiples of
$1,000,000 in excess of that amount as a LIBOR Loan and the
succeeding LIBOR Period(s) of such continued Loan shall commence on
the last day of the LIBOR Period of the Loan to be continued;
provided that LIBOR Loans may only be converted into Base Rate
Loans on the expiration date of a LIBOR Period applicable thereto;
and provided, further, that no outstanding Loan may be continued
as, or be converted into, a LIBOR Loan when any Default or Event of
Default has occurred and is continuing.
(h) All computations of interest and Fees calculated on
a per annum basis shall be made by Agent on the basis of a three
hundred and sixty (360) day year, in each case for the actual
number of days occurring in the period for which such interest is
payable. In the case of Base Rate Loans, the Stated Rate shall be
calculated based on the Base Rate as in effect on each day. Each
determination by Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error or
bad faith.
(i) So long as any Default or Event of Default shall
have occurred and be continuing, the interest rate applicable to
the Obligations shall be increased, at the option of Agent, by two
percent (2%) per annum above the Stated Rate from time to time
applicable (the "Default Rate").
(j) Notwithstanding anything to the contrary set forth
in this Section 1.7, if, at any time until payment in full of all
of the Obligations, the rate of interest payable hereunder exceeds
the highest rate of interest permissible under any law which a
court of competent jurisdiction shall, in a final determination,
deem applicable hereto (the "Maximum Lawful Rate"), then in such
event and so long as the Maximum Lawful Rate would be so exceeded,
the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total
interest received by Agent, on behalf of Lenders, from the making
of such advances hereunder is equal to the total interest which
would have been received had the interest rate payable hereunder
been (but for the operation of this paragraph) the interest rate
payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, the interest rate payable hereunder shall
be the applicable rate of interest prescribed in Section 1.7 of
this Agreement, unless and until the rate of interest again exceeds
the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest received by any Lender
pursuant to the terms hereof exceed the amount which such Lender
could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. In
the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal
to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made. In the event that a court
of competent jurisdiction, notwithstanding the provisions of this
Section 1.7(j), shall make a final determination that a Lender has
received interest hereunder or under any of the other Loan
Documents in excess of the Maximum Lawful Rate, Agent shall, to the
extent permitted by applicable law, promptly apply such excess
first to any interest due and not yet paid hereunder, then to the
outstanding principal of the Obligations, then to Fees and any
other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise
order.
1.8 Eligible Accounts. Based on the most recent
Schedule of Accounts delivered by Borrower to Agent and on other
information available to Agent, Agent shall determine in its
reasonable credit judgment which Accounts shall be deemed to be
"Eligible Accounts" for purposes of determining the amounts, if
any, to be advanced to Borrower. In determining whether a
particular Account constitutes an Eligible Account, Agent shall not
include any such Account which is subject to any of the criteria
set forth on Schedule 1.8.
1.9 Eligible Inventory. Based on the most recent
Schedule of Inventory delivered by Borrower to Agent and on other
information available to Agent, Agent shall determine in its
reasonable credit judgment which Inventory shall be deemed to be
"Eligible Inventory" for purposes of determining the amounts, if
any, to be advanced to Borrower. In determining whether any
particular Inventory constitutes Eligible Inventory, Agent shall
not include Inventory which is subject to any of the criteria set
forth on Schedule 1.9A. Without limiting the generality of the
foregoing, Eligible Inventory shall be further limited to finished
goods inventory consisting of color televisions and VCRs
concentrated at no more than the ten (10) locations in the
continental United States which are set forth on Schedule 1.9B or
such other locations in the continental United States, if any, as
may be agreed to in writing by Agent.
1.10 Fees. (a) Borrower shall pay to GE Capital,
individually, the fees specified in that certain Fee Letter of even
date herewith (the "GE Capital Fee Letter"), between Borrower and
GE Capital at the times specified for payment therein. The GE
Capital Fee Letter dated March 2, 1993 between Borrower and GE
Capital is terminated as of the date hereof.
(b) As additional compensation for Lenders' costs and
risks in making the Revolving Credit Loan available to Borrower,
Borrower agrees to pay to Agent, for the ratable benefit of
Lenders, in arrears for the preceding month, on the first Business
Day of each month prior to the Commitment Termination Date and on
the Commitment Termination Date, a fee for Borrower's non-use of
funds (the "Non-use Fee") in an amount equal to one-half of one
percent (0.5%) per annum of the difference between the respective
daily averages of (i) the Maximum Revolving Credit Loan and (ii) an
amount equal to the Revolving Credit Loan plus Letter of Credit
Obligations outstanding during the period for which the Non-Use Fee
is due.
(c) On the Closing Date, Borrower shall pay to Agent
for the ratable benefit of the Lenders an amendment fee in the
amount of Four Hundred Twelve Thousand Five Hundred Dollars
($412,500) (the "Amendment Fee").
1.11 Cash Management Systems. On or prior to the
Closing Date, Borrower will establish, and Borrower will maintain,
the cash management systems described on Schedule C.
1.12 Receipt of Payments. Borrower shall make each
payment under this Agreement not later than 2:00 p.m. (New York
time) on the day when due in lawful money of the United States of
America in immediately available funds to the Collection Account.
For purposes of computing interest and fees and determining the
amount of funds available for borrowing by Borrower pursuant to
Section 1.1(a), (a) all payments (including cash sweeps) consisting
of cash, wire or electronic transfers in immediately available
funds shall be deemed received upon deposit in the Collection
Account and notice to Agent of such deposit, and (b) all payments
consisting of checks, drafts or similar non-cash items shall be
deemed received upon receipt of good funds following deposit of
such payment in the Collection Account and notice to Agent of such
deposit.
1.13 Application and Allocation of Payments. Borrower
irrevocably waives the right to direct the application of any and
all payments at any time or times hereafter received from or on
behalf of Borrower, and Borrower irrevocably agrees that Agent
shall have the continuing exclusive right to apply any and all such
payments against the then due and payable Obligations of Borrower
and in repayment of the Revolving Credit Loan and Letter of Credit
Obligations, as Agent may deem advisable, notwithstanding any
previous entry by Agent upon the Loan Account or any other books
and records. In the absence of a specific determination by Agent
with respect thereto, the same shall be applied in the following
order: (i) to then due and payable Fees and expenses payable to
Agent or any Lender; (ii) to then due and payable interest
payments; (iii) to Obligations other than Fees, expenses and
interest and principal payments; and (iv) to then due and payable
principal payments on the Revolving Credit Loan. Agent is
authorized to, and at its option may, make or cause to be made
Revolving Credit Advances on behalf of Borrower for payment of all
Fees, expenses, Charges, costs, principal, interest or other
Obligations owing by Borrower under this Agreement or any of the
other Loan Documents if and to the extent Borrower fails to
promptly pay any such amounts as and when due, even if such
Revolving Credit Advance would cause total Revolving Credit
Advances to exceed Borrowing Availability or the Maximum Revolving
Credit Loan. At Agent's option and to the extent permitted by law,
any advances so made shall be deemed Revolving Credit Advances
constituting part of the Revolving Credit Loan hereunder.
1.14 Borrower's Loan Account and Accounting. Agent
shall maintain a loan account (the "Loan Account") on its books to
record: (a) all Revolving Credit Advances and payments made under
Letter of Credit Obligations, (b) all payments made by Borrower and
(c) all other appropriate debits and credits as provided in this
Agreement with respect to the Obligations. All entries in the Loan
Account shall be made in accordance with Agent's customary
accounting practices as in effect from time to time. Borrower
shall pay all Obligations as such amounts become due or are
declared due pursuant to the terms of this Agreement.
The balance in the Loan Account, as recorded on Agent's
most recent printout or other written statement, shall be
presumptive evidence of the amounts due and owing to Agent and
Lenders by Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect
Borrower's obligation to pay the Obligations. Agent shall render
to Borrower a monthly accounting of transactions under the
Revolving Credit Loan and setting forth the balance of the Loan
Account. Each and every such accounting shall (absent manifest
error) be deemed final, binding and conclusive upon Borrower in all
respects as to all matters reflected therein, unless Borrower,
within 30 days after the date any such accounting is rendered,
shall notify Agent in writing of any objection which Borrower may
have to any such accounting, describing the basis for such
objection with specificity. In that event, only those items
expressly and reasonably objected to in such notice shall be deemed
to be disputed by Borrower. Agent's determination, based upon the
facts available, of any item objected to by Borrower in such notice
shall (absent manifest error) be final, binding and conclusive on
Borrower, unless Borrower shall notify Agent of its continued
objection within 30 days following Agent's notifying Borrower of
such determination.
1.15 Indemnity. (a) Borrower shall indemnify and hold
each of Agent, Lenders and their respective Affiliates, officers,
directors, employees, attorneys, agents and representatives (each,
an "Indemnified Person"), harmless from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities
and expenses (including attorneys' fees and disbursements and other
costs of investigations or defense, including those incurred upon
any appeal) which may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been
extended under this Agreement and the other Loan Documents or in
connection with or arising out of the transactions contemplated
hereunder and thereunder, including any and all Environmental
Liabilities and Costs; provided that Borrower shall not be liable
for any indemnification to such Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss,
liability or expense results solely from such Indemnified Person's
gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction after all possible appeals have
been exhausted. NEITHER AGENT, ANY LENDER NOR ANY OTHER
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF
SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR DIRECT, INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS.
(b) Borrower hereby acknowledges and agrees that
neither Agent nor any Lender (i) is now, or has ever been, in
control of Borrower's or any of its Subsidiaries' affairs or (ii)
has the capacity through the provisions of the Loan Documents or
otherwise to influence Borrower's or any of its Subsidiaries'
conduct with respect to the ownership, operation or management of
any property.
(c) Borrower acknowledges that in connection with
Lenders' arranging to provide the LIBOR Loans from time to time
subject to Section 1.7(f) at the option of Borrower, Lenders may
enter into funding arrangements with third parties ("Funding
Arrangements") on terms and conditions which could result in
substantial losses to such Lenders if such LIBOR Rate funds do not
remain outstanding at the interest rates provided herein for the
entire LIBOR Period with respect to which the LIBOR Rate has been
fixed. Consequently, in order to induce Lenders to provide LIBOR
Loans on the terms provided herein and in consideration for the
entering into by Lenders of Funding Arrangements from time to time
in contemplation thereof, if any LIBOR Loans are either not
borrowed after delivery of an irrevocable borrowing notice under
Section 1.7(g) or repaid in whole or in part prior to the last day
of any such LIBOR Period therefor (whether such failure to borrow
or repayment is made pursuant to any provision of this Agreement or
any other Loan Document or is the result of acceleration, by
operation of law or otherwise), Borrower shall indemnify and hold
harmless each Lender from and against and in respect of any and all
losses, costs and expenses resulting from, or arising out of or
imposed upon or incurred by such Lender by reason of the
liquidation or reemployment of funds acquired or committed to be
acquired by such Lender to fund such LIBOR Loans pursuant to the
Funding Arrangements. The amount of any losses, costs or expenses
resulting in an obligation of Borrower to make a payment pursuant
to the foregoing sentence shall not include any losses attributable
to lost profit to Lenders but shall represent the excess, if any,
of (A) such Lender's cost of borrowing the LIBOR Rate funds
pursuant to the Funding Arrangements over (B) the return to such
Lender on its reinvestment of such funds; provided, however, that
if any Lender terminates any Funding Arrangements in respect of the
LIBOR Rate funds instead of reinvesting the funds, the amount of
such losses, costs and expenses shall include the cost to such
Lender of such termination. In reinvesting any funds borrowed by
any Lender pursuant to the Funding Arrangements, such Lender shall
take into consideration the remaining maturity of such borrowings.
As promptly as practicable under the circumstances, each Lender
shall provide Borrower with its written calculation of all amounts
payable pursuant to the next preceding sentence, and such
calculation shall be binding on the parties hereto unless Borrower
shall object thereto in writing within ten (10) Business Days of
receipt thereof.
1.16 Access. Borrower shall provide full access during
normal business hours, from time to time upon one (1) Business
Day's prior notice, to Agent and any of its officers, employees,
designees, agents and representatives, as frequently as Agent
determines, in its sole discretion, to be appropriate (unless a
Default or Event of Default shall have occurred and be continuing,
in which event Agent and its officers, employees, designees, agents
and representatives shall have access at any and all times and
without any notice), to the properties, facilities, books, records,
suppliers, customers, advisors and employees (including officers)
of Borrower and its Subsidiaries, to the Collateral and, either
through Borrower or with Borrower present (unless a Default or
Event of Default shall have occurred and be continuing, in which
event Agent and its officers, employees, designees, and agents
shall have access directly without going through Borrower or having
Borrower present), to the accountants (including Arthur Andersen
LLP) of Borrower and its Subsidiaries. Without limiting the
generality of the foregoing, Borrower shall (i) permit Agent, and
any of its officers, employees, agents and representatives, to
inspect, audit and make extracts from all of Borrower's and its
Subsidiaries' records, files and books of account and (ii) permit
Agent, and any of its officers, employees, agents and
representatives, to inspect, review and evaluate the Accounts,
Inventory and Borrower's and its Subsidiaries' books and other
records, at Borrower's and its Subsidiaries' locations and at
premises not owned by or leased to Borrower or any Subsidiary of
Borrower. Borrower shall make available to Agent and its counsel,
as quickly as is possible under the circumstances, originals or
copies of all books, records, board minutes, contracts, insurance
policies, environmental audits and reports, business plans, files,
financial statements (actual and pro forma), filings with federal,
state, local and foreign regulatory agencies, and other instruments
and documents which Agent may reasonably request. Borrower shall
deliver any document or instrument necessary for Agent, as it may
from time to time reasonably request, to obtain records from any
service bureau or other Person which maintains records for Borrower
or any Subsidiary of Borrower, and, if any of the records of
Borrower or any Subsidiary of Borrower are maintained with any
service bureau or other Person, shall maintain duplicate records or
supporting documentation on media, including on computer tapes and
discs owned by Borrower. Borrower shall instruct its certified
public accountants and its banking and other financial institutions
to make available to Agent, and its officers, employees, agents and
representatives, such information and records as Agent may from
time to time reasonably request. Notwithstanding the foregoing,
Borrower and its Subsidiaries shall not be required to make
available to Agent, and its officers, employees, designees, agents
and representatives, contracts or other agreements between Borrower
or any of its Subsidiaries and another Person if (i) the disclosure
thereof would violate any government security clearance regulation
applicable to such Person or destroy any attorney-client privilege
that exists in connection with such information or (ii) such
contract or other agreement contains a confidentiality provision
prohibiting its provision to Agent, and its officers, employees,
designees, agents and representatives; provided, that, Borrower and
its Subsidiaries shall use their best efforts to obtain the consent
of any other Persons party to any such contract or other agreement
to the provision of such contract or other agreement to Agent, and
its officers, employees, designees, agents and representatives;
and, provided, further, that, in the event Borrower and its
Subsidiaries are unable to obtain such consent, Borrower and its
Subsidiaries shall provide Agent, and its officers, designees,
agents and representatives, with copies of such contract or other
agreement from which the confidential and privileged information
has been redacted.
1.17 Taxes. (a) Any and all payments by Borrower
hereunder or in respect of the Amended Revolving Credit Notes shall
be made, in accordance with this Section 1.17, free and clear of
and without deduction for any and all present or future Taxes. If
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or in respect of the Amended
Revolving Credit Notes, (i) the sum payable shall be increased as
much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 1.17) Agent or Lenders, as applicable,
receive an amount equal to the sum they would have received had no
such deductions been made, (ii) Borrower shall make such deductions
and (iii) Borrower shall pay the full amount deducted to the
relevant taxing or other authority in accordance with applicable
law.
(b) Except as Borrower shall otherwise consent, each
Lender hereby severally (but not jointly) represents that under
applicable law and treaties in effect on the date of this Agreement
no Taxes will be required to be withheld by Borrower with respect
to any payments to be made to such Lender in respect of this
Agreement, the other Loan Documents or the Revolving Credit Loan.
Each Lender, if any, organized under the laws of a jurisdiction
outside of the United States (a "Foreign Lender") as to which
payments to be made in respect of this Agreement, the other Loan
Documents or the Revolving Credit Loan are wholly or partially
exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Borrower and Agent (i) two
(2) copies of a properly completed and executed Internal Revenue
Service Form 4224 or Form 1001 or other applicable form,
certificate or document prescribed by the Internal Revenue Service
certifying as to such Foreign Lender's entitlement to such
exemption with respect to payments to be made to such Foreign
Lender in respect of this Agreement, the other Loan Documents or
the Revolving Credit Loan (a "Certificate of Exemption") or (ii) a
letter from any such Foreign Lender stating that it is not entitled
to any such exemption (a "Letter of Non-Exemption"). Prior to
becoming a Lender under this Agreement and within fifteen (15) days
after a written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this
Agreement shall provide a Certificate of Exemption or a Letter of
Non-Exemption to Borrower and Agent.
If a Foreign Lender is entitled to an exemption with
respect to payments to be made to such Foreign Lender in respect of
this Agreement, the other Loan Documents and the Revolving Credit
Loan and does not provide a Certificate of Exemption to Borrower
and Agent within the time periods set forth in the immediately
preceding paragraph, Borrower shall withhold taxes from payments to
such Foreign Lender at the applicable statutory rates and Borrower
shall not be required to pay any additional amounts as a result of
such withholding; provided, that all such withholding shall cease
upon any delivery by such Foreign Lender of a Certificate of
Exemption to Borrower and Agent.
(c) Borrower shall indemnify and pay, within 10 days of
demand therefor, Agent and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable
under this Section 1.17) paid by Agent or such Lender, as
appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally asserted.
(d) Within 30 days after the date of any payment of
Taxes, Borrower shall furnish to Agent, at its address referred to
in Section 11.10, the original or a certified copy of a receipt
evidencing payment thereof.
1.18 Capital Adequacy and Other Adjustments.
(a) In the event that any Lender shall have determined
that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar
requirements or compliance by any Lender with any request or
directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) from
any central bank or governmental agency or body having jurisdiction
does or would have the effect of increasing the amount of capital,
reserves or other funds required to be maintained by such Lender
and thereby reducing the rate of return on such Lender's capital as
a consequence of its obligations hereunder, then Borrower shall
from time to time within fifteen (15) days after notice and demand
from such Lender (together with the certificate referred to in the
next sentence and with a copy to Agent) pay to Agent, for the
account of such Lender, additional amounts sufficient to compensate
such Lender for such reduction; provided, however, that,
notwithstanding the foregoing, Borrower shall have no obligation to
make any such payment in the event, if any, that such notice and
demand was sent by such Lender more than ninety (90) days after it
became aware of such law, treaty, governmental (or quasi-
governmental) rule, regulation, guideline or order. A certificate
as to the amount of such cost and showing the basis of the
computation of such cost submitted by such Lender to Borrower and
Agent shall, absent manifest error, be final, conclusive and
binding for all purposes.
(b) If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation or (ii)
the compliance with any guideline or request from any central bank
or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining of any Revolving
Credit Advance or portion thereof bearing interest based on the
LIBOR Rate, other than an increase which is already covered as a
result of the reserve adjustment applied to the LIBOR Rate pursuant
to clause (b) of the definition thereof, then Borrower shall from
time to time, upon demand by such Lender (with a copy of such
demand to Agent), pay to Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased
cost, submitted to Borrower, shall be binding and conclusive for
all purposes, absent manifest error. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances
referred to in clause (i) or (ii) above which would result in any
such increased cost to such Lender, such Lender shall, to the
extent not inconsistent with such Lender's internal policies of
general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by Borrower
pursuant to this Section 1.18(b).
(c) Notwithstanding anything to the contrary contained
herein, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or
any central bank or other Governmental Authority shall assert that
it is unlawful, for any Lender to agree to make or to make or to
continue to fund or maintain a Revolving Credit Advance bearing
interest based on the LIBOR Rate, then, unless such Lender
determines that it is able to (A) to make, continue to fund or
maintain such Loans which bear interest based on the LIBOR Rate at
another branch or office of such Lender or (B) to maintain such
LIBOR Loan until the end of the respective LIBOR Period, without,
in such Lender's opinion in either case, adversely affecting it or
its Revolving Credit Advances or the income obtained therefrom, on
notice thereof and demand therefor by such Lender to Borrower
through Agent, (i) the obligation of such Lender to agree to make
or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) Borrower shall forthwith prepay in full all such
outstanding LIBOR Loans, together with interest accrued thereon, to
such Lender unless Borrower, within five (5) Business Days after
the delivery of such notice and demand, converts all such Loans
into a Base Rate Loan.
(d) Upon the Agent obtaining actual knowledge of the
occurrence of any of the events set forth in this Section 1.18,
Agent shall promptly notify Borrower of the occurrence of such
event. Borrower shall have the right within five (5) days of
receipt of such notice to convert all outstanding LIBOR Loans to a
Base Rate Loan.
1.19 Amendment and Restatement.
(a) This Agreement amends and restates in its entirety
the Prior Credit Agreement and, upon effectiveness of this
Agreement, the terms and provisions of the Prior Credit Agreement
shall, subject to this Section 1.19, be superseded hereby.
(b) All references to "Credit Agreement" contained in
the Loan Documents delivered in connection with the Prior Credit
Agreement shall be deemed to refer to this First Amended and
Restated Credit Agreement.
(c) Notwithstanding the amendment and restatement of
the Prior Credit Agreement by this Agreement, the Obligations
outstanding under the Prior Credit Agreement shall remain
outstanding as of the date hereof, constitute continuing
Obligations hereunder and shall continue to be secured by the
Collateral.
The Obligations outstanding under the Prior Credit
Agreement and the Liens securing payment thereof shall in all
respects be continuing, and this Agreement shall not be deemed to
evidence or result in a novation or repayment and re-borrowing of
such Obligations. In furtherance of and without limiting the
foregoing, from and after the date hereof, the terms, conditions,
and covenants governing the Obligations outstanding under the Prior
Credit Agreement shall be solely as set forth in this Agreement,
which shall supersede the Prior Credit Agreement in its entirety.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Revolving Credit Advance
and Initial Letter of Credit Obligations.
Notwithstanding any other provision of this Agreement
and without affecting in any manner the rights of Agent and Lenders
hereunder, Borrower shall have no rights under this Agreement (but
shall have all applicable obligations hereunder), and no Lender
shall be obligated to make any Revolving Credit Advance, incur any
Letter of Credit Obligation or take, fulfill or perform any other
action hereunder from and after the date hereof, until the
following conditions have been satisfied, in Agent's sole
discretion, or waived in writing by Agent:
(a) This Agreement or counterparts hereof shall have
been duly executed by, and delivered to, Borrower, Agent and each
Lender.
(b) Agent shall have received such guaranties,
documents, instruments, agreements and legal opinions as Agent may
request in connection with the transactions contemplated by this
Agreement and the other Loan Documents, including a reaffirmation
of all Guaranties issued under the Prior Credit Agreement and all
documents, instruments, agreements and legal opinions listed in the
Schedule of Documents, each in form and substance satisfactory to
Agent.
(c) The transactions contemplated by the Term Loan
Agreement shall have been consummated and the Term Loan shall have
been funded.
(d) Agent shall have received evidence satisfactory to
Agent that Borrower has obtained consents and acknowledgments of
all Persons whose consents and acknowledgments may be required,
including, but not limited to, all requisite Governmental
Authorities, to the terms, and to the execution and delivery, of
this Agreement, the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby.
(e) Agent shall have received evidence satisfactory to
Agent that the insurance policies provided for in Section 3.20
remain in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured clauses or
endorsements, as requested by Agent, in favor of Agent, on behalf
of Lenders as previously delivered to Agent.
(f) Borrower shall have paid to the Lenders and GE
Capital of all Fees required to be paid at or prior to the Closing
Date under the terms hereof and of the GE Capital Fee Letter.
(g) Since December 31, 1994, there shall have been (i)
no event the occurrence of which could have a Material Adverse
Effect on the business, operations or prospects of Borrower,
Borrower and its Subsidiaries, taken as a whole, or Borrower and
the Guarantor Subsidiaries, taken as a whole; (ii) no litigation
will have commenced which, if successful, could have any such
Material Adverse Effect or could challenge any of the transactions
contemplated by this Agreement and the other Loan Documents; (iii)
no dividends or other distributions to Borrower's stockholders;
(iv) no increase in liabilities, liquidated or contingent, and no
decrease in assets of Borrower or any Guarantor Subsidiary which
could have a Material Adverse Effect; and (v) no event the
occurrence of which could have a Material Adverse Effect on the
financial condition of Borrower or any Guarantor Subsidiary, except
as reflected in Borrower's financial statements as of April 1, 1995
which have been delivered to Agent.
(h) Agent, on behalf of Lenders, shall have received a
letter satisfactory in form and substance to Agent signed by
Borrower's independent certified public accountants, Arthur
Andersen LLP, reaffirming that Agent and Lenders are entitled to
rely upon Arthur Andersen LLP's certification of Borrower's
financial statements.
(i) Agent, on behalf of Lenders, shall have received
landlord waivers and consents, in form and substance satisfactory
to Agent, with respect to each leased location, if any, where any
Collateral is or may be located and as to which Agent has not
received such waivers and consents pursuant to the Prior Credit
Agreement.
(j) Agent, on behalf of Lenders, shall have received
bailee letters, in form and substance satisfactory to Agent, with
respect to each warehouse where any Collateral is located, if any,
and as to which Agent has not received such letters pursuant to the
Prior Credit Agreement.
2.2 Further Conditions to Each Revolving Credit Advance
and Each of the Letter of Credit Obligations. It shall be a
further condition to the initial and each subsequent Revolving
Credit Advance and the incurrence of the initial and each
subsequent Letter of Credit Obligation that the following
statements shall be true on the date of each such Advance or
incurrence, as the case may be:
(a) All of Borrower's and each Domestic Subsidiary's
representations and warranties contained herein or in any of the
other Loan Documents shall be true and correct on and as of the
Closing Date, and the date on which each such Revolving Credit
Advance is made or Letter of Credit Obligation incurred, as though
made on and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier date and
except for changes therein expressly permitted by this Agreement.
(b) Borrower and each Guarantor Subsidiary shall be in
full compliance with all of its covenants and other agreements
contained herein or in any of the other Loan Documents.
(c) No event shall have occurred and be continuing, or
would result from the making of any Revolving Credit Advance or the
incurrence of any Letter of Credit Obligation which constitutes or
would constitute a Default or an Event of Default.
(d) After giving effect to such Revolving Credit
Advance or the incurrence of such Letter of Credit Obligation, as
the case may be, the aggregate principal amount of the Revolving
Credit Loan shall not exceed the maximum amount permitted by
Section 1.2(a) without requiring that a payment be made to Agent or
any Lender.
The request and acceptance by Borrower of the proceeds of any
Revolving Credit Advance and the request by Borrower for the
incurrence by Lenders of any Letter of Credit Obligation shall be
deemed to constitute, as of the date of such request or acceptance,
(i) a representation and warranty by Borrower that all of the
conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrower of the granting and continuance of
Agent's Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents.
2.3 Deliveries By Agent and Lenders.
Upon consummation of the transactions contemplated
hereby, Agent and Lenders shall deliver to Borrower the Revolving
Credit Notes received in accordance with the Prior Credit
Agreement.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make or continue the Revolving
Credit Loan and incur Letter of Credit Obligations, in each case as
herein provided for, Borrower makes the following representations
and warranties to Agent and each Lender, each and all of which
shall be true and correct as of the date of execution and delivery
of this Agreement, and shall survive the execution and delivery of
this Agreement:
3.1 Corporate Existence; Compliance with Law. Borrower
and each of its Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has been duly qualified to
conduct business and is in good standing in each other jurisdiction
where its ownership or lease of property or the conduct of its
business requires such qualification; (ii) has the requisite
corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease and to conduct its business as
now, heretofore and proposed to be conducted; (iii) has all
licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction over it, except to the extent, if
any, that failure to have such licenses, permits, consents or
approvals, to have made such filings, or to have given such
notices, either individually or in the aggregate, would not have a
Material Adverse Effect; (iv) is in compliance with its certificate
or articles of incorporation and bylaws; and (v) is in compliance
with all applicable provisions of law, except for any noncompliance
which, either individually or in the aggregate with all
circumstances of noncompliance, could not have or result in a
Material Adverse Effect.
3.2 Executive Offices. As of the Closing Date, the
location of Borrower's and each Subsidiary of Borrower's executive
offices and principal place of business is set forth on Schedule
3.2 and, except as set forth on Schedule 3.2, none of such
locations have changed within the past six (6) months.
3.3 Corporate Power; Authorization; Enforceable
Obligations. The execution, delivery and performance by Borrower
and the Guarantor Subsidiaries of this Agreement and the other Loan
Documents and all instruments and documents to be delivered by
Borrower or any Guarantor Subsidiary hereunder and thereunder (in
each case, to the extent such Person is a party thereto) and the
creation of all Liens provided for herein and therein: (i) are
within Borrower's and each Guarantor Subsidiary's corporate power;
(ii) have been duly authorized by all necessary or proper corporate
and shareholder action; (iii) are not in contravention of any
provision of Borrower's or any Subsidiary of Borrower's certificate
or articles of incorporation or bylaws; (iv) will not violate any
law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which
Borrower or any Subsidiary of Borrower is a party or by which
Borrower or any Subsidiary of Borrower or any of its or their
assets or properties is bound, where the consequence of such
conflict, breach, termination, default or acceleration could have
or result in a Material Adverse Effect; (vi) will not result in the
creation or imposition of any Lien upon any of the assets or
properties of Borrower or any Subsidiary of Borrower other than
those on the assets and properties Borrower and the Guarantor
Subsidiaries in favor of Agent, on behalf of itself and Lenders,
pursuant to the Loan Documents; and (vii) do not require the
consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(d), all of which
will have been duly obtained, made or complied with prior to the
Closing Date. At or prior to the Closing Date, this Agreement and
each of the other Loan Documents shall have been duly executed and
delivered on behalf of or for the benefit of Borrower and the
Guarantor Subsidiaries and each shall then constitute a legal,
valid and binding obligation of Borrower and the Guarantor
Subsidiaries enforceable against Borrower and the Guarantor
Subsidiaries in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws
affecting the rights of creditors generally or by application of
general principles of equity.
3.4 Financial Statements. Borrower has delivered the
financial statements identified on Schedule 3.4 and each such
financial statement complies with the description thereof contained
on Schedule 3.4.
3.5 Collateral Reports. Borrower has delivered the
Collateral Reports identified on Schedule 3.5 and each such
Collateral Report complies with the description thereof contained
on Schedule 3.5.
3.6 Material Adverse Effect. Neither Borrower nor any
of its Subsidiaries, as of December 31, 1994, had any obligations,
contingent liabilities, or liabilities for Charges, long-term
leases or unusual forward or long-term commitments which are not
reflected in the consolidated pro forma balance sheet of Borrower
and its Subsidiaries dated as of such date and which could, alone
or in the aggregate, have or result in a Material Adverse Effect.
Between December 31, 1994 and the Closing Date, there has been (i)
no event the occurrence of which could have a Material Adverse
Effect on the business, operations or prospects of Borrower,
Borrower and its Subsidiaries, taken as a whole, or Borrower and
the Guarantor Subsidiaries, taken as a whole, (ii) no litigation
which, if successful, could have any such Material Adverse Effect
or could challenge any of the transactions contemplated by this
Agreement and the other Loan Documents, (iii) no increase in
liabilities, liquidated or contingent, and no decrease in assets of
Borrower or any Guarantor Subsidiary which could have a Material
Adverse Effect and (iv) no event the occurrence of which could have
a Material Adverse Effect on the financial condition of Borrower or
any Guarantor Subsidiary, except as reflected in Borrower's
financial statements as of April 1, 1995, which have been delivered
to Agent. Since December 31, 1994 and until the Closing Date, no
dividends, advances or other distributions have been declared, paid
or made upon any Stock of Borrower and no shares of Stock of
Borrower have been, or are now required to be, redeemed, retired,
purchased or otherwise acquired for value by Borrower.
3.7 Ownership of Property; Liens. (a) Except as
described on Schedule 3.7, the real estate listed on Schedule 3.7
constitutes all of the real property owned, leased or used in its
business by Borrower or any Subsidiary of Borrower. Borrower, or
such Subsidiary of Borrower, as applicable, (i) holds title to all
of its owned real estate, subject to no Liens other than Permitted
Encumbrances, and has valid leasehold interests in all of its
Leases (both as lessor and lessee, sublessee or assignee), all as
described on Schedule 3.7, and (ii) holds title to, or valid
leasehold interests in, all of its other properties and assets, and
none of the properties or assets of Borrower or any Subsidiary of
Borrower are subject to any Liens, except Permitted Encumbrances.
Borrower or such Subsidiary of Borrower, as applicable, has
received all deeds, assignments, waivers, consents, non-disturbance
and recognition or similar agreements, bills of sale and other
documents, and duly effected all recordings, filings and other
actions necessary to establish, protect and perfect Borrower's or
such Subsidiary's, as appropriate, right, title and interest in and
to all such real estate and other assets and properties that are
material to the conduct of its business or at which Collateral is
located. Except as described on Schedule 3.7, (i) neither Borrower
or any Subsidiary of Borrower nor, to the knowledge of Borrower,
any other party to any such Lease described on Schedule 3.7 is in
material default of its obligations thereunder or has delivered or
received any notice of termination under any such Lease, and no
event has occurred which, with the giving of notice, the passage of
time or both, would constitute a material default under any such
Lease; (ii) on the Closing Date, neither Borrower nor any
Subsidiary of Borrower owns or holds, or is obligated under or a
party to, any option, right of first refusal or any other
contractual right to purchase, acquire, sell, assign or dispose of
any real property owned or leased by Borrower or any Subsidiary of
Borrower except as set forth on Schedule 3.7; and (iii) on the
Closing Date, no portion of any real property owned or leased by
Borrower or any Subsidiary of Borrower has suffered any material
damage by fire or other casualty loss or a Release which has not
heretofore been completely repaired and restored to its original
condition or is being remedied. All permits required to have been
issued or appropriate to enable the real property owned or leased
by Borrower and its Subsidiaries, and material to the conduct of
their respective businesses or at which any Collateral is located,
to be lawfully occupied and used for all of the purposes for which
they are currently occupied and used, have been lawfully issued and
are, as of the date hereof, in full force and effect.
3.8 Restrictions; No Default. No contract, lease,
agreement or other instrument to which Borrower or any Subsidiary
of Borrower is a party or by which it or any of its properties or
assets is bound or affected and no provision of applicable law or
governmental regulation has or results in a Material Adverse Effect
or could have or result in a Material Adverse Effect. Neither
Borrower nor any Subsidiary of Borrower is in default, and, to
Borrower's knowledge, no third party is in default, under or with
respect to any contract, agreement, lease or other instrument to
which it is a party where the consequence of such default, either
individually or when considered in the aggregate with all such
defaults, could have or result in a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
3.9 Labor Matters. There are no strikes which have
lasted more than seven (7) Business Days, or, as of the Closing
Date, other material labor disputes, against Borrower or any
Subsidiary of Borrower that are pending or, to Borrower's
knowledge, threatened. Hours worked by and payment made to
employees of Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable
federal, state, local or foreign law dealing with such matters.
All payments due from Borrower or any Subsidiary of Borrower on
account of employee health and welfare insurance have been paid or
accrued as a liability on the books of Borrower or the applicable
Subsidiary, as appropriate. As of the Closing Date, neither
Borrower nor any Subsidiary of Borrower has any obligation under
any collective bargaining agreement or any employment agreement
except as set forth on Schedule 3.9 hereto, a true and complete
copy of each of which has been furnished to Agent. As of the
Closing Date, there is no organizing activity involving Borrower or
any Subsidiary of Borrower pending or threatened by any labor union
or group of employees. As of the Closing Date, except as set forth
on Schedule 3.9, there are no representation proceedings pending
or, to Borrower's knowledge, threatened with the National Labor
Relations Board, and no labor organization or group of employees of
Borrower or any Subsidiary of Borrower has made a demand for
recognition. As of the Closing Date, except as set forth on
Schedule 3.9, there are no complaints or charges involving an
amount in excess of $400,000 against Borrower or any Subsidiary of
Borrower pending or threatened to be filed with any federal, state,
local or foreign court, governmental agency or arbitrator based on,
arising out of, in connection with, or otherwise relating to the
employment or termination of employment of any individual by
Borrower or any Subsidiary of Borrower.
3.10 Joint Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness. Except as set forth on
Schedule 3.10 or as otherwise expressly permitted by the terms of
this Agreement: (i) Borrower has no Subsidiaries, is not engaged,
directly or indirectly through a Subsidiary or otherwise, in any
joint venture or partnership with any other Person, and is not an
Affiliate of any Person other than a Subsidiary of Borrower; (ii)
there are no outstanding rights to purchase, options, warrants or
similar rights or agreements pursuant to which Borrower may be
required to issue or sell any Stock or other equity security of
Borrower and; (iii) Borrower is the sole direct or indirect
beneficial owner of the stock of all of its Subsidiaries. Except
as set forth on Schedule 3.10, on the Closing Date, to Borrower's
knowledge, no stockholder of Borrower owns more than five percent
(5%) of any class of its Stock. Except as set forth on Schedule
3.10, there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which Borrower
or any Subsidiary of Borrower may be required to issue or sell any
Stock or other equity security of any Subsidiary. As of the
Closing Date, all outstanding Indebtedness and all Liens of
Borrower and its Subsidiaries are described on Schedule 6.3 and
Schedule 6.7, respectively.
3.11 Government Regulation. Neither Borrower nor any
Subsidiary of Borrower is an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither Borrower nor any Material
Subsidiary is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or any other federal, state, local or foreign statute
that restricts or limits its ability to incur Indebtedness or to
perform its obligations hereunder or under any of the other Loan
Documents, and the making of the Revolving Credit Advances and the
incurrence of the Letter of Credit Obligations by Lenders, the
application of the proceeds and repayment thereof by Borrower and
the consummation of the transactions contemplated by this Agreement
and the other Loan Documents does not and will not violate any
provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission or any
Governmental Authority.
3.12 Margin Regulations. Neither Borrower nor any
Subsidiary of Borrower is engaged, nor will it engage, principally
or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin
security" within the respective meanings of each of the quoted
terms under Regulation U or G of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") as now and
from time to time hereafter in effect. None of the proceeds of the
Revolving Credit Advances or any Letter of Credit will be used,
directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of
the loans or other extensions of credit under this Agreement to be
considered a "purpose credit" within the meaning of Regulation G,
T, U or X of the Federal Reserve Board. Neither Borrower nor any
Subsidiary of Borrower will take, or permit any agent acting on its
behalf to take, any action which might cause this Agreement or any
other Loan Document or any document or instrument delivered
pursuant hereto or thereto to violate any regulation of the Federal
Reserve Board.
3.13 Taxes. As of the Closing Date, all federal,
state, local and foreign tax returns, reports and statements
required to be filed by Borrower, or any Subsidiary of Borrower,
have been filed with the appropriate Governmental Authority and all
Charges and other impositions shown thereon to be due and payable
have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment
thereof, or any such fine, penalty, interest, late charge or loss
has been paid. Borrower and each of its Subsidiaries has paid when
due and payable all Charges required to be paid by it. As of the
Closing Date, proper and accurate amounts have been withheld by
Borrower and each of its Subsidiaries from their respective
employees for all periods in full and complete compliance with the
tax, social security and unemployment withholding provisions of
applicable federal, state, local and foreign law and such
withholdings have been timely paid to the respective Governmental
Authorities. Schedule 3.13 sets forth those taxable years for
which Borrower's tax returns are currently being audited by the IRS
or any other applicable Governmental Authority and any assessments
or threatened assessments in connection with such audit or
otherwise currently outstanding. As of the Closing Date, except as
described on Schedule 3.13, Borrower has not executed or filed with
the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period
for assessment or collection of any Charges. Borrower has not
filed a consent pursuant to IRC Section 341(f) or agreed to have
IRC Section 341(f)(2) apply to any dispositions of subsection (f)
assets (as such term is defined in IRC Section 341(f)(4)). None of
the property owned by Borrower or any Subsidiary of Borrower is
property which Borrower or any Subsidiary of Borrower is required
to treat as being owned by any other Person pursuant to the
provisions of IRC 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 or is "tax-exempt use property"
within the meaning of the IRC Section 168(h). As of the Closing
Date, except as set forth on Schedule 3.13, neither Borrower nor
any Subsidiary of Borrower has agreed or been requested to make any
adjustment under IRC Section 481(a) by reason of a change in
accounting method or otherwise. Neither Borrower nor any
Subsidiary of Borrower has any obligation under any written tax
sharing agreement except as set forth on Schedule 3.13.
3.14 ERISA. (a) Schedule 3.14 lists all Plans
maintained or contributed to by Borrower or any Subsidiary of
Borrower and all Qualified Plans maintained or contributed to by
any ERISA Affiliate, and separately identifies the Title IV Plans,
Multiemployer Plans, any multiple employer plans subject to Section
4064 of ERISA, unfunded Pension Plans, Welfare Plans and Retiree
Welfare Plans. Each Qualified Plan, if any, has been determined by
the IRS to qualify under Section 401 of the IRC, and the trusts
created thereunder have been determined to be exempt from tax under
the provisions of Section 501 of the IRC, and nothing has occurred
which would cause the loss of such qualification or tax-exempt
status. Each Plan is in compliance with the applicable provisions
of ERISA and the IRC, including the filing of reports required
under the IRC or ERISA, all of which are true and correct as of the
date filed, and with respect to each Plan, other than a Qualified
Plan, all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. Neither Borrower
or any Subsidiary of Borrower nor any ERISA Affiliate, with respect
to any Qualified Plan, has failed to make any contribution or pay
any amount due as required by Section 412 of the IRC or Section 302
of ERISA or the terms of any such Plan. With respect to all
Retiree Welfare Plans, the present value of future anticipated
expenses pursuant to the latest actuarial projections of
liabilities does not exceed $50,000 and copies of such latest
projections have been provided to Agent; with respect to Pension
Plans, other than Qualified Plans, the present value of the
liabilities for current participants thereunder using the PBGC
interest rate for immediate annuities in effect on the Closing Date
does not exceed $50,000. Neither Borrower nor any Subsidiary of
Borrower has engaged in a prohibited transaction, as defined in
Section 4975 of the IRC or Section 406 of ERISA, in connection with
any Plan.
(b) Except as set forth on Schedule 3.14: (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or
event described in Section 4062(e) of ERISA with respect to any
Title IV Plan has occurred or is reasonably expected to occur;
(iii) there are no pending or, to the knowledge of Borrower,
threatened claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (x)
any Plan or its assets, (y) any fiduciary with respect to any Plan
or (z) Borrower, any Subsidiary of Borrower or any ERISA Affiliate
with respect to any Plan; (iv) neither Borrower or any Subsidiary
of Borrower nor any ERISA Affiliate has incurred or reasonably
expects to incur any Withdrawal Liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 of ERISA
as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years neither Borrower
or any Subsidiary of Borrower nor any ERISA Affiliate has engaged
in a transaction which resulted in a Title IV Plan with Unfunded
Liabilities being transferred outside of the "controlled group"
(within the meaning of Section 4001(a)(14) of ERISA) of any such
entity; (vi) no Plan which is a Retiree Welfare Plan provides for
continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination
of employment (except as may be required by Section 4980B of the
IRC and at the sole expense of the participant or the beneficiary
of the participant); Borrower, each Subsidiary of Borrower and each
ERISA Affiliate have complied with the notice and continuation
coverage requirements of Section 4980B of the IRC and the
regulations thereunder; and (vii) no liability under any Plan has
been funded, nor has any such obligation been satisfied, with the
purchase of a contract from an insurance company that is not rated
AAA by the Standard & Poor's Corporation and the equivalent by each
other nationally recognized rating agency.
3.15 No Litigation. Except as set forth in writing to
Agent, on behalf of itself and Lenders, in that certain letter of
even date herewith (the "Disclosure Letter"), as of the Closing
Date, no action, claim or proceeding is now pending or, to the
knowledge of Borrower, threatened against Borrower, or any
Subsidiary of Borrower, at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of any federal,
state, local or foreign government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators, (i)
which challenges Borrower's or any Domestic Subsidiary's right,
power or competence to enter into or perform any of its obligations
under this Agreement or any of the other Loan Documents, or the
validity or enforceability of any Loan Document or any action taken
thereunder or (ii) which seeks monetary damages in excess of
$400,000 or injunctive relief, nor to the knowledge of Borrower
does a state of facts exist which is reasonably likely to give rise
to such proceedings.
3.16 Brokers. No broker or finder acting on behalf of
Borrower brought about the obtaining, making or closing of the
loans made pursuant to this Agreement or the transactions
contemplated by the Loan Documents and neither Borrower nor any
Subsidiary of Borrower, nor Agent or any Lender by reason of any
action of Borrower, has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.
3.17 Patents, Trademarks, Copyrights and Licenses.
Except as otherwise set forth on Schedule 3.17, Borrower owns all
licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names necessary to
continue to conduct its business as heretofore conducted by it and
its Subsidiaries, now conducted by it and its Subsidiaries and
proposed to be conducted by it or any of its Subsidiaries each of
which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on Schedule
3.17. Schedule 3.17 lists all tradenames or other names under
which Borrower or any Subsidiary of Borrower conducts business.
Except as otherwise set forth in the Disclosure Letter, Borrower
and each of its Subsidiaries conducts its business without
infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. Except as otherwise
set forth on Schedule 3.17, there is no infringement or claim of
infringement by others of any license, patent, copyright, service
mark, trademark, trade name, trade secret or other intellectual
property right of Borrower or any Subsidiary of Borrower.
3.18 Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, the Disclosure Letter,
the Financial Statements, the Collateral Reports or any written
statement furnished by or on behalf of Borrower or any Subsidiary
of Borrower pursuant to the terms of this Agreement, which has
previously been delivered to Agent or any Lender, contains any
untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein
not misleading in light of the circumstances under which they were
made. The Liens granted to Agent, on behalf of itself and Lenders,
pursuant to the Collateral Documents will at the Closing Date be
fully perfected first priority Liens in and on the Collateral
described therein.
3.19 Hazardous Materials. As of the Closing Date,
except as set forth in the Disclosure Letter, all real property
owned or leased by Borrower or any Subsidiary of Borrower is free
of contamination from any Hazardous Material. In addition, the
Disclosure Letter discloses all existing or potential environmental
liabilities of Borrower and its Subsidiaries of which Borrower has
knowledge which could constitute or result in a Material Adverse
Effect or any Environmental Liabilities or Costs. As of the
Closing Date, except as set forth in the Disclosure Letter, neither
Borrower nor any Subsidiary of Borrower has caused or suffered to
occur any Release at, under, above or within any real property
which it owns or leases. As of the Closing Date, except as set
forth in the Disclosure Letter, neither Borrower nor any Subsidiary
of Borrower is involved in any operations which are reasonably
likely to lead to the imposition of any liability or Lien on it or
any of its properties or other assets, or any owner of any premises
which it occupies, under the Environmental Laws, and neither
Borrower nor any Subsidiary of Borrower has permitted any tenant or
occupant of such premises to engage in any such activity.
3.20 Insurance Policies. Schedule 3.20 Part II lists
all insurance of any nature maintained for current occurrences by
Borrower or any Subsidiary of Borrower, as well as a summary of the
terms of such insurance. Borrower covenants that such insurance
complies with and shall at all times comply with the standards set
forth on Schedule 3.20 Part I.
3.21 Deposit and Disbursement Accounts. As of the
Closing Date, Schedule 3.21 lists all banks and other financial
institutions at which Borrower or any Domestic Subsidiary of
Borrower maintains deposits and/or other accounts, and such
Schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a
description of the purpose of the account and the complete account
number.
3.22 Government Contracts. As of the Closing Date,
except as set forth on Schedule 3.22 hereto, neither Borrower nor
any Subsidiary of Borrower is a party to any contract or agreement
with the federal government and none of the Accounts are subject to
the Federal Assignment of Claims Act (31 U.S.C. Section 3727)
relative to the assignment of such Accounts.
3.23 Customer and Trade Relations. There exists no
actual or threatened termination or cancellation of, or any
material adverse modification or change in: (a) the business
relationship of Borrower or any Subsidiary of Borrower with any
customer or group of customers of Borrower whose purchases
individually or in the aggregate are material to the operations of
Borrower, Borrower and its Subsidiaries, taken as a whole, or
Borrower and the Guarantor Subsidiaries, taken as a whole; or (b)
the business relationship of Borrower or any Subsidiary of Borrower
with any supplier material to the operations of Borrower, Borrower
and its Subsidiaries, taken as a whole, or Borrower and the
Guarantor Subsidiaries, taken as a whole.
3.24 Non-Material Subsidiaries. Neither any Non-
Guarantor Domestic Subsidiary nor any other Non-Material Subsidiary
has any assets or liabilities, other than (i) assets or liabilities
consisting solely of intercompany balances and/or intercompany
allocation of tax assets or liabilities, (ii) liabilities (whether
contingent or liquidated) of Zenith Electronics Corporation of
Pennsylvania with respect to environmental matters as disclosed to
Agent and Lenders in the Disclosure Letter (the "Pennsylvania
Liabilities"); (iii) with respect to Zenith Electronics (Ireland)
Limited: (y) assets consisting of cash or cash equivalents not
exceeding $135,000, in the aggregate and (z) liabilities (whether
contingent or liquidated) with respect to accrued accounts payable
not yet due and payable, accrued accounts payable subject to
dispute, liabilities for taxes filed but not yet finalized and
other miscellaneous liabilities and contingencies for which
reserves have been estimated and established, all of which
liabilities shall not exceed $200,000 in the aggregate
(collectively, the "Ireland Assets and Liabilities"); (iv) trade
payables incurred in the ordinary course of business consistent
with past practices by Interocean Advertising Corporation of
California and Interocean Advertising Corporation of Illinois; and
(v) with respect to Non-Material Subsidiaries other than Zenith
Electronics Corporation of Pennsylvania and Zenith Electronics
(Ireland) Limited other assets with a value not in excess of
$50,000. Neither any Non-Guarantor Domestic Subsidiary nor any
other Non-Material Subsidiary, except for Interocean Advertising
Corporation, Interocean Advertising Corporation of California and
Interocean Advertising Corporation of Illinois, carries on any
trade or business.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Borrower covenants and
agrees that from and after the Closing Date, it shall deliver to
Agent and/or Lenders, as required, the Financial Statements,
notices and Projections at the times, to the Persons and in the
manner set forth on Schedule 4.1(A).
(b) Borrower covenants and agrees that from and after
the Closing Date, it shall deliver to Agent and/or Lenders, as
required, the various Collateral Reports at the times, to the
Persons and in the manner set forth on Schedule 4.1(B).
4.2 Communication with Accountants. Borrower
authorizes Agent, on behalf of Lenders, to communicate either
through Borrower or with Borrower present (and upon the occurrence
and during the continuance of any Default or Event of Default,
directly and without the presence of Borrower) with its independent
certified public accountants and tax advisors and authorizes those
accountants to disclose to Agent, on behalf of Lenders, any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to
the business, financial condition and other affairs of Borrower or
any of its Subsidiaries.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Agent and
Requisite Lenders shall otherwise consent in writing, from and
after the date hereof:
5.1 Maintenance of Existence and Conduct of Business.
Borrower shall, and shall cause each of its Subsidiaries to: (a)
except as otherwise expressly permitted under this Agreement, do or
cause to be done all things necessary to preserve and keep in full
force and effect Borrower's and each of its Subsidiaries' corporate
existence and its rights and franchises; (b) except as otherwise
expressly permitted under this Agreement, continue to conduct
Borrower's and each of its Subsidiaries' business substantially as
now conducted or as otherwise permitted hereunder; (c) at all times
maintain, preserve and protect all of its United States, Canadian
and Mexican trademarks, patents, trade names, copyrights and all
United States, Canadian and Mexican other intellectual property and
rights as licensee or licensor thereof, including all rights of
Borrower and its Subsidiaries under and pursuant to the Tuning
System Patents and Tuning System Patent Licenses; (d) at all times
maintain, preserve and protect all the remainder of Borrower's and
each of its Subsidiaries' properties, equipment, fixtures and other
assets in use or useful in the conduct of its business, and keep
the same in good repair, working order and condition and from time
to time make, or cause to be made, all necessary or appropriate
maintenance, service, repairs, replacements and improvements
thereto consistent with industry practices, so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times; and (e) except as otherwise
expressly permitted under this Agreement, transact business only in
such names as are set forth on Schedule 5.1.
5.2 Payment of Obligations. (a) Borrower shall: (i)
pay and discharge or cause to be paid and discharged all
Obligations; (ii) so long as there shall not be any Default or
Event of Default, pay and discharge, or cause to be paid and
discharged, its Indebtedness other than the Obligations at the time
such amounts are due and payable; and (iii) subject to Section
5.2(b), pay and discharge or cause to be paid and discharged
promptly all (A) Charges imposed upon it, its income and profits,
or any of its property (real, personal or mixed), and (B) lawful
claims for labor, materials, supplies and services or otherwise,
before any thereof shall become in default.
(b) Borrower may in good faith contest, by proper legal
actions or proceedings, the validity or amount of any Charges or
claims arising under Section 5.2 (a) (iii) above; provided, that at
the time of commencement of any such action or proceeding, and
during the pendency thereof (i) no Default or Event of Default
shall have occurred, (ii) adequate reserves with respect thereto
are maintained on the books of Borrower, in accordance with GAAP,
(iii) such contest operates to suspend collection of the contested
Charges or claims and such contest is maintained and prosecuted
continuously and with diligence, (iv) none of the Collateral would
be subject to forfeiture or loss or any Lien by reason of the
institution or prosecution of such contest, (v) no Lien shall
exist, be imposed or be attempted to be imposed for such Charges or
claims during such action or proceeding, (vi) Borrower shall
promptly pay or discharge such contested Charges and all additional
charges, interest, penalties and expenses, if any, and shall
deliver to Agent evidence acceptable to Agent of such compliance,
payment or discharge, if such contest is terminated or discontinued
adversely to Borrower, and (vii) Agent has not advised Borrower in
writing that Agent believes that nonpayment or nondischarge thereof
could have or result in a Material Adverse Effect.
5.3 Books and Records. Borrower shall keep adequate
records and books of account with respect to Borrower's and its
Subsidiaries' business activities, in which proper entries,
reflecting all of their financial transactions (including
consolidating transactions), are made in accordance with GAAP and
on a basis consistent with the Financial Statements referred to in
Schedule 3.4.
5.4 Litigation. Borrower shall notify Agent in
writing, promptly upon learning thereof, of any litigation
commenced or, to the knowledge of Borrower, threatened against
Borrower or any Subsidiary of Borrower, and of the institution
against it of any suit or administrative proceeding, that (a) may
involve an amount in excess of $400,000, or (b) seeks injunctive
relief or could have or result in a Material Adverse Effect if
adversely determined.
5.5 Insurance. (a) Borrower shall, at its sole cost
and expense, maintain the policies of insurance described on
Schedule 3.20 in form and with insurers satisfactory to Agent.
Such policies shall be in such amounts as are set forth on Schedule
3.20 and in no event less than the amounts maintained on the
Closing Date, except as otherwise approved in writing in advance by
Agent in its sole discretion. Borrower shall notify Agent promptly
of any occurrence causing a material loss or decline in value of
any real or personal property of Borrower or any of its
Subsidiaries and the estimated (or actual, if available) amount of
such loss or decline. Except as otherwise specified on Schedule
3.20, Borrower hereby directs all present and future insurers under
its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Agent, on behalf of Lenders; provided,
however, that to the extent that such proceeds are paid solely in
respect of the loss of or damage to Excluded Assets, Agent shall
release such proceeds to Borrower when and as necessary to pay for
the repair, replacement or reconstruction of the Excluded Assets
subject to such casualty, provided that: (i) at the time of any
requested release of insurance proceeds, no Default or Event of
Default shall have occurred and be continuing and (ii) the repair,
replacement or reconstruction of such Excluded Assets shall be
reasonably anticipated to be completed prior to the Commitment
Termination Date. Effective upon the occurrence of any Default or
Event of Default and for so long as any Default or Event of Default
shall have occurred and be continuing, Borrower irrevocably makes,
constitutes and appoints Agent (and all officers, employees or
agents designated by Agent) as Borrower's true and lawful agent and
attorney in-fact for the purpose of making, settling and adjusting
claims under the "All Risk" policies of insurance, endorsing the
name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such "All Risk" policies of insurance,
and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. In the event Borrower at
any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required above or to pay any premium in
whole or in part relating thereto, Agent, without waiving or
releasing any Obligations or Default or Event of Default hereunder,
may at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium
and take any other action with respect thereto as Agent may deem
advisable. All sums so disbursed, including reasonable attorneys'
fees, court costs and other charges related thereto, shall be
payable, on demand, by Borrower to Agent and shall be additional
Obligations hereunder secured by the Collateral; provided, that, if
and to the extent that Borrower fails to promptly pay any of such
sums upon Agent's demand therefor, Agent is authorized to, and at
its option may, make or cause to be made Revolving Credit Advances
on behalf of Borrower for payment thereof.
(b) Agent reserves the right at any time, upon review
of Borrower's and/or any Guarantor Subsidiaries' risk profile, to
require additional forms and limits of insurance to, in Agent's
sole opinion, both adequately protect Agent's and Lenders'
interests in all or any portion of the Collateral and to ensure
that Borrower and each Guarantor Subsidiary is protected by
insurance in amounts and with coverage customary for businesses
engaged in their business. Upon the occurrence and during the
continuance of any Default or Event of Default, Agent reserves the
right at any time, upon review of Borrower's and/or any Material
Subsidiaries' risk profile, to require additional forms and limits
of insurance to, in Agent's sole opinion, adequately protect
Agent's and Lenders' interests, including, but not limited to,
their interests in the Collateral. Borrower shall, if so requested
by Agent, deliver to Agent, as often as Agent may request, a report
of a reputable insurance broker, satisfactory to Agent with respect
to its insurance policies.
(c) Borrower shall deliver to Agent endorsements (i) to
all "All Risk" and business interruption insurance naming Agent
loss payee, on behalf of itself and Lenders, and (ii) to all
general liability and other liability policies naming Agent, on
behalf of itself and Lenders, as an additional insured.
5.6 Compliance with Laws. Borrower and each of its
Subsidiaries shall comply with all federal, state, local and
foreign laws and regulations applicable to it, including those
relating to licensing, environmental, consumer credit,
truth-in-lending, ERISA and labor matters, except for those which
if not complied with, either individually or in the aggregate,
could have or result in a Material Adverse Effect.
5.7 Agreements. Borrower and each of its Subsidiaries
shall perform, within all required time periods (after giving
effect to any applicable grace periods), all of its obligations and
enforce all of its rights under each agreement to which it is a
party, including any leases and customer contracts to which it is a
party, where the consequence of failure to so perform could have or
result in a Material Adverse Effect. Neither Borrower nor any
Subsidiary of Borrower shall terminate or modify any provision of
any agreement to which it is a party which termination or
modification could have or result in a Material Adverse Effect.
5.8 Supplemental Disclosure. On the request of Agent
(in the event that such information is not otherwise delivered by
Borrower to Agent pursuant to this Agreement), so long as there are
Obligations outstanding hereunder, but not more frequently than
once every three (3) months, Borrower will supplement each schedule
or representation herein with respect to any matter hereafter
arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in
such schedule or as an exception to such representation or which is
necessary to correct any information in such schedule or
representation which has been rendered inaccurate thereby;
provided, however, that such supplement to such schedule or
representation shall not be deemed an amendment thereof unless
expressly consented to in writing by Agent and Requisite Lenders,
and no such amendments, except as the same may be consented to in a
writing which expressly includes a waiver, shall be or be deemed a
waiver of any Default or Event of Default disclosed therein.
5.9 Employee Plans. Borrower shall notify Agent of (i)
to the extent that any of the following individually, or that all
of the following in the aggregate, exceeds $400,000, any and all
claims, actions, or lawsuits asserted or instituted, and any and
all threatened litigation or claims in connection with any Plan
maintained, at any time, by Borrower, any Subsidiary of Borrower or
any ERISA Affiliate, or to which Borrower, any Subsidiary of
Borrower or any ERISA Affiliate has or had at any time any
obligation to contribute and (ii) the occurrence of any Reportable
Event with respect to any Pension Plan of Borrower, any Subsidiary
of Borrower or any ERISA Affiliate.
5.10 Environmental Matters. Borrower and each
Subsidiary of Borrower shall (i) comply in all respects with the
Environmental Laws applicable to it, where the consequence of
failure to so comply, either individually or when considered in the
aggregate with all such failures to so comply, could have or result
in a Material Adverse Effect, (ii) notify Agent promptly after
Borrower becomes aware of any Release upon any premises owned or
occupied by Borrower or any Subsidiary of Borrower if such Release
requires reporting to a Governmental Authority and (iii) promptly
forward to Agent a copy of any order, notice, permit, application
or any communication or report received by Borrower in connection
with any such Release or any other matter relating to the
Environmental Laws that may affect such premises or Borrower or any
Subsidiary of Borrower. The provisions of this Section 5.10 shall
apply whether or not the Environmental Protection Agency, any other
federal agency or any state, local or foreign environmental or
other agency has taken or threatened any action in connection with
any Release or the presence of any Hazardous Materials.
5.11 Landlords' Agreements and Bailee Letters.
Borrower shall use its best efforts to obtain a landlord's
agreement in form and substance acceptable to Agent from the lessor
of each leased premises currently being used by Borrower or any
Guarantor Subsidiary and the lessor of any new leased premises, in
each case where Collateral is currently or may be located.
Borrower shall use its best efforts to obtain a bailee letter in
form and substance acceptable to Agent with respect to each
warehouse currently being used by Borrower or any Guarantor
Subsidiary and with respect to any warehouse used in the future, in
each case where Collateral is currently or may be located.
5.12 Public Offering Proceeds. Unless Agent shall
otherwise agree, Borrower shall apply the entire net cash proceeds
from any sale of Stock permitted under Section 6.18 hereof, first,
to reduce the Revolving Credit Loan to zero without any
corresponding reduction of the Revolving Credit Commitment, second,
to reduce all of the other Obligations then due and payable to zero
and, third, for any other legally permissible purpose.
5.13 Notice of Labor Matters. Borrower shall provide
prompt notice to Agent of (i) any strike or other material labor
dispute against Borrower or any Subsidiary of Borrower, (ii) any
organizing efforts involving Borrower or any Subsidiary of Borrower
by any labor union or group of employees, and (iii) any complaints
or charges against Borrower or any Subsidiary of Borrower filed
with any federal, state, local or foreign court, governmental
agency or arbitrator involving an amount in excess of $400,000 and
based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by Borrower or any
Subsidiary of Borrower of any individual. Borrower shall provide
prompt notice to Agent of any collective bargaining agreement or
employment agreement with any officer entered into by Borrower or
any Material Subsidiary with any other Person and, together with
such notice, shall provide Agent with a copy of any such collective
bargaining agreement or employment agreement.
5.14 Government Contracts. Borrower shall designate in
the monthly report delivered to Agent pursuant to Section 4.1(b)
all Accounts arising out of any contract or agreement entered into
by Borrower or any Subsidiary with the federal government. In
addition, Borrower shall inform Agent, at any time and from time to
time upon Agent's request, as to whether or not such contract or
agreement is subject to the Federal Assignment of Claims Act (31
U.S.C. 3727) and, if subject to the Federal Assignment of Claims
Act, whether or not Borrower or the appropriate Subsidiary has
complied with such Act (providing evidence thereof if it has so
complied).
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Agent's and
Requisite Lenders' prior written consent, from and after the date
hereof:
6.1 Mergers, Etc. Neither Borrower nor any Subsidiary
of Borrower shall directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise
combine with, any Person or form any Subsidiary, except that so
long as no Default or Event of Default shall have occurred and be
continuing or would result after giving effect thereto: (i) any
Domestic Subsidiary may be merged with and into any other Domestic
Subsidiary or Borrower upon not less than thirty (30) days' prior
written notice to Agent and delivery to Agent of executed UCC-1
financing statements and such other documents and filings as may be
necessary or appropriate to maintain Agent's perfected security
interest in the Collateral; (ii) upon not less than thirty (30)
days prior written notice to Agent, Borrower may form additional
Domestic Subsidiaries if necessary to prudently manage or reduce
state or local tax liabilities; provided that if assets with a
value in excess of $25,000 are contributed to the capital of or
otherwise transferred to such Subsidiary, it shall within ten (10)
days thereafter (A) become a Guarantor Subsidiary, (B) become a
party to the Domestic Subsidiaries Guaranty, the Security Agreement
and the Guarantor Contribution Agreement and (C) shall execute and
deliver to Agent executed UCC-1 financing statements and such other
documents and filings as may be necessary to obtain a first
priority perfected security interest in any Collateral of that
Domestic Subsidiary; and (iii) upon not less than ten (10) days'
prior written notice to Agent, Borrower may form a Domestic
Subsidiary for the purpose of acquiring the finished goods bearing
Borrower's brand name from a distributor of Borrower the
distributor agreement of which has been terminated by Borrower or
such distributor or which distributor is insolvent and is likely to
sell those finished goods at distressed prices, and such Domestic
Subsidiary may acquire those finished goods; provided that (A) the
aggregate net cash outlay made with respect to the acquisitions of
such finished goods shall not exceed $5,000,000, (B) neither
Borrower nor any Subsidiary, including any Subsidiary formed in
connection therewith, shall assume or incur any liability, express
or implied, of such distributor, other than those unsecured
liabilities (other than Indebtedness), if any, which directly
relate to the finished goods Inventory being repurchased, and (C)
Borrower shall within ten (10) days after the formation of that
Domestic Subsidiary cause it to comply with provisions of clause
(ii) above regarding newly formed Domestic Subsidiaries with assets
in excess of $25,000.
6.2 Investments, Loans and Advances. Borrower shall
not, and shall not cause or permit any Subsidiary to, directly or
indirectly, make any investment in, or make or accrue loans or
advances to any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except for the
following:
(A) So long as no Default or Event of Default shall
have occurred and be continuing or would result after giving effect
thereto, intercompany loans by Borrower to any Material Subsidiary
or by any Subsidiary to Borrower; provided that in the case of
intercompany loans to any such Subsidiary: (i) such loans shall be
made solely in the ordinary course of business for the working
capital needs of such Subsidiary or Capital Expenditures made or
committed to by such Subsidiary solely in the ordinary course of
its business; (ii) at the time such intercompany loans are to be
made, those intercompany loans together with cash on hand or on
deposit held by such Subsidiary shall not exceed the cash needs of
that Subsidiary for working capital and Capital Expenditures which
it is contractually obligated to pay during the period of ten (10)
consecutive days following any date of determination; and (iii)
such intercompany loans shall be reflected on the books and records
of Borrower and shall be summarized in the monthly financial
statements delivered to Agent in accordance herewith (collectively,
"Intercompany Loans").
(B) Investments in Subsidiaries permitted in accordance
with Section 6.1 hereof.
(C) Loans to employees permitted in accordance with
Section 6.4 hereof.
(D) Investments in Foreign Subsidiaries arising from
the contribution to capital of Intercompany Loans owing by such
Foreign Subsidiaries to the extent necessary (i) to comply with the
capitalization requirements of the laws of the jurisdictions in
which such Subsidiaries are incorporated and (ii) for tax planning
purposes; provided, that the amount of such Investments in Foreign
Subsidiaries made after the date hereof for tax planning purposes
shall not exceed $20,000,000 in the aggregate.
(E) Investments by Borrower in its Subsidiaries as in
existence on the Closing Date.
(F) So long as no Default or Event of Default shall
have occurred and be continuing, Borrower and its Subsidiaries may
invest in (i) short term obligations of, or fully guaranteed by,
the United States government; (ii) commercial paper rated A-1 or
better by Standard and Poors or P-1 or better by Moody's; or (iii)
certificates of deposit issued by or time deposits with commercial
banks having capital and surplus in excess of $100,000,000 and no
set off rights against Borrower or any Subsidiary (other than for
normal and customary service charges or returned checks), but, in
each case with respect to Domestic Subsidiaries, only to the extent
necessary (a) to invest funds overnight that are not swept from
Borrower's and its Domestic Subsidiaries' cash management systems
maintained in accordance with Schedule C, (b) to the extent
necessary to invest funds which are permitted to be maintained in
bank accounts under Section 6.20(ii) or 6.20(iii) (which funds may
only be invested in investments satisfying the requirements of
(iii) immediately above), or (c) to the extent necessary to invest
funds so long as the Revolving Credit Advances have been reduced to
zero.
(G) Joint ventures formed between Borrower or any
Subsidiary and any Person that is not an Affiliate of Borrower;
provided that (i) neither Borrower nor any Subsidiary shall
contribute or be obligated to contribute any cash or cash
equivalents or other assets other than non-exclusive licenses to
use Patents to that joint venture and (ii) neither Borrower nor any
Subsidiary shall guarantee or be liable in any manner for any debts
or liabilities of that joint venture.
(H) Advances by Borrower or any Domestic Subsidiary for
payment of Taxes for up to ten days prior to the due date of such
Taxes in an amount not exceeding $5,250,000 in the aggregate at any
time, to one or more providers of payroll tax payment services
("Service Company") selected by Borrower, and reasonably acceptable
to Agent (such acceptance subject to reasonable prior notice to
Agent of the identity of such Service Company) which Service
Company shall have established, in the reasonable credit judgment
of Borrower, through net worth, insurance, security bond or
otherwise, such Service Company's ability to fulfill the tax
obligation against which funds have been advanced.
6.3 Indebtedness. Borrower shall not and shall not
cause or permit any Subsidiary to, directly or indirectly create,
incur, assume or permit to exist any Indebtedness, except:
(A) The Obligations;
(B) Indebtedness outstanding on the date hereof as set
forth on Schedule 6.3 hereto;
(C) Indebtedness secured by Liens set forth on Schedule
6.7 or Permitted Encumbrances;
(D) Royalty Financing or other Indebtedness incurred in
accordance with Section 1.2(b) hereof;
(E) Intercompany Loans permitted in accordance with
Section 6.2 hereof;
(F) Surety bonds entered into, solely in the ordinary
course of Borrower's or such Subsidiary's business;
(G) Insurance premium financing incurred solely in the
ordinary course of Borrower's business consistent with past
practice;
(H) Subordinated indebtedness on terms and conditions
and subordinated in right of payment to the Obligations in a
manner, satisfactory to Agent in its sole discretion in all
respects;
(I) The Convertible Debentures;
(J) The Term Loan; and
(K) Other Indebtedness not to exceed $1,000,000 in the
aggregate.
6.4 Employee Loans and Transactions. Borrower shall
not and shall not cause or permit any Subsidiary to:
(i) make loans or advances to any employee or Affiliate
other than:
(A) Intercompany Loans permitted in accordance with
Section 6.2 hereof, or
(B) advances for travel and related expenses and
for relocation expenses (including any related tax reimbursements)
to Borrower's officers and employees and loans to employees in
Mexico, in each case solely in the ordinary course of business
consistent with past practice, and not to exceed $1,500,000 in the
aggregate for all such amounts outstanding at any time; or
(ii) enter into any transactions with any Affiliate
(excluding transactions between or among Borrower and the Guarantor
Subsidiaries or Borrower and its Subsidiaries in Mexico to the
extent such transactions are in the ordinary course of business in
accordance with past practices) except on an arms' length basis on
fair and reasonable terms no less favorable to Borrower or the
applicable Subsidiary than would be obtained in a transaction with
a Person that is not an Affiliate; or
(iii) except for that certain consulting agreement
dated as of July 1, 1994 between the Thomas Group, Inc. and
Borrower, as in effect on the Closing Date and a copy of which has
been delivered to Agent, enter into any management consulting,
advisory or similar agreement providing for compensation determined
by or as a percentage of Borrower's or such Subsidiary's operating
performance or income.
6.5 Capital Structure and Business. Neither Borrower
nor any Subsidiary of Borrower shall: (i) make any change in any
of its business objectives, purposes or operations, (ii) make any
change in its capital structure, including the issuance of any
shares of Stock, warrants or other securities convertible into
Stock, other than as set forth on Schedule 6.5 hereto or permitted
under Section 6.18, or any revision of the terms of its outstanding
Stock; or (iii) amend its certificate or articles of incorporation
or bylaws if such amendment would have an adverse effect upon (i)
the Collateral or Agent's security interest therein; (ii) the
ability of Borrower or any Guarantor to repay the Obligations; or
(iii) Borrower's or any Subsidiary's ability to comply with any
provision of any Loan Document. Neither Borrower nor any
Subsidiary of Borrower shall engage in any business other than the
business currently engaged in by it.
6.6 Guaranteed Indebtedness. Neither Borrower nor any
Subsidiary of Borrower shall incur any Guaranteed Indebtedness
except:
(A) by endorsement of instruments or items of payment
for deposit to the general account of Borrower; and
(B) for Guaranteed Indebtedness incurred for the benefit
of Borrower or such Subsidiary of Borrower if the primary
obligation constitutes Indebtedness permitted by this Agreement;
and
(C) for Guaranteed Indebtedness of Borrower or such
Subsidiary of Borrower under Currency Protection Agreements, but
only to the extent entered into solely in the ordinary course of
Borrower's or such Subsidiary's business, which, in any event,
shall not include any speculative or similar investment purpose;
and
(D) guaranties issued by Borrower for the benefit of
any Material Subsidiary solely in the ordinary course of business
consistent with past practice with respect to leases, workmen's
compensation, performance of contracts, trade payables or customs
bonds owing or incurred by such Material Subsidiary solely in the
ordinary course of business of such Material Subsidiary consistent
with past practices; provided that neither such guaranty nor the
underlying obligations so guaranteed constitute Indebtedness or are
secured by a Lien and, provided, further, that, so long as any
Default or Event of Default shall have occurred and be continuing,
Borrower shall not enter into any such guaranty without the prior
written consent of Agent.
6.7 Liens. Neither Borrower nor any Subsidiary of
Borrower shall create or permit to exist any Lien on any of its
properties or other assets, except (A) presently existing or
hereafter created Liens in favor of Agent, on behalf of itself and
Lenders, (B) Liens set forth on Schedule 6.7, (C) Permitted
Encumbrances and (D) Liens created or permitted to be created in
accordance with Section 1.2(b). In addition, neither Borrower nor
any Subsidiary of Borrower shall become a party to any agreement,
note, indenture or instrument, or take any other action, which
would prohibit the creation of a Lien on any of its properties or
other assets, including on any Excluded Asset, in favor of Agent,
on behalf of itself and Lenders, as additional collateral for the
Obligations.
6.8 Sale of Assets. Neither Borrower nor any
Subsidiary of Borrower shall sell, transfer, convey, assign or
otherwise dispose of any of its properties or other assets
(including, without limitation, the capital stock of any
Subsidiary, any of its Accounts or any of the other Collateral),
other than:
(A) sales of Inventory in the ordinary course of
business;
(B) sales, transfers, conveyances, assignments or other
dispositions of Material Assets permitted in accordance with
Section 1.2(b); and
(C) sales of equipment or fixtures to Persons that are
not Affiliates of Borrower or any Subsidiary which are obsolete or
not used or usable in the ordinary course of Borrower's or the
applicable Subsidiaries' business, provided, that the fair value of
such assets sold shall not exceed $5,000,000 in the aggregate
during any Fiscal Year; the net cash proceeds thereof shall be
applied to the outstanding Revolving Credit Advances; and, unless
Agent and Requisite Lenders shall otherwise consent in writing,
which consent shall not be unreasonably withheld, such assets shall
not constitute Material Assets listed on Schedule 1.2(b) hereto.
6.9 Events of Default. Neither Borrower nor any
Subsidiary of Borrower shall take any action or omit to take any
action, which act or omission would constitute (a) a Default or an
Event of Default under, or noncompliance with any of, the terms of
this Agreement or any of the other Loan Documents or (b) a default
or an event of default pursuant to, or noncompliance with, any
other contract, lease, mortgage, deed of trust, instrument or
agreement to which it is a party or by which it or any of its
properties is bound which would have a Material Adverse Effect.
6.10 ERISA. Neither Borrower or any Subsidiary of
Borrower nor any ERISA Affiliate shall without Agent's prior
written consent acquire any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either
an "accumulated funding deficiency," as defined in Section 302 of
ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(e)(iii) of ERISA, in the case of any Plan other than a
Multiemployer Plan, and in Section 4211 of ERISA, in the case of a
Multiemployer Plan. Additionally, neither Borrower or any
Subsidiary of Borrower nor any ERISA Affiliate shall, without
Agent's prior written consent, terminate any Pension Plan that is
subject to Title IV of ERISA where such termination could
reasonably be anticipated to result in material liability to
Borrower or any Subsidiary of Borrower; permit any accumulated
funding deficiency, as defined in Section 302(a)(2) of ERISA, to be
incurred with respect to any Pension Plan; fail to make any
contributions or fail to pay any amounts due and owing as required
by the terms of any Plan before such contributions or amounts
become delinquent; make a complete or partial withdrawal (within
the meaning of Section 4201 of ERISA) from any Multiemployer Plan;
or at any time fail to provide Agent with copies of any Plan
documents or governmental reports or filings which may be requested
by Agent.
6.11 Financial Covenants. Borrower shall not breach or
fail to comply with any of the Financial Covenants (the "Financial
Covenants") set forth on Schedule 6.11.
6.12 Hazardous Materials. Except as set forth in the
Disclosure Letter, neither Borrower nor any Subsidiary of Borrower
shall, and neither Borrower nor any Subsidiary of Borrower shall
permit any other Person within its control to, cause or permit a
Release or the presence, use, generation, manufacture,
installation, Release, discharge, storage or disposal of any
Hazardous Materials on, under, in, above or about any of its real
estate or the transportation of any Hazardous Materials to or from
any real estate where such Release or such presence, use,
generation, manufacture, installation, Release, discharge, storage
or disposal would violate, or form the basis for liability under,
any Environmental Laws. If an Event of Default shall have occurred
and be continuing, Borrower, at its own expense, shall cause the
performance of such environmental audits and preparation of such
environmental reports as Agent may from time to time request as to
any location at which Collateral is then located, by reputable
environmental consulting firms acceptable to Agent, and in form and
substance acceptable to Agent.
6.13 Sale-Leasebacks. Neither Borrower nor any
Subsidiary of Borrower shall engage in any sale-leaseback or
similar transaction involving any of its assets, except (A) sale-
leaseback transactions with respect to Material Assets permitted in
accordance with Section 1.2(b) hereof and (B) so long as no Default
or Event of Default shall have occurred and be continuing, sale-
leaseback transactions of equipment or real estate not constituting
Material Assets; provided that (i) such sale-leaseback transactions
shall be subject to the terms governing sale-leaseback transactions
set forth in Section 1.2(b) hereof and (ii) the aggregate
capitalized liability outstanding with respect to such sale lease-
back transactions shall not exceed $5,000,000 in the aggregate at
any time.
6.14 Cancellation of Indebtedness. Neither Borrower
nor any Subsidiary of Borrower shall cancel any claim or debt owing
to it, except for (A) reasonable consideration negotiated on an
arms length basis and in the ordinary course of its business
consistent with past practices and (B) cancellation of Intercompany
Loans permitted to be cancelled in accordance with Section 6.2
hereof.
6.15 Restricted Payments. Neither Borrower nor any
Subsidiary of Borrower shall make any Restricted Payment except for
the payment of dividends or other distributions by a Subsidiary of
Borrower directly to Borrower; provided, however, that so long as
no Default or Event of Default shall have occurred and be
continuing, or would result after giving effect to the payment
thereof, Borrower may pay cash dividends with respect to preferred
stock permitted to be issued by it in accordance with Section 6.18
hereof, if at all; provided, that the amount of cash dividends paid
in respect of such preferred stock as of any date of determination
shall not exceed forty percent (40%) of the cumulative, positive
Net Income (net of all losses) earned by Borrower and its
Subsidiaries, on a consolidated basis, during the period from April
4, 1993 through such date of determination, less the aggregate
amount of such cash dividends previously paid by Borrower during
such period.
6.16 Fiscal Year. Neither Borrower nor any Subsidiary
of Borrower shall change its Fiscal Year, except that Borrower and
its Subsidiaries may change their Fiscal Year to that date of each
year or the next succeeding year which is the Saturday closest to
December 31st of each year.
6.17 Change of Corporate Name. Neither Borrower nor
any Guarantor Subsidiary shall change its corporate name, except
that a Guarantor Subsidiary may change its name so long as no
Default or Event of Default shall have occurred and be continuing;
provided that at least thirty (30) days prior to such name change,
the Guarantor Subsidiary shall have given written notice thereof to
Agent and shall have delivered to Agent executed UCC-1s and such
other documents and filings as shall be necessary or desirable to
enable Agent to maintain its first priority security interest and
otherwise protect its security interest in the Collateral.
6.18 Sale of Stock. Neither Borrower nor any
Subsidiary of Borrower shall sell (whether in a public or private
offering or otherwise) any of its Stock, other than a sale of
common stock of Borrower solely for cash, and except for preferred
stock or convertible preferred stock on terms and conditions
satisfactory to Agent in its sole discretion.
6.19 Bank Accounts. Borrower shall not, and shall not
cause or permit any Subsidiary of Borrower to establish or maintain
any checking, depository, lock box or similar account other than
those accounts set forth on Schedule 3.21, accounts maintained by
Borrower's Foreign Subsidiaries outside the United States, and
those accounts, if any, in the United States which at all times
contain less than $50,000 per account and less than $250,000 for
all such accounts in the aggregate (without taking into account in
the calculation thereof amounts which are deposited into the cash
management system established and maintained in accordance with
Schedule C); provided that so long as no Default or Event of
Default shall have occurred and be continuing, (A) Borrower or any
Subsidiary may, upon at least fifteen (15) days' prior written
notice to Agent, establish additional disbursement or payroll
accounts; and (B) Borrower or any Subsidiary may, upon at least
thirty (30) days' prior written notice to the Agent, establish
additional depository or lock box accounts at banks acceptable to
Agent; provided, that, all such depository and lock box accounts
are subject to tri-party blocked account and/or lock box agreements
in form and substance satisfactory to Agent, in its sole
discretion, and such accounts are part of Borrower's cash
management systems established and maintained in accordance with
Schedule C.
6.20 Cash Management. Borrower shall not, and shall not
cause or permit any Subsidiary to accumulate or maintain cash (i)
in disbursement or payroll accounts as of any date of determination
in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements;
(ii) in the case of all bank accounts of Borrower or any Subsidiary
(other than those accounts, if any, in the United States which at
all times contain less than $50,000 per account and less than
$250,000 for all such accounts in the aggregate (without taking
into account in the calculation thereof amounts which are deposited
into the cash management system established and maintained in
accordance with Schedule C)), in excess of the cash needs of
Borrower or that Subsidiary for working capital and Capital
Expenditures which it is contractually obligated to pay solely in
the ordinary course of Borrower's or that Subsidiary's business
during the period of ten (10) consecutive days following any date
of determination; (iii) in the case of Zenith Video Tech
Corporation-Florida, in the minimum amount necessary to comply with
applicable laws, rules and regulations of the State of Florida; or
(iv) other than with respect to Zenith Electronics (Ireland)
Limited which shall not exceed $135,000 in the aggregate.
6.21 Non-Material Subsidiaries. Borrower shall not
cause or permit any Domestic Non-Guarantor Subsidiary or any other
Non-Material Subsidiary to own or hold any assets or assume or
incur any liabilities, other than (i) assets or liabilities
consisting solely of intercompany balances and/or intercompany
allocation of tax assets or liabilities, (ii) the Pennsylvania
Liabilities, (iii) the Ireland Assets or Liabilities, (iv) trade
payables incurred in the ordinary course of business consistent
with past practices by Interocean Advertising Corporation of
California and Interocean Advertising Corporation of Illinois, and
(v) with respect to Non-Material Subsidiaries other than Zenith
Electronics Corporation of Pennsylvania and Zenith Electronics
(Ireland) Limited, other assets which do not exceed $50,000 in
value in the aggregate as to each such Subsidiary of Borrower.
Borrower shall not cause or permit any Domestic Non-Guarantor
Subsidiary or any other Non-Material Subsidiary to engage in any
trade or business, except that those Domestic Non-Guarantor
Subsidiaries acting as domestic advertising agencies as of the
Closing Date may continue to do so.
6.22 Foreign Subsidiaries. Borrower shall not cause or
permit any Foreign Subsidiary to (i) sell Inventory to any Account
Debtor located in the United States and agrees that all such sales
to domestic Account Debtors shall be by Borrower or a Guarantor
Subsidiary or (ii) accumulate or maintain more than three (3) days'
supply of finished goods Inventory, other than (a) Partes de
Television de Reynosa, S.A. de C.V. and Productos de Magneticos de
Chihuahua, S.A. de C.V., which may maintain a supply of finished
goods Inventory in the ordinary course of business consistent with
past practices for sale to customers in Mexico and which, in
addition, may maintain a supply of finished goods Inventory in the
ordinary course of business for sale to customers located in
Central America and South America and (b) Zenith Radio Canada,
Ltd./Zenith Radio Canada Ltee., which may maintain a supply of not
more than $6,000,000 of finished goods Inventory in the ordinary
course of business consistent with past practices for sale to
customers in Canada.
Borrower shall cause Zenith Electronics Corporation of
Texas or Zenith Electronics Corporation of Arizona to maintain
ownership of and title to substantially all of the equipment used
by and substantially all of the Inventory processed or assembled by
the Foreign Subsidiaries located in Mexico; provided, however, that
Partes de Television de Reynosa, S.A. de C.V. and Productos de
Magneticos de Chihuahua, S.A. de C.V., may maintain a supply of
finished goods Inventory in the ordinary course of business
consistent with past practices for sale to customers in Mexico.
6.23 No Impairment of Upstreaming. Except in connection
with any current asset financing by a Foreign Subsidiary permitted
by and made in accordance with Section 1.2(b), Borrower shall not,
and shall not cause or permit any Subsidiary to, directly or
indirectly, enter into or become bound by any agreement,
instrument, indenture or other obligation which could directly or
indirectly restrict, prohibit or require the consent of any Person
with respect to the payment of dividends or distributions or the
making of Intercompany Loans by any Subsidiary to Borrower.
6.24 Amendment of Other Debt. Borrower shall not amend,
modify or permit to be amended or modified any of the documents
evidencing or governing the Subordinated Debt, the Convertible
Debentures, or any other Indebtedness if the documents evidencing
or governing the same were subject to the approval of Agent prior
to the execution thereof in accordance with this Agreement or any
other Loan Document.
6.25 Prepayments of Other Debt. Borrower shall not, and
shall not cause or permit any Subsidiary to, directly or
indirectly, prepay, repurchase, redeem, retire or otherwise prepay
the Subordinated Debt or the Convertible Debentures except (a) that
Borrower may cause the Subordinated Debt or the Convertible
Debentures to be converted into common stock of Borrower or, on
terms satisfactory to Agent in its sole discretion, into preferred
stock or subordinated debt of Borrower and (b) in the case of the
Subordinated Debt, as permitted pursuant to Section 1.5(iv) hereof.
7. TERM
7.1 Termination. Subject to the terms hereof, the
financing arrangement contemplated hereby shall be in effect until
the Commitment Termination Date; provided, however, that in the
event of a prepayment of any part of the Obligations, other than a
prepayment made in compliance with Section 1.2(b) in connection
with a Material Asset Disposition or from the proceeds of
Indebtedness permitted under Section 6.3(D), (H), (I), (J) or (K),
prior to the Commitment Termination Date with funds borrowed from
any Person other than Lenders pursuant to this Agreement, Borrower
shall simultaneously therewith pay to Agent, on behalf of Lenders,
in full, in immediately available funds all then current and
liquidated Obligations arising under this Agreement or any of the
other Loan Documents and provide for payment of all other
Obligations, including the provision of cash collateral for all
Letter of Credit Obligations, in a manner satisfactory to Agent.
7.2 Survival of Obligations Upon Termination of
Financing Arrangement. Except as otherwise expressly provided for
in this Agreement or the other Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair
the obligations, duties and liabilities of Borrower or the rights
of Agent and Lenders relating to any unpaid Obligation, due or not
due, liquidated, contingent or unliquidated, or any transaction or
event occurring prior to such termination, or any transaction or
event the performance of which is not required until after the
Commitment Termination Date. Except as otherwise expressly
provided herein or in any other Loan Document, all undertakings,
agreements, covenants, warranties and representations of or binding
upon Borrower or any Subsidiary of Borrower, and all rights of
Agent and Lenders, all as contained in this Agreement or any of the
other Loan Documents shall not terminate or expire, but rather
shall survive such termination or cancellation and shall continue
in full force and effect until such time as all of the Obligations
have been indefeasibly paid in full or performed in accordance with
the terms of the agreements creating such Obligations.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or
more of the following events (regardless of the reason therefor)
shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to make any payment in respect
of any Obligation hereunder or under any of the other Loan
Documents when due and payable or declared due and payable,
including any payment of principal of, interest on or Fees with
respect to the Revolving Credit Loan or any payment of Fees with
respect to the Letter of Credit Obligations.
(b) Borrower or any Subsidiary of Borrower shall fail
or neglect to perform, keep or observe any of the provisions of
Section 1.11, Section 5.5(a), Section 5.12, or any of Sections 6.1
through 6.25, inclusive, including any of the provisions set forth
on Schedule C or Schedule 6.11.
(c) Borrower or any Subsidiary of Borrower shall fail
or neglect to perform, keep or observe any term or provision of
this Agreement (other than any such term or provision referred to
in paragraph (a) or (b) above) or any of the other Loan Documents,
and the same shall remain unremedied for a period ending thirty
(30) days after Borrower shall become aware thereof.
(d) A default shall occur and be continuing under any
other agreement, document or instrument to which Borrower or any
Subsidiary of Borrower is a party or by which Borrower or any
Subsidiary of Borrower or any of Borrower's or any Subsidiary of
Borrower's properties or other assets is bound and such default (i)
involves an event of default under the Term Loan Agreement, (ii)
involves any default or event of default under the Subordinated
Debt or Convertible Debentures, or (iii) causes, or permits any
holder of such Indebtedness or any trustee to cause, such
Indebtedness or a portion thereof in an amount exceeding $5,000,000
for all such Indebtedness in the aggregate, to become due prior to
its stated maturity or prior to its regularly scheduled dates of
payment.
(e) Any representation or warranty herein or in any
other Loan Document or in any written statement pursuant hereto or
thereto, any report, financial statement or certificate made or
delivered to Agent or any Lender by Borrower or any Subsidiary of
Borrower shall be untrue or incorrect in any material respect, as
of the date when made or deemed made (including any of those made
or deemed made pursuant to Section 2.2).
(f) Any of the assets of Borrower or any Material
Subsidiary of Borrower (including any Collateral) shall be
attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of Borrower or
any Material Subsidiary of Borrower and shall remain unstayed or
undismissed for forty (40) consecutive days; or any Person other
than Borrower shall apply for the appointment of a receiver,
trustee or custodian for any of Borrower's or any of its Material
Subsidiaries' assets and shall remain unstayed or undismissed for
forty (40) consecutive days; or Borrower or any Material Subsidiary
of Borrower shall have concealed, removed or permitted to be
concealed or removed, any part of its properties or other assets
with intent to hinder, delay or defraud its creditors or any of
them or made or suffered a transfer of any of its properties, or
obligation, which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced
against Borrower or any Material Subsidiary of Borrower in a court
having competent jurisdiction seeking a decree or order (i) under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of Borrower or any Material Subsidiary of Borrower or of
any substantial part of Borrower's or any Material Subsidiary of
Borrower's properties, or other assets, or (iii) ordering the
winding up or liquidation of the affairs of Borrower or any
Material Subsidiary of Borrower and such case or proceeding shall
remain undismissed or unstayed for forty (40) consecutive days or
such court shall enter a decree or order granting the relief sought
in such case or proceeding.
(h) Borrower or any Material Subsidiary of Borrower
shall (i) file a petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other
similar law, (ii) make an assignment for the benefit of creditors,
(iii) consent to the institution of proceedings thereunder or to
the filing of any such petition or to the appointment of or taking
of possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Borrower or any
Material Subsidiary of Borrower or of any substantial part of
Borrower's or any of its Material Subsidiaries' properties or other
assets, (iv) fail generally to pay its debts as such debts become
due, or (v) take any corporate action in furtherance of any such
action.
(i) A final judgment or judgments (after the expiration
of all times to appeal therefrom) for the payment of money in
excess of $5,000,000 in the aggregate during any Fiscal Year shall
be rendered against Borrower or any Subsidiary of Borrower unless
the same shall be (i) fully covered by insurance in accordance with
Section 5.5 and the insurer shall have accepted liability therefor
in writing or (ii) vacated, stayed, bonded, paid or discharged
within a period of fifteen (15) days from the date of such
judgment.
(j) Any other event shall have occurred which has a
Material Adverse Effect.
(k) Any provision of any Collateral Document, after
delivery thereof pursuant to Section 2.1, shall for any reason
cease to be valid, binding and enforceable in accordance with its
terms, or any security interest created under any Collateral
Document shall cease to be a valid and perfected security interest
or Lien having the first priority as to all of the Collateral
purported to be covered thereby, subject only to Liens permitted in
accordance with the terms of the Security Agreement.
(l) There shall be any Change in Control of Borrower.
8.2 Remedies. If any Default or Event of Default shall
have occurred and be continuing, Agent may, without notice, and, at
the request of the Requisite Lenders, shall, take any one or more
of the following actions: (a) increase the rate of interest
applicable to the Revolving Credit Loan to the Default Rate, as
provided in Section 1.7(i), or (b) terminate this facility with
respect to further Revolving Credit Advances and Letter of Credit
Obligations, whereupon any further Revolving Credit Advances or
Letter of Credit Obligations shall be made or incurred in Lenders'
sole discretion. If any Event of Default shall have occurred and
be continuing, Agent may, without notice, and, at the request of
the Requisite Lenders, shall, (i) declare all or any portion of the
Obligations to be forthwith due and payable, including contingent
liabilities with respect to Letter of Credit Obligations, whereupon
such Obligations shall become and be due and payable, without
presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrower, and (ii) exercise any
rights and remedies provided to Agent under this Agreement and the
other Loan Documents and/or at law or equity, including all
remedies provided under the Code; provided, however, that upon the
occurrence of an Event of Default specified in Section 8.1(f), (g)
or (h), all Obligations shall automatically become immediately due
and payable without any declaration, notice or demand by Agent.
Upon the occurrence of any Event of Default, at Agent's request,
Borrower shall deposit with Agent cash collateral in the amount of
all then existing Letter of Credit Obligations.
8.3 Waivers by Borrower. Except as otherwise provided
for in this Agreement, Borrower waives: (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of
any or all Loan Documents, Amended Revolving Credit Notes,
commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Agent
or any Lender on which Borrower may in any way be liable, and
hereby ratifies and confirms whatever Agent may do in this regard
on behalf of Lenders, (ii) all rights to notice and a hearing prior
to Agent's taking possession or control of, or to Agent's replevy,
attachment or levy upon, the Collateral or any bond or security
which might be required by any court prior to allowing Agent to
exercise any of its or any Lender's remedies, and (iii) the benefit
of all valuation, appraisal and exemption laws. Borrower
acknowledges that it has been advised by counsel of its choice with
respect to this Agreement, the other Loan Documents and the
transactions evidenced by this Agreement and the other Loan
Documents and has knowingly entered into this Agreement and each of
the other Loan Documents.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations. GE Capital may
assign its rights and delegate its obligations as a Lender under
this Agreement and, further, may assign, or sell participations in,
all or any part of its Revolving Credit Advances, its Letter of
Credit Obligations, its Commitments or any other interest herein or
in its Amended Revolving Credit Note to an Affiliate or to any
another Person.
Unless Agent shall have otherwise agreed in writing, no
other Lender shall assign any of its rights or delegate any of its
obligations under this Agreement or any of the other Loan Documents
or assign, or sell any participation in, all or any part of its
Revolving Credit Advances, its Letter of Credit Obligations, its
Commitments or any other interest herein or in its Amended
Revolving Credit Note to any Affiliate or other Person.
In the case of an assignment by GE Capital under this
Section 9.1, (or in the event, if any, that Agent shall so agree in
writing, an assignment by another Lender), the assignee shall have,
to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. The
assigning Lender shall be relieved of its obligations hereunder
with respect to its Commitment or assigned portion thereof.
Borrower hereby acknowledges and agrees that any assignment will
give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender." In all
instances, each Lender's liability to make Revolving Credit
Advances or incur Letter of Credit Obligations hereunder shall be
several and not joint and shall be limited to such Lender's Pro
Rata Share.
GE Capital may (or, in the event, if any, that Agent
shall so agree in writing, another Lender may) sell participations
in all or any part of any Revolving Credit Advances made, or any
Letter of Credit Obligations incurred, by it as a Lender to an
Affiliate or any other Person; provided that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not
sold such participation and the holder of any such participation
shall not be entitled to require such Lender to take or omit to
take any action hereunder except action directly affecting (a) any
reduction in the principal amount, interest rate or fees payable
with respect to any Revolving Credit Advances in which such holder
participates; (b) any extension of the final scheduled maturity
date of the principal amount of the Revolving Credit Advances in
which such holder participates; and (c) any release of any
Collateral with a value in excess of $2,500,000 in the aggregate
(other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents). Borrower hereby
acknowledges and agrees that any participation will give rise to a
direct obligation of Borrower to the participant and the
participant shall for purposes of Sections 1.15, 1.17 and 9.3 be
considered to be a "Lender."
Unless Agent shall have otherwise agreed in writing, no
Lender, other than GE Capital, shall sell any participation in all
or any part of any Revolving Credit Advances made, or any Letter of
Credit Obligations incurred, by it to any Affiliate or other
Person.
Except as otherwise provided in this Section 9.1 no
Lender shall, as between Borrower and that Lender, be relieved of
any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Revolving Credit Advances,
the Amended Revolving Credit Notes or other Obligations owed to
such Lender. Any Lender permitted to sell assignments and
participations under this Section 9.1 may furnish any information
concerning Borrower and its Subsidiaries in the possession of that
Lender from time to time to assignees and participants (including
prospective assignees and participants).
Borrower shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 in whatever
manner necessary in order to enable or effect any such assignment
or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall
be requested and the preparation of informational materials for,
and the participation of relevant management in meetings with,
potential assignees or participants. Borrower shall certify the
correctness, completeness and accuracy of all descriptions of
Borrower and its affairs contained in any selling materials and all
information provided by it and included in such materials. No
information provided to potential co-Lenders or participants shall
be provided unless and until such potential co-Lenders or
participants have signed a confidentiality agreement substantially
in the form provided to Borrower and used by Agent prior to the
Closing Date (as defined in the Prior Credit Agreement).
9.2 Appointment of Agent. GE Capital is hereby
appointed Agent hereunder to act on behalf of all Lenders as Agent
under this Agreement and the other Loan Documents. The provisions
of this Section 9.2 are solely for the benefit of Agent and Lenders
and neither Borrower or any Subsidiary of Borrower nor any other
Person shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties
under this Agreement and the other Loan Documents, Agent shall act
solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower, any Subsidiary of Borrower or
any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to
have, by reason of this Agreement, any other Loan Document or
otherwise a fiduciary relationship in respect of any Lender.
Neither Agent nor any of its officers, directors, employees, agents
or representatives shall be liable to any Lender for any action
taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, unless
caused by its or their own gross negligence or willful misconduct
as finally determined by a court of competent jurisdiction after
all possible appeals have been exhausted.
The agency hereby created shall in no way impose any of
the rights and powers of, or impose any duties or obligations upon,
Agent in its individual capacity as a Lender hereunder. Agent
shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder. Agent may resign
at any time by giving thirty (30) days prior written notice thereof
to Lenders and Borrower. Upon any such resignation, Requisite
Lenders shall have the right, upon five (5) days notice to
Borrower, to appoint a successor Agent. Upon acceptance of
appointment, the successor Agent shall succeed to and become vested
with all rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from all of its
duties and obligations under this Agreement and the other Loan
Documents.
If Agent shall request instructions from Requisite
Lenders with respect to any act or action (including failure to
act) in connection with this Agreement or any other Loan Document,
then Agent shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions
from Requisite Lenders; and Agent shall not incur liability to any
Person by reason of so refraining. Agent shall be fully justified
in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of
Agent, be contrary to law or the terms of this Agreement or any
other Loan Document or (b) if Agent shall not first be indemnified
to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any
such action. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders.
9.3 Set Off and Sharing of Payments. In addition to
any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and
during the continuance of any Event of Default, each Lender and
each holder of any Amended Revolving Credit Note is hereby
authorized at any time or from time to time, without notice to
Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account
of Borrower or any Guarantor Subsidiary (regardless of whether such
balances are then due to Borrower or such Guarantor Subsidiary) and
any other properties or assets any time held or owing by that
Lender or that holder to or for the credit or for the account of
Borrower or any Guarantor Subsidiary against and on account of any
of the Obligations which are not paid when due. Any Lender or
holder of any Amended Revolving Credit Note having a right to set
off shall, to the extent the amount of any such set off exceeds its
Pro Rata Share of the Obligations, purchase for cash (and the other
Lenders or holders shall sell) such participations in each such
other Lender's or holder's Pro Rata Share of the Obligations as
would be necessary to cause such Lender to share such excess with
each other Lender or holder in accordance with their respective Pro
Rata Shares. Borrower agrees, to the fullest extent permitted by
law, that (a) any Lender or holder may exercise its right to set
off with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such excess to other
Lenders and holders and (b) any Lender or holders so purchasing a
participation in the Revolving Credit Advances made or other
Obligations held by other Lenders or holders may exercise all
rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or
holder were a direct holder of Revolving Credit Advances and other
Obligations in the amount of such participation.
9.4 Disbursement of Funds. Agent may, on behalf of
Lenders, disburse funds to Borrower for Revolving Credit Advances
requested. Each Lender shall reimburse Agent on demand for all
funds disbursed on its behalf by Agent, or if Agent so requests,
each Lender will remit to Agent its Pro Rata Share of any Revolving
Credit Advance before Agent disburses same to Borrower. If any
Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent's demand, Agent shall promptly notify Borrower and Borrower
shall immediately repay such amount to Agent. Nothing in this
Section 9.4 or elsewhere in this Agreement or the other Loan
Documents shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation
to fulfill its Commitments hereunder or to prejudice any rights
that Borrower may have against any Lender as a result of any
default by such Lender hereunder.
9.5 Disbursements of Advances, Payments and
Information.
(A) Revolving Credit Advances and Payments; Fee
Payments.
(1) The Revolving Credit Loan balance may fluctuate
from day to day through Agent's disbursement of funds to, and
receipt of funds from, Borrower. In order to minimize the
frequency of transfers of funds between Agent and each Lender,
Revolving Credit Advances and payments in respect thereof will be
settled according to the procedures described in Sections 9.5(A)(2)
and 9.5(A)(3) below. Notwithstanding these procedures, each
Lender's obligation to fund its portion of any advances made by
Agent to Borrower will commence on the date such advances are made
by Agent. Such payments will be made by each Lender without set-
off, counterclaim or reduction of any kind.
(2) On the second Business Day of each week, or more
frequently (including daily) if Agent so elects (each such day
being a "Settlement Date"), Agent will advise each Lender by
telephone, telex or telecopy of the amount of such Lender's Pro
Rata Share of the Revolving Credit Loan balance as of the close of
business on the second Business Day immediately preceding the
Settlement Date. In the event that payments are necessary to
adjust the amount of such Lender's portion of the Revolving Credit
Loan to such Lender's Pro Rata Share of the Revolving Credit Loan
as of any Settlement Date, the party from which such payment is due
will pay the other, in same day funds, by wire transfer to the
other's account not later than 1:00 p.m. New York time on the first
Business Day following the Settlement Date. Notwithstanding the
foregoing, if Agent so elects, Agent may require that each Lender
make its Pro Rata Share of any requested Revolving Credit Advance
available to Agent for disbursement prior to the funding of such
Revolving Credit Advance. If Agent elects to require that such
funds be so made available, Agent shall advise each Lender by
telephone, telex or telecopy of the amount of such Lender's Pro
Rata Share of the requested Revolving Credit Advance no later than
12:30 p.m. New York time on the date of funding thereof, and each
such Lender shall pay Agent such Lender's Pro Rata Share of such
requested Revolving Credit Advance, in same day funds, by wire
transfer to the Agent's account not later than 2:00 p.m. New York
time on the date of funding such Revolving Credit Advance.
(3) For purposes of this Section 9.5(A)(3), the
following terms and conditions will have the following meanings:
(a) "Daily Loan Balance" means an amount calculated as
of the end of each calendar day by subtracting (i)
the cumulative principal amount paid by Agent to a
Lender with respect to the Revolving Credit Loan
from the Closing Date through and including such
calendar day, from (ii) the cumulative principal
amount of the Revolving Credit Loan advanced by
such Lender to Agent from the Closing Date through
and including such calendar day.
(b) "Daily Interest Rate" means an amount calculated by
dividing the Stated Rate payable to a Lender on the
Revolving Credit Loan (as set forth in Section 1.7)
as of each calendar day by three hundred sixty
(360) days.
(c) "Daily Interest Amount" means an amount calculated
by multiplying the Daily Loan Balance of the
Revolving Credit Loan by the associated Daily
Interest Rate on the Revolving Credit Loan.
(d) "Interest Ratio" means a number calculated by
dividing the total amount of interest on the
Revolving Credit Loan received by Agent during the
immediately preceding month by the total amount of
interest on the Revolving Credit Loan due from
Borrower during the immediately preceding month.
On the first Business Day of each calendar month (an "Interest
Settlement Date"), Agent will advise each Lender by telephone,
telex or telecopy of the amount of such Lender's Pro Rata Share of
interest paid and Fees paid under Section 1.10(b) on the Revolving
Credit Loan and Fees paid pursuant to Schedule B in respect of
Letter of Credit Obligations as of the end of the last day of the
immediately preceding month. Provided that such Lender has made
all payments required to be made by it under this Agreement and the
other Loan Documents, Agent will pay to such Lender, by wire
transfer to such Lender's account (as specified by such Lender on
Schedule 9.5(a)(3) or the applicable Lender Addition Agreement, as
amended by such Lender from time to time after the date hereof
pursuant to the notice provisions contained herein or in the
applicable Lender Addition Agreement) not later than 12:00 p.m.
(New York time) on the next Business Day following the Interest
Settlement Date, such Lender's Pro Rata Share of interest paid and
Fees paid under Section 1.10(b) on the Revolving Credit Loan and
Fees paid pursuant to Schedule B in respect of Letter of Credit
Obligations. Such Lender's Pro Rata Share of interest on the
Revolving Credit Loan will be calculated by adding together the
Daily Interest Amounts for each calendar day of the prior month for
the Revolving Credit Loan and multiplying the total thereof by the
Interest Ratio for the Revolving Credit Loan.
(B) Availability of Lender's Pro Rata Share.
(1) Agent may assume that each Lender will make its Pro
Rata Share of each Revolving Credit Advance available to Agent on
the first Business Day following the next Settlement Date. If such
Pro Rata Share is not, in fact, paid to Agent by such Lender when
due, Agent will be entitled to recover such amount on demand from
such Lender without set-off, counterclaim or deduction of any kind.
(2) Nothing contained in this Section 9.6(B) will be
deemed to relieve any Lender of its obligation to fulfill its
Commitments or to prejudice any rights Agent or Borrower may have
against any Lender as a result of any default by such Lender under
this Agreement.
(3) Without limiting the generality of the foregoing,
each Lender shall be obligated to fund its Pro Rata Share of any
Revolving Credit Advance made after any acceleration of the
Obligations with respect to any Letter of Credit Obligations.
(C) Return of Payments.
(1) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related
payment is not received by Agent, then Agent will be entitled to
recover such amount from such Lender on demand without set-off,
counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to
Borrower or paid to any other Person pursuant to any insolvency law
or otherwise, then, notwithstanding any other term or condition of
this Agreement or any other Loan Document, Agent will not be
required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together
with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim or
deduction of any kind.
(D) Dissemination of Information.
Agent will use reasonable efforts to provide Lenders
with any information received by Agent from Borrower which is
required to be provided to Lenders hereunder, with any notice of
Default or Event of Default received by Agent from Borrower, with
any notice of Default or Event of Default delivered by Agent to
Borrower, with notice of any Default or Event of Default of which
Agent has become aware and with notice of any action taken by Agent
following any Default or Event of Default; provided, however, that
Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable to Agent's
gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction after all possible appeals have
been exhausted.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the
other Loan Documents shall be binding on and shall inure to the
benefit of Borrower, the Domestic Subsidiaries, Agent, Lenders and
their respective successors and assigns, except as otherwise
provided herein or therein. Neither Borrower nor any Domestic
Subsidiary shall assign, transfer, hypothecate or otherwise convey
any of its rights, benefits, obligations or duties hereunder or
under any of the other Loan Documents to any Person without the
prior express written consent of Agent and Requisite Lenders. Any
such purported assignment, transfer, hypothecation or other
conveyance by Borrower or any Domestic Subsidiary without the prior
express written consent of Agent shall be void. The terms and
provisions of this Agreement are for the purpose of defining the
relative rights and obligations of Borrower, the Domestic
Subsidiaries, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries
of any of the terms or provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement.
This Agreement and the other Loan Documents constitute the complete
agreement between the parties with respect to the subject matter
thereof and may not be modified, altered or amended except as set
forth in Section 11.2 below. Any letter of interest or commitment
letter between Borrower and GE Capital or any of its affiliates, or
between Borrower and BNYCC, predating this Agreement and relating
to a financing of substantially similar form, purpose or effect
shall be superseded by this Agreement.
11.2 Amendments and Waivers. (a) Except as otherwise
provided herein, no amendment, modification, termination or waiver
of any provision of this Agreement or any of the Amended Revolving
Credit Notes, or consent to any departure by Borrower or any
Subsidiary of Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by Requisite Lenders
and Borrower.
(b) In furtherance of and without limiting the
foregoing, no amendment, modification, termination or waiver of or
consent with respect to any provision of this Agreement which (i)
increases the percentage advance rates set forth in the definition
of Borrowing Base or (ii) makes less restrictive the non-
discretionary criteria for exclusion from Eligible Accounts and
Eligible Inventory set forth in Schedule 1.8 and Schedule 1.9A
hereto shall be effective unless the same shall be in writing and
signed by Requisite Lenders and Borrower; provided however, that
Agent, in its discretion, may (but shall have no obligation to) on
behalf and for the account of Lenders, regardless of whether the
conditions precedent set forth in Section 2.2 have been satisfied,
make Revolving Credit Advances in amounts which exceed the amounts
permitted to be advanced pursuant to Section 1.1(a) (such excess
being referred to as an "Overadvance"); provided further, that (u)
the aggregate amount of Over Advances outstanding shall not exceed
the lesser of $5,000,000 and 10% of Eligible Inventory at any time;
(v) such Over Advances shall not be outstanding for more than
thirty (30) consecutive days; (w) no such Over Advance shall cause
the Revolving Credit Loan to exceed the lesser of (1) the Maximum
Revolving Credit Loan minus the Letter of Credit Obligations and
(2) $150,000,000 minus the sum of the Letter of Credit Obligations
and the principal balance of the Term Loan; (x) no more than two
(2) such Over Advances shall be made during any Fiscal Year; (y)
any such Over Advance shall be made only during the period of June
1st through October 31st of each Fiscal Year; and (z) nothing
contained herein shall create any duty on the part of any Lender to
Borrower (as opposed to a duty to Agent) to make any Over Advance.
(c) Notwithstanding the foregoing, except to the extent
permitted by any applicable Lender Addition Agreement, no
amendment, modification, termination or waiver shall, unless in
writing and signed by each affected Lender, do any of the
following: (a) increase the principal amount of the Commitment of
any affected Lender; (b) reduce the principal of, rate of interest
on or Fees payable with respect to any Revolving Credit Advance or
Fees payable with respect to any Letter of Credit Obligation; (c)
extend the final scheduled maturity date of the principal amount of
the Revolving Credit Loan; (d) waive, forgive, defer, extend or
postpone any payment required hereunder; (e) release any Guarantor
with gross assets in excess of $2,500,000; (f) except as otherwise
contemplated herein or in one of the other Loan Documents, permit
Borrower or any Guarantor Subsidiary to sell or otherwise dispose
of any Collateral with a value exceeding $2,500,000 in the
aggregate; (g) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Revolving Credit Loan
which shall be required for Lenders or any of them to take any
action hereunder; (h) release Collateral with a value exceeding
$2,500,000 in the aggregate (except if the sale or other
disposition of such Collateral is permitted under the Loan
Documents); (i) amend or waive clause (ii) of the definition of
"Enforcement Period" contained in the Intercreditor Agreement
referred to in Schedule D; and (j) amend or waive this Section 11.2
or the definitions of the terms used in this Section 11.2 insofar
as the definitions affect the substance of this Section 11.2; and
provided, further, that no amendment, modification, termination or
waiver affecting the rights or duties of Agent under this Agreement
or any other Loan Document shall in any event be effective, unless
in writing and signed by Agent, in addition to Lenders required
hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required
for Agent to take additional Collateral pursuant to any Loan
Document. No amendment, modification, termination or waiver of any
provision of any Amended Revolving Credit Note shall be effective
without the written concurrence of the holder of that Amended
Revolving Credit Note . No notice to or demand on Borrower in any
case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance
with this Section 11.2 shall be binding upon each holder of the
Amended Revolving Credit Notes at the time outstanding and each
future holder of the Amended Revolving Credit Notes.
11.3 Fees and Expenses. Borrower shall reimburse Agent
for all of its out-of-pocket expenses incurred in connection with
(i) the preparation of this Agreement and the other Loan Documents
(including the fees and expenses of Agent's counsel, advisors,
consultants and auditors retained in connection with this Agreement
and the other Loan Documents and the transactions contemplated
hereby and thereby and advice in connection therewith), (ii) wire
transfers to the account of Borrower and (iii) Letter of Credit
Obligations. Borrower shall reimburse Agent for all fees, costs
and expenses, including the fees, costs and expenses of counsel and
other advisors (including environmental and management
consultants), for advice, assistance or other representation in
connection with:
(a) the forwarding to Borrower or any other Person on
behalf of Borrower by Agent of the proceeds of the Revolving Credit
Advances;
(b) any amendment, modification or waiver of, or
consent with respect to, this Agreement or any of the other Loan
Documents or advice in connection with the administration of the
loans made pursuant hereto or Agent's or any Lender's rights
hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Agent, any Lender, Borrower, any
Subsidiary of Borrower or any other Person) in any way relating to
the Collateral, this Agreement or any of the other Loan Documents
or any other agreement to be executed or delivered in connection
therewith or herewith, whether as a party, witness or otherwise,
including any litigation, contest, dispute, suit, case, proceeding
or action, and any appeal or review thereof, in connection with a
case commenced by or against Borrower, any Subsidiary of Borrower
or any other Person that may be obligated to Agent or Lenders by
virtue of this Agreement or any of the other Loan Documents;
(d) any attempt to enforce any rights of Agent or any
Lender against Borrower, any Subsidiary of Borrower or any other
Person that may be obligated to Agent or any Lender by virtue of
this Agreement or any of the other Loan Documents; or
(e) any attempt to (i) monitor the Revolving Credit
Advances, Letter of Credit Obligations or any other Obligations,
(ii) evaluate, observe or assess Borrower, any of its Subsidiaries
or Borrower's or any of its Subsidiaries' affairs or (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral;
including all the attorneys' and other professional and service
providers' fees arising from such services, including those in
connection with any appellate proceedings; and all expenses, costs,
charges and other fees incurred by such counsel and others in any
way or respect arising in connection with or relating to any of the
events or actions described in this Section 11.3 shall be payable,
on demand, by Borrower to Agent. Without limiting the generality
of the foregoing, such expenses, costs, charges and fees shall
include: fees, costs and expenses of environmental advisors to
advise Agent, but not to conduct any on site environmental review
or testing, appraisers, management and other consultants,
paralegals, court costs and expenses, photocopying and duplication
expenses, court reporter fees, costs and expenses, long distance
telephone charges, air express charges, telegram charges,
secretarial overtime charges, expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal
or other advisory services, and, in accordance with the GE Capital
Fee Letter, fees, costs and expenses of Agent's internal collateral
auditors, provided that so long as no Default or Event of Default
has occurred and is continuing such collateral audits or
examinations shall be conducted not more frequently than four (4)
times in any Fiscal Year; and, following the occurrence and during
the continuance of any Default or Event of Default, environmental
advisors for any reason, including to conduct on site environmental
reviews and testing, outside accountants, and investment bankers.
11.4 No Waiver. Agent's or any Lender's failure, at
any time or times, to require strict performance of any provision
of this Agreement or any of the other Loan Documents shall not
waive, affect or diminish any right of Agent or such Lender
thereafter to demand strict compliance and performance therewith.
Any suspension or waiver of an Event of Default under the Loan
Documents shall not suspend, waive or affect any other Event of
Default under this Agreement or any of the other Loan Documents
whether the same is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower and its
Subsidiaries contained in this Agreement or any of the other Loan
Documents and no Default or Event of Default under this Agreement
and no defaults or events of default under any of the other Loan
Documents shall be deemed to have been suspended or waived by Agent
or any Lender, unless such waiver or suspension is by an instrument
in writing signed by an officer of or other authorized employee of
Agent and Requisite Lenders and directed to Borrower specifying
such suspension or waiver.
11.5 Remedies. Agent's and Lenders' rights and
remedies under this Agreement shall be cumulative and nonexclusive
of any other rights and remedies which Agent or any Lender may have
under any other agreement, including the Loan Documents, by
operation of law or otherwise. Recourse to the Collateral shall
not be required.
11.6 Severability. Wherever possible, each provision
of this Agreement and the other Loan Documents shall be interpreted
in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement or any other Loan Document
shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement and
the other Loan Documents.
11.7 Conflict of Terms. Except as otherwise provided
in this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision contained in any of the other Loan
Documents, the provision contained in this Agreement shall govern
and control.
11.8 Authorized Signature. Until Agent shall be
notified by Borrower to the contrary, the signature upon any
document or instrument delivered pursuant hereto of an officer of
Borrower or a Guarantor Subsidiary, as appropriate, listed on
Schedule 11.8 shall bind Borrower or such Guarantor Subsidiary, as
the case may be, and be deemed to be the act of Borrower or such
Guarantor Subsidiary, as the case may be, affixed pursuant to and
in accordance with resolutions duly adopted by Borrower's Board of
Directors or such Guarantor Subsidiary's Board of Directors, as
appropriate. Agent shall be entitled to assume the authenticity of
each signature and the authority of each Person whose signature it
is or appears to be unless the responsible Person of Agent acting
in reliance thereupon shall have actual knowledge, at the time of
reliance thereon, of the fact that such signature is false or the
Person whose signature or purported signature is presented is
without authority.
11.9 GOVERNING LAW; CONSENT TO JURISDICTION. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. BORROWER, AGENT AND LENDERS HEREBY
CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER, ANY GUARANTOR
SUBSIDIARY, AGENT OR ANY LENDER PERTAINING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT AGENT, LENDERS, BORROWER AND EACH GUARANTOR
SUBSIDIARY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS
AND, PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR LENDERS.
BORROWER, EACH GUARANTOR SUBSIDIARY, AGENT AND LENDERS EXPRESSLY
SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER, EACH GUARANTOR
SUBSIDIARY, AGENT AND LENDERS HEREBY WAIVE ANY OBJECTION WHICH THEY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
BORROWER, EACH GUARANTOR SUBSIDIARY, AGENT AND LENDERS HEREBY WAIVE
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED
IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED, IN THE CASE OF NOTICE TO BORROWER OR ANY GUARANTOR
SUBSIDIARY, TO BORROWER, IN THE CASE OF NOTICE TO AGENT, TO AGENT,
IN THE CASE OF NOTICE TO A LENDER, TO SUCH LENDER, AT THEIR
RESPECTIVE ADDRESSES SET FORTH ON SCHEDULE 11.10 OF THIS AGREEMENT
AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may
be given to or served upon any of the parties by any other party,
or whenever any the parties desires to give or serve upon any other
party any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been
validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper
postage prepaid, (ii) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this
Section 11.10), (iii) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid or (iv) when
delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or
facsimile number indicated on Schedule 11.10 or to such other
address (or facsimile number) as may be substituted by notice given
as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other
communication to any Person (other than Borrower or Agent)
designated on Schedule 11.10 to receive copies shall in no way
adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of
Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.
11.12 Counterparts. This Agreement may be executed in
any number of separate counterparts, each of which shall
collectively and separately constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING
IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY
AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER
THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM
AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN
AGENT, LENDERS, BORROWER OR ANY DOMESTIC SUBSIDIARY ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
11.14 Confidentiality. Each of the Lenders and Agent
agrees to exercise reasonable efforts to keep any non-public
information delivered or made available to it pursuant to this
Agreement or any other Loan Document, which Borrower has identified
in writing as confidential information, confidential from any
Person other than officers, employees, agents, designees or
representatives of such Lender or Agent who are or are expected to
become engaged in evaluating, approving, structuring or
administering this Agreement or any of the other Loan Documents, or
Revolving Credit Advances, Letter of Credit Obligations or any
other transaction contemplated hereby or thereby; provided, that,
nothing herein shall prevent Agent or any Lender from disclosing
such information to any bona fide assignee, transferee or
participant that has agreed in writing to comply with this Section
11.14 in connection with the contemplated assignment or transfer of
any Revolving Credit Advances or Letter of Credit Obligations or
participations therein; to any of its Affiliates to the extent any
such Affiliates require such information in the ordinary course of
Agent's or such Lender's credit committee or asset management
procedures; or as required or requested by any Governmental
Authority or representative thereof or pursuant to legal process or
as required in connection with the exercise of any remedy under
this Agreement or any of the other Loan Documents.
[signature pages follow]
IN WITNESS WHEREOF, this First Amended and Restated
Credit Agreement has been duly executed as of the date first
written above.
ZENITH ELECTRONICS CORPORATION
By: /s/ Willard C. McNitt
-----------------------
Title: Vice President
----------------
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Robert Battle
-------------------
Title: Authorized Signatory
---------------------
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By: /s/ Stephen Mangiante
----------------------
Title: Vice President
-----------------
CONGRESS FINANCIAL CORPORATION
By: /s/ Kenneth Donahue
---------------------
Title: Assistant Vice President
--------------------------
ACKNOWLEDGED AND AGREE TO BE
BOUND BY ANY AND ALL PROVISIONS
HEREOF AFFECTING THEM:
ZENITH DISTRIBUTING CORPORATION
OF ILLINOIS
By: /s/ Willard C. McNitt
- -----------------------
Title: Treasurer
- ----------------
ZENITH DISTRIBUTING CORPORATION -
MIDSTATES
By: /s/ Willard C. McNitt
________________________
Title: Treasurer
_________________
ZENITH DISTRIBUTING CORPORATION
OF NEW ENGLAND
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION
OF NEW YORK
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION -
SOUTHEAST
By: /s/ Willard C. McNitt
___________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION -
WEST
By: /s/ Willard C. McNitt
___________________________
Title: Treasurer
_________________________
ZENITH/INTEQ, INC.
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH ELECTRONICS CORPORATION
OF ARIZONA
By: /s/ Willard C. McNitt
___________________________
Title: Treasurer
_________________________
ZENITH ELECTRONICS CORPORATION
OF TEXAS
By: /s/ Willard C. McNitt
___________________________
Title: Treasurer
_________________________
ZENITH MICROCIRCUITS CORPORATION
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH VIDEO TECH CORPORATION
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH VIDEO TECH CORPORATION -
FLORIDA
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENTRANS, INC.
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
Exhibit (4g)
TERM LOAN AGREEMENT
Dated as of May 10, 1995
among
ZENITH ELECTRONICS CORPORATION,
as Borrower,
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender,
THE BANK OF NEW YORK COMMERCIAL CORPORATION,
as Lender,
and
CONGRESS FINANCIAL CORPORATION,
as Lender
TABLE OF CONTENTS
-----------------
PAGE
1. AMOUNT AND TERMS OF CREDIT 1
1.1 Term Loan 1
1.2 Amortization 1
1.3 Mandatory Prepayments 2
1.4 Voluntary Prepayments 2
1.5 Prepayment Fees and Interest 2
1.6 Single Loan 3
1.7 Interest on the Term Loan 3
1.8 Use of Proceeds 4
1.9 Fees 4
1.10 Cash Management Systems 5
1.11 Receipt of Payments 5
1.12 Application and Allocation of Payments 5
1.13 Borrower's Loan Account and Accounting 5
1.14 Indemnity 6
1.15 Access 7
1.16 Taxes 8
1.17 Capital Adequacy and Other Adjustments. 9
2. CONDITIONS PRECEDENT 10
2.1 Conditions to Funding the Term Loan 10
3. REPRESENTATIONS AND WARRANTIES 11
3.1 Corporate Existence; Compliance with Law 11
3.2 Executive Offices 11
3.3 Corporate Power; Authorization; Enforceable
Obligations 11
3.4 Financial Statements 12
3.5 Collateral Reports 12
3.6 Material Adverse Effect 12
3.7 Ownership of Property; Liens 13
3.8 Restrictions; No Default 14
3.9 Labor Matters 14
3.10 Joint Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness 15
3.11 Government Regulation 15
3.12 Margin Regulations 15
3.13 Taxes 16
3.14 ERISA 17
3.15 No Litigation 18
3.16 Brokers 18
3.17 Patents, Trademarks, Copyrights and Licenses 18
3.18 Full Disclosure 19
3.19 Hazardous Materials 19
3.20 Insurance Policies 19
3.21 Deposit and Disbursement Accounts 20
3.22 Government Contracts 20
3.23 Customer and Trade Relations 20
3.24 Non-Material Subsidiaries 20
4. FINANCIAL STATEMENTS AND INFORMATION 21
4.1 Reports and Notices 21
4.2 Communication with Accountants 21
5. AFFIRMATIVE COVENANTS 21
5.1 Maintenance of Existence and Conduct of Business 21
5.2 Payment of Obligations 22
5.3 Books and Records 22
5.4 Litigation 23
5.5 Insurance 23
5.6 Compliance with Laws 24
5.7 Agreements 24
5.8 Supplemental Disclosure 25
5.9 Employee Plans 25
5.10 Environmental Matters 25
5.11 Landlords' Agreements and Bailee Letters 25
5.12 Public Offering Proceeds 26
5.13 Notice of Labor Matters 26
5.14 Government Contracts 26
5.15 Intellectual Property 26
6. NEGATIVE COVENANTS 27
6.1 Mergers, Etc. 27
6.2 Investments, Loans and Advances. 27
6.3 Indebtedness 29
6.4 Employee Loans and Transactions 30
6.5 Capital Structure and Business 30
6.6 Guaranteed Indebtedness 31
6.7 Liens 31
6.8 Sale of Assets 32
6.9 Events of Default 32
6.10 ERISA 32
6.11 Financial Covenants 33
6.12 Hazardous Materials 33
6.13 Sale-Leasebacks 33
6.14 Cancellation of Indebtedness 33
6.15 Restricted Payments 33
6.16 Fiscal Year 34
6.17 Change of Corporate Name 34
6.18 Sale of Stock 34
6.19 Bank Accounts 34
6.20 Cash Management 35
6.21 Non-Material Subsidiaries 35
6.22 Foreign Subsidiaries 35
6.23 No Impairment of Upstreaming 36
6.24 Amendment of Other Debt 36
6.25 Prepayments of Other Debt 36
6.26 Permitted Asset Dispositions 37
7. TERM 38
7.1 Termination 38
7.2 Survival of Obligations Upon Termination of
Financing Arrangement 38
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES 38
8.1 Events of Default 38
8.2 Remedies 41
8.3 Waivers by Borrower 41
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT 41
9.1 Assignment and Participations 41
9.2 Appointment of Agent 43
9.3 Set Off and Sharing of Payments 44
9.4 Disbursements of Payments and Information 44
10. SUCCESSORS AND ASSIGNS 45
10.1 Successors and Assigns 45
11. MISCELLANEOUS 46
11.1 Complete Agreement; Modification of Agreement 46
11.2 Amendments and Waivers 46
11.3 Fees and Expenses 47
11.4 No Waiver 48
11.5 Remedies 48
11.6 Severability 48
11.7 Conflict of Terms 49
11.8 Authorized Signature 49
11.9 GOVERNING LAW; CONSENT TO JURISDICTION 49
11.10 Notices 50
11.11 Section Titles 50
11.12 Counterparts 51
11.13 WAIVER OF JURY TRIAL 51
11.14 Confidentiality 51
INDEX OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Term Note
Schedule 1.1(a) - Responsible Individual of Agent
Schedule 1.7 - Election of Fixed or Floating Rate
Schedule 1.10 - List of Lock Box and Collection Account Banks
Schedule 3.2 - Executive Offices
Schedule 3.4 - Financial Statements
Schedule 3.5 - Collateral Reports
Schedule 3.7 - Real Estate and Leases
Schedule 3.9 - Labor Matters
Schedule 3.10 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 3.13 - Tax Matters
Schedule 3.14 - ERISA Plans
Schedule 3.17 - Patents, Trademarks and Copyrights
Schedule 3.20, I - Insurance Standards
Schedule 3.20, II - Insurance Policies
Schedule 3.21 - Deposit and Disbursement Accounts
Schedule 3.22 - Government Contracts
Schedule 4.1(A) - Financial Statements and Notices -- Reporting
Schedule 4.1(B) - Collateral Reports -- Reporting
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.7 - Liens
Schedule 6.11 - Financial Covenants
Schedule 6.26 - Material Assets
Schedule 9.5(A)(3) - Lenders' Accounts
Schedule 11.8 - Authorized Signatures
Schedule 11.10 - Notice Addresses
Schedule A - Definitions
Schedule B - intentionally omitted
Schedule C - Cash Management Systems
Schedule D - Schedule of Documents
Schedule E - Tuning System Patents
Schedule F - Term Loan Commitments
Schedule G - Fiscal Periods
THIS TERM LOAN AGREEMENT, dated as of May 10, 1995 among
ZENITH ELECTRONICS CORPORATION, a Delaware corporation
("Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York
corporation (in its individual capacity, "GE Capital"), for itself,
as Lender, and as Agent for Lenders (the "Agent"), THE BANK OF NEW
YORK COMMERCIAL CORPORATION, a New York corporation ("BNYCC"), as
Lender, and CONGRESS FINANCIAL CORPORATION, a California
corporation ("Congress"), as Lender.
RECITALS
-----------
A. The Borrower desires to borrow Forty Million
Dollars ($40,000,000) and, subject to the terms hereof, the Lenders
are willing to provide such financing.
B. Capitalized terms used in this Agreement shall have
the meanings ascribed to them in Schedule A. All Schedules,
Exhibits and other attachments hereto, or expressly identified to
this Agreement, are incorporated herein by reference and, taken
together, shall constitute but a single agreement. These Recitals
shall be construed as part of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto agree as
follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Term Loan. (a) Subject to the terms hereof, each
Lender agrees to advance to Borrower on the date hereof, its Pro
Rata Share of a loan (the "Term Loan") in the aggregate principal
amount of Forty Million Dollars ($40,000,000).
(b) Borrower shall execute and deliver to each Lender a
promissory note in the principal amount of the Pro Rata Share of
the Term Loan funded by such Lender, dated the Closing Date and
substantially in the form of Exhibit A hereto (each, a "Term
Note").
1.2 Amortization. Borrower shall repay the Term Loan
to Agent for the benefit of the Lenders in twelve (12) consecutive
quarterly payments (the "Scheduled Installments"), payable on the
last day of each of the following calendar quarters, commencing
September 30, 1995, in the following respective amounts:
Payment Date Scheduled Installments
------------------------------- ------------------------------
September 30, and
December 31, 1995 $ 1,500,000 each
March 31, June 30, September 30
and December 31, 1996 $ 1,750,000 each
March 31, June 30, September 30
and December 31, 1997 $ 2,500,000 each
March 31, 1998 $ 2,500,000
June 30, 1998 $ 17,500,000
The final Scheduled Installment shall be in the amount of
$17,500,000 or the then outstanding principal balance of the Term
Loan.
1.3 Mandatory Prepayments. (a) If Borrower has
elected to have the Floating Rate apply to the Term Loan in
accordance with Section 1.7(a) hereof: (1) Borrower shall deliver
to Agent within ten (10) Business Days following the last day of
each Fiscal Quarter, commencing with the Fiscal Quarter ending
September 30, 1995, a report, certified by its Chief Financial
Officer, setting forth all revenue received by Borrower during the
preceding Fiscal Quarter under the Tuning System Patent Licenses,
and (2) if 25% of the revenues received by Borrower during any
Fiscal Quarter under the Tuning System Patent Licenses exceeds the
Scheduled Installment paid or payable as of the last day of the
corresponding calendar quarter, Borrower shall pay such excess to
Agent for the benefit of the Lenders concurrently with the delivery
of the applicable quarterly report. Each prepayment in accordance
with this Section 1.3(a) shall be applied to the Scheduled
Installments in inverse order of maturity.
(b) Borrower shall prepay the Term Loan in full upon
payment in full of the Revolving Credit Loan and termination of the
Revolving Loan Agreement, unless the Revolving Credit Loan is
replaced by a similar working capital facility of not less than $90
million and not more than $110 million on terms satisfactory to
each Lender and subject to an intercreditor agreement containing
terms satisfactory to each Lender in its sole and absolute
discretion, which terms may differ from those of the Intercreditor
Agreement.
1.4 Voluntary Prepayments. Borrower may voluntarily
prepay the Term Loan in whole or in part at any time; provided that
Borrower shall notify Agent at least thirty (30) days prior to a
prepayment in full of the Term Loan.
1.5 Prepayment Fees and Interest. Each prepayment of
the Term Loan shall be accompanied by payment of all interest
accrued on the amount so prepaid. Each voluntary prepayment of the
Term Loan on or prior to the first anniversary of the Closing Date
shall be accompanied by a premium in the amount of one percent (1%)
of the principal amount prepaid. If Borrower has elected to have
the Term Loan bear interest at a Fixed Rate in accordance with
Section 1.7(a), each prepayment of the Term Loan, whether voluntary
or mandatory, shall be accompanied by a breakage fee, calculated as
set forth below. The breakage fee shall be equal to an amount
(which for purposes hereof shall not be deemed less than zero)
equal to the present value, for each remaining year of the Term
Loan, of (x) the yield as reported on the Closing Date in the
Federal Reserve statistical release H.15 (519) under the caption
"U.S. Government Securities/Treasury Constant Maturities" for a
Treasury Note with a term equal to that of the Term Loan (which
will be obtained by interpolating between the yield reported on the
H.15 for specific whole years), less (y) the yield as reported on
the date of such prepayment in the Federal Reserve statistical
release H.15 (519) under the caption "U.S. Government
Securities/Treasury Constant Maturities" for a Treasury Note with a
term equal to that remaining on the Term Loan (which will be
obtained by interpolating between the yield reported on the H.15
for specific whole years) on the date of such prepayment,
multiplied by the outstanding principal balance of the Term Loan at
the time of prepayment for purposes of calculating such amount for
the first Loan Year and by the principal balance that would have
been outstanding at the beginning of each successive year in the
remaining term of the Term Loan had the amortization schedule set
forth in subsection 1.2 hereof been adhered to; provided, that the
rate determined in (y) above will be used as the discount rate in
computing such present value.
1.6 Single Loan. The Term Loan and all of the other
Obligations of Borrower arising under this Agreement and the other
Loan Documents shall constitute one general obligation of Borrower
secured by all of the Collateral.
1.7 Interest on the Term Loan. (a) At Borrower's
election upon irrevocable written notice, which shall have been
delivered to Lenders at least one (1) Business Day prior to the
Closing Date and attached hereto as Schedule 1.7, the Term Loan
shall bear interest at (i) the Base Rate from time to time in
effect, plus one and one-half percent (1.5%) per annum (the
"Floating Rate") or (ii) the Base Rate as in effect on the Closing
Date plus two and two-tenths percent (2.2%) per annum (the "Fixed
Rate").
(b) If any interest or other payment on the Term 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 and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
(c) Borrower shall pay interest to the Agent for the
ratable benefit of the Lenders, in arrears, on the first day of
each calendar month for the preceding calendar month, commencing on
June 1, 1995.
(d) All computations of interest shall be made by Agent
on the basis of a three hundred and sixty (360) day year, in each
case for the actual number of days occurring in the period for
which such interest is payable. If applicable, the Floating Rate
shall be calculated based on the Base Rate as in effect on each
day. Each determination by Agent of an interest rate hereunder
shall be conclusive and binding for all purposes, absent manifest
error or bad faith.
(e) So long as any Default or Event of Default shall
have occurred and be continuing, the interest rate applicable to
the Obligations shall be increased, at the option of Agent, by two
percent (2%) per annum in excess of the Fixed Rate or the Floating
Rate from time to time in effect, as applicable (the "Default
Rate").
(f) Notwithstanding anything to the contrary set forth
in this Section 1.7, if, at any time until payment in full of all
of the Obligations, the rate of interest payable hereunder exceeds
the highest rate of interest permissible under any law which a
court of competent jurisdiction shall, in a final determination,
deem applicable hereto (the "Maximum Lawful Rate"), then in such
event and so long as the Maximum Lawful Rate would be so exceeded,
the rate of interest payable hereunder shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total
interest received by Agent, on behalf of Lenders, from the making
of such advances hereunder is equal to the total interest which
would have been received had the interest rate payable hereunder
been (but for the operation of this paragraph) the interest rate
payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, the interest rate payable hereunder shall
be the rate of interest provided in Sections 1.7(a) through (e) of
this Agreement, unless and until the rate of interest again exceeds
the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest received by any Lender
pursuant to the terms hereof exceed the amount which such Lender
could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. In
the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal
to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made. In the event that a court
of competent jurisdiction, notwithstanding the provisions of this
Section 1.7(f), shall make a final determination that a Lender has
received interest hereunder or under any of the other Loan
Documents in excess of the Maximum Lawful Rate, Agent shall, to the
extent permitted by applicable law, promptly apply such excess
first to any interest due and not yet paid hereunder, then to the
outstanding principal of the Obligations, then to Fees and any
other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise
order.
1.8 Use of Proceeds. Borrower shall utilize the
proceeds of the Term Loan solely for (i) the payment of Fees and
expenses in connection with the transactions contemplated hereby
and (ii) the financing of Borrower's and its Material Subsidiaries'
working capital needs.
1.9 Fees. Borrower shall pay to GE Capital,
individually, the fees specified in that certain Fee Letter dated
as of April 16, 1995 (the "GE Capital Fee Letter"), between
Borrower and GE Capital at the times specified for payment therein.
On the Closing Date, Borrower shall pay to Agent for the ratable
benefit of Lenders a closing fee in the amount of Two Hundred Fifty
Thousand Dollars ($250,000).
1.10 Cash Management Systems. On or prior to the
Closing Date, Borrower will establish, and Borrower will maintain,
the cash management systems described on Schedule C.
1.11 Receipt of Payments. Borrower shall make each
payment under this Agreement not later than 2:00 p.m. (New York
time) on the day when due in lawful money of the United States of
America in immediately available funds to the Collection Account.
For purposes of computing interest and fees, (a) all payments
consisting of cash, wire or electronic transfers in immediately
available funds shall be deemed received upon deposit in the
Collection Account and notice to Agent of such deposit, and (b) all
payments consisting of checks, drafts or similar non-cash items
shall be deemed received upon receipt of good funds following
deposit of such payment in the Collection Account and notice to
Agent of such deposit.
1.12 Application and Allocation of Payments. Borrower
irrevocably waives the right to direct the application of any and
all payments at any time or times hereafter received from or on
behalf of Borrower, and Borrower irrevocably agrees that Agent
shall have the continuing exclusive right to apply any and all such
payments against the then due and payable Obligations of Borrower
and in repayment of the Term Loan, as Agent may deem advisable,
notwithstanding any previous entry by Agent upon the Loan Account
or any other books and records. In the absence of a specific
determination by Agent with respect thereto, the same shall be
applied in the following order: (i) to then due and payable Fees
and expenses payable to Agent or any Lender; (ii) to then due and
payable interest payments; (iii) to Obligations other than Fees,
expenses and interest and principal payments; and (iv) to then due
and payable principal payments on the Term Loan.
1.13 Borrower's Loan Account and Accounting. Agent
shall maintain a loan account (the "Loan Account") on its books to
record: (a) all payments made by Borrower and (b) all other
appropriate debits and credits as provided in this Agreement with
respect to the Obligations. All entries in the Loan Account shall
be made in accordance with Agent's customary accounting practices
as in effect from time to time. Borrower shall pay all Obligations
as such amounts become due or are declared due pursuant to the
terms of this Agreement.
The balance in the Loan Account, as recorded on Agent's
most recent printout or other written statement, shall be
presumptive evidence of the amounts due and owing to Agent and
Lenders by Borrower; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect
Borrower's obligation to pay the Obligations. Agent shall render
to Borrower a monthly accounting of transactions reflected in the
Loan Account and setting forth the balance of the Loan Account.
Each and every such accounting shall (absent manifest error) be
deemed final, binding and conclusive upon Borrower in all respects
as to all matters reflected therein, unless Borrower, within 30
days after the date any such accounting is rendered, shall notify
Agent in writing of any objection which Borrower may have to any
such accounting, describing the basis for such objection with
specificity. In that event, only those items expressly and
reasonably objected to in such notice shall be deemed to be
disputed by Borrower. Agent's determination, based upon the facts
available, of any item objected to by Borrower in such notice shall
(absent manifest error) be final, binding and conclusive on
Borrower, unless Borrower shall notify Agent of its continued
objection within 30 days following Agent's notifying Borrower of
such determination.
1.14 Indemnity. (a) Borrower shall indemnify and hold
each of Agent, Lenders and their respective Affiliates, officers,
directors, employees, attorneys, agents and representatives (each,
an "Indemnified Person"), harmless from and against any and all
suits, actions, proceedings, claims, damages, losses, liabilities
and expenses (including attorneys' fees and disbursements and other
costs of investigations or defense, including those incurred upon
any appeal) which may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been
extended under this Agreement and the other Loan Documents or in
connection with or arising out of the transactions contemplated
hereunder and thereunder, including any and all Environmental
Liabilities and Costs; provided that Borrower shall not be liable
for any indemnification to such Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss,
liability or expense results solely from such Indemnified Person's
gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction after all possible appeals have
been exhausted. NEITHER AGENT, ANY LENDER NOR ANY OTHER
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF
SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR DIRECT, INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED UNDER THE LOAN DOCUMENTS.
(b) Borrower hereby acknowledges and agrees that
neither Agent nor any Lender (i) is now, or has ever been, in
control of Borrower's or any of its Subsidiaries' affairs or (ii)
has the capacity through the provisions of the Loan Documents or
otherwise to influence Borrower's or any of its Subsidiaries'
conduct with respect to the ownership, operation or management of
any property.
1.15 Access. Borrower shall provide full access during
normal business hours, from time to time upon one (1) Business
Day's prior notice, to Agent and any of its officers, employees,
designees, agents and representatives, as frequently as Agent
determines, in its sole discretion, to be appropriate (unless a
Default or Event of Default shall have occurred and be continuing,
in which event Agent and its officers, employees, designees, agents
and representatives shall have access at any and all times and
without any notice), to the properties, facilities, books, records,
suppliers, customers, advisors and employees (including officers)
of Borrower and its Subsidiaries, to the Collateral and, either
through Borrower or with Borrower present (unless a Default or
Event of Default shall have occurred and be continuing, in which
event Agent and its officers, employees, designees, and agents
shall have access directly without going through Borrower or having
Borrower present), to the accountants (including Arthur Andersen
LLP) of Borrower and its Subsidiaries. Without limiting the
generality of the foregoing, Borrower shall (i) permit Agent, and
any of its officers, employees, agents and representatives, to
inspect, audit and make extracts from all of Borrower's and its
Subsidiaries' records, files and books of account and (ii) permit
Agent, and any of its officers, employees, agents and
representatives, to inspect, review and evaluate the Accounts,
Inventory and Borrower's and its Subsidiaries' books and other
records, at Borrower's and its Subsidiaries' locations and at
premises not owned by or leased to Borrower or any Subsidiary of
Borrower. Borrower shall make available to Agent and its counsel,
as quickly as is possible under the circumstances, originals or
copies of all books, records, board minutes, contracts, insurance
policies, environmental audits and reports, business plans, files,
financial statements (actual and pro forma), filings with federal,
state, local and foreign regulatory agencies, and other instruments
and documents which Agent may reasonably request. Borrower shall
deliver any document or instrument necessary for Agent, as it may
from time to time reasonably request, to obtain records from any
service bureau or other Person which maintains records for Borrower
or any Subsidiary of Borrower, and, if any of the records of
Borrower or any Subsidiary of Borrower are maintained with any
service bureau or other Person, shall maintain duplicate records or
supporting documentation on media, including on computer tapes and
discs owned by Borrower. Borrower shall instruct its certified
public accountants and its banking and other financial institutions
to make available to Agent, and its officers, employees, agents and
representatives, such information and records as Agent may from
time to time reasonably request. Notwithstanding the foregoing,
Borrower and its Subsidiaries shall not be required to make
available to Agent, and its officers, employees, designees, agents
and representatives, contracts or other agreements between Borrower
or any of its Subsidiaries and another Person if (i) the disclosure
thereof would violate any government security clearance regulation
applicable to such Person or destroy any attorney-client privilege
that exists in connection with such information or (ii) such
contract or other agreement contains a confidentiality provision
prohibiting its provision to Agent, and its officers, employees,
designees, agents and representatives; provided, that, Borrower and
its Subsidiaries shall use their best efforts to obtain the consent
of any other Persons party to any such contract or other agreement
to the provision of such contract or other agreement to Agent, and
its officers, employees, designees, agents and representatives;
and, provided, further, that, in the event Borrower and its
Subsidiaries are unable to obtain such consent, Borrower and its
Subsidiaries shall provide Agent, and its officers, designees,
agents and representatives, with copies of such contract or other
agreement from which the confidential and privileged information
has been redacted.
1.16 Taxes. (a) Any and all payments by Borrower
hereunder or in respect of the Term Notes shall be made, in
accordance with this Section 1.16, free and clear of and without
deduction for any and all present or future Taxes. If Borrower
shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder or in respect of the Term Notes, (i) the
sum payable shall be increased as much as shall be necessary so
that after making all required deductions (including deductions
applicable to additional sums payable under this Section 1.16)
Agent or Lenders, as applicable, receive an amount equal to the sum
they would have received had no such deductions been made, (ii)
Borrower shall make such deductions and (iii) Borrower shall pay
the full amount deducted to the relevant taxing or other authority
in accordance with applicable law.
(b) Except as Borrower shall otherwise consent, each
Lender hereby severally (but not jointly) represents that under
applicable law and treaties in effect on the date of this Agreement
no Taxes will be required to be withheld by Borrower with respect
to any payments to be made to such Lender in respect of this
Agreement, the other Loan Documents or the Term Loan. Each Lender,
if any, organized under the laws of a jurisdiction outside of the
United States (a "Foreign Lender") as to which payments to be made
in respect of this Agreement, the other Loan Documents or the Term
Loan are wholly or partially exempt from United States withholding
tax under an applicable statute or tax treaty shall provide to
Borrower and Agent (i) two (2) copies of a properly completed and
executed Internal Revenue Service Form 4224 or Form 1001 or other
applicable form, certificate or document prescribed by the Internal
Revenue Service certifying as to such Foreign Lender's entitlement
to such exemption with respect to payments to be made to such
Foreign Lender in respect of this Agreement, the other Loan
Documents or the Term Loan (a "Certificate of Exemption") or (ii) a
letter from any such Foreign Lender stating that it is not entitled
to any such exemption (a "Letter of Non-Exemption"). Prior to
becoming a Lender under this Agreement and within fifteen (15) days
after a written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this
Agreement shall provide a Certificate of Exemption or a Letter of
Non-Exemption to Borrower and Agent.
If a Foreign Lender is entitled to an exemption with
respect to payments to be made to such Foreign Lender in respect of
this Agreement, the other Loan Documents and the Term Loan and does
not provide a Certificate of Exemption to Borrower and Agent within
the time periods set forth in the immediately preceding paragraph,
Borrower shall withhold taxes from payments to such Foreign Lender
at the applicable statutory rates and Borrower shall not be
required to pay any additional amounts as a result of such
withholding; provided, that all such withholding shall cease upon
any delivery by such Foreign Lender of a Certificate of Exemption
to Borrower and Agent.
(c) Borrower shall indemnify and pay, within 10 days of
demand therefor, Agent and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable
under this Section 1.16) paid by Agent or such Lender, as
appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not
such Taxes were correctly or legally asserted.
(d) Within 30 days after the date of any payment of
Taxes, Borrower shall furnish to Agent, at its address referred to
in Section 11.10, the original or a certified copy of a receipt
evidencing payment thereof.
1.17 Capital Adequacy and Other Adjustments. In the
event that any Lender shall have determined that the adoption after
the date hereof of any law, treaty, governmental (or quasi-
governmental) rule, regulation, guideline or order regarding
capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding
capital adequacy, reserve requirements or similar requirements
(whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or
governmental agency or body having jurisdiction does or would have
the effect of increasing the amount of capital, reserves or other
funds required to be maintained by such Lender and thereby reducing
the rate of return on such Lender's capital as a consequence of its
Pro Rata Share of the Term Loan hereunder, then Borrower shall from
time to time within fifteen (15) days after notice and demand from
such Lender (together with the certificate referred to in the next
sentence and with a copy to Agent) pay to Agent, for the account of
such Lender, additional amounts sufficient to compensate such
Lender for such reduction; provided, however, that, notwithstanding
the foregoing, Borrower shall have no obligation to make any such
payment in the event, if any, that such notice and demand was sent
by such Lender more than ninety (90) days after it became aware of
such law, treaty, governmental (or quasi-governmental) rule,
regulation, guideline or order. A certificate as to the amount of
such cost and showing the basis of the computation of such cost
submitted by such Lender to Borrower and Agent shall, absent
manifest error, be final, conclusive and binding for all purposes.
2. CONDITIONS PRECEDENT
2.1 Conditions to Funding the Term Loan.
Notwithstanding any other provision of this Agreement
and without affecting in any manner the rights of Agent and Lenders
hereunder, Borrower shall have no rights under this Agreement (but
shall have all applicable obligations hereunder), and no Lender
shall be obligated to make its Pro Rata Share of the Term Loan or
take, fulfill or perform any other action hereunder from and after
the date hereof, until the following conditions have been
satisfied, in Agent's sole discretion, or waived in writing by
Agent:
(a) This Agreement or counterparts hereof shall have
been duly executed by, and delivered to, Borrower, Agent and each
Lender.
(b) Agent shall have received such guaranties,
documents, instruments, agreements and legal opinions as Agent may
request in connection with the transactions contemplated by this
Agreement and the other Loan Documents, including the Domestic
Subsidiaries Guaranty and all documents, instruments, agreements
and legal opinions listed in the Schedule of Documents, each in
form and substance satisfactory to Agent.
(c) The transactions contemplated by the Revolving Loan
Agreement shall have been consummated.
(d) Agent shall have received evidence satisfactory to
Agent that Borrower has obtained consents and acknowledgments of
all Persons whose consents and acknowledgments may be required,
including, but not limited to, all requisite Governmental
Authorities, to the terms, and to the execution and delivery, of
this Agreement, the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby.
(e) Borrower shall have paid to the Lenders and GE
Capital of all Fees required to be paid at or prior to the Closing
Date under the terms hereof and of the GE Capital Fee Letter.
(f) Since December 31, 1994, there shall have been (i)
no event the occurrence of which could have a Material Adverse
Effect on the business, operations or prospects of Borrower,
Borrower and its Subsidiaries, taken as a whole, or Borrower and
the Guarantor Subsidiaries, taken as a whole; (ii) no litigation
will have commenced which, if successful, could have any such
Material Adverse Effect or could challenge any of the transactions
contemplated by this Agreement and the other Loan Documents; (iii)
no dividends or other distributions to Borrower's stockholders;
(iv) no increase in liabilities, liquidated or contingent, and no
decrease in assets of Borrower or any Guarantor Subsidiary which
could have a Material Adverse Effect; and (v) no event the
occurrence of which could have a Material Adverse Effect on the
financial condition of Borrower or any Guarantor Subsidiary, except
as reflected in Borrower's financial statements as of April 1, 1995
which have been delivered to Agent.
(g) Agent, on behalf of Lenders, shall have received a
letter satisfactory in form and substance to Agent signed by
Borrower's independent certified public accountants, Arthur
Andersen LLP, affirming that Agent and Lenders are entitled to rely
upon Arthur Andersen LLP's certification of Borrower's financial
statements.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Term Loan as herein
provided for, Borrower makes the following representations and
warranties to Agent and each Lender, each and all of which shall be
true and correct as of the date of execution and delivery of this
Agreement, and shall survive the execution and delivery of this
Agreement:
3.1 Corporate Existence; Compliance with Law. Borrower
and each of its Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has been duly qualified to
conduct business and is in good standing in each other jurisdiction
where its ownership or lease of property or the conduct of its
business requires such qualification; (ii) has the requisite
corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease and to conduct its business as
now, heretofore and proposed to be conducted; (iii) has all
licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction over it, except to the extent, if
any, that failure to have such licenses, permits, consents or
approvals, to have made such filings, or to have given such
notices, either individually or in the aggregate, would not have a
Material Adverse Effect; (iv) is in compliance with its certificate
or articles of incorporation and bylaws; and (v) is in compliance
with all applicable provisions of law, except for any noncompliance
which, either individually or in the aggregate with all
circumstances of noncompliance, could not have or result in a
Material Adverse Effect.
3.2 Executive Offices. As of the Closing Date, the
location of Borrower's and each Subsidiary of Borrower's executive
offices and principal place of business is set forth on Schedule
3.2 and, except as set forth on Schedule 3.2, none of such
locations have changed within the past six (6) months.
3.3 Corporate Power; Authorization; Enforceable
Obligations. The execution, delivery and performance by Borrower
and the Guarantor Subsidiaries of this Agreement and the other Loan
Documents and all instruments and documents to be delivered by
Borrower or any Guarantor Subsidiary hereunder and thereunder (in
each case, to the extent such Person is a party thereto) and the
creation of all Liens provided for herein and therein: (i) are
within Borrower's and each Guarantor Subsidiary's corporate power;
(ii) have been duly authorized by all necessary or proper corporate
and shareholder action; (iii) are not in contravention of any
provision of Borrower's or any Subsidiary of Borrower's certificate
or articles of incorporation or bylaws; (iv) will not violate any
law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or
accelerate any performance required by, any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which
Borrower or any Subsidiary of Borrower is a party or by which
Borrower or any Subsidiary of Borrower or any of its or their
assets or properties is bound, where the consequence of such
conflict, breach, termination, default or acceleration could have
or result in a Material Adverse Effect; (vi) will not result in the
creation or imposition of any Lien upon any of the assets or
properties of Borrower or any Subsidiary of Borrower other than
those on the assets and properties Borrower and the Guarantor
Subsidiaries in favor of Agent, on behalf of itself and Lenders,
pursuant to the Loan Documents; and (vii) do not require the
consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(d), all of which
will have been duly obtained, made or complied with prior to the
Closing Date. At or prior to the Closing Date, this Agreement and
each of the other Loan Documents shall have been duly executed and
delivered on behalf of or for the benefit of Borrower and the
Guarantor Subsidiaries and each shall then constitute a legal,
valid and binding obligation of Borrower and the Guarantor
Subsidiaries enforceable against Borrower and the Guarantor
Subsidiaries in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency or other similar laws
affecting the rights of creditors generally or by application of
general principles of equity.
3.4 Financial Statements. Borrower has delivered the
financial statements identified on Schedule 3.4 and each such
financial statement complies with the description thereof contained
on Schedule 3.4.
3.5 Collateral Reports. Borrower has delivered the
Collateral Reports identified on Schedule 3.5 and each such
Collateral Report complies with the description thereof contained
on Schedule 3.5.
3.6 Material Adverse Effect. Neither Borrower nor any
of its Subsidiaries, as of December 31, 1994, had any obligations,
contingent liabilities, or liabilities for Charges, long-term
leases or unusual forward or long-term commitments which are not
reflected in the consolidated pro forma balance sheet of Borrower
and its Subsidiaries dated as of such date and which could, alone
or in the aggregate, have or result in a Material Adverse Effect.
Between December 31, 1994 and the Closing Date, there has been (i)
no event the occurrence of which could have a Material Adverse
Effect on the business, operations or prospects of Borrower,
Borrower and its Subsidiaries, taken as a whole, or Borrower and
the Guarantor Subsidiaries, taken as a whole, (ii) no litigation
which, if successful, could have any such Material Adverse Effect
or could challenge any of the transactions contemplated by this
Agreement and the other Loan Documents, (iii) no increase in
liabilities, liquidated or contingent, and no decrease in assets of
Borrower or any Guarantor Subsidiary which could have a Material
Adverse Effect and (iv) no event the occurrence of which could have
a Material Adverse Effect on the financial condition of Borrower or
any Guarantor Subsidiary, except as reflected in Borrower's
financial statements as of April 1, 1995, which have been delivered
to Agent. Since December 31, 1994 and until the Closing Date, no
dividends, advances or other distributions have been declared, paid
or made upon any Stock of Borrower and no shares of Stock of
Borrower have been, or are now required to be, redeemed, retired,
purchased or otherwise acquired for value by Borrower.
3.7 Ownership of Property; Liens. (a) Except as
described on Schedule 3.7, the real estate listed on Schedule 3.7
constitutes all of the real property owned, leased or used in its
business by Borrower or any Subsidiary of Borrower. Borrower, or
such Subsidiary of Borrower, as applicable, (i) holds title to all
of its owned real estate, subject to no Liens other than Permitted
Encumbrances, and has valid leasehold interests in all of its
Leases (both as lessor and lessee, sublessee or assignee), all as
described on Schedule 3.7, and (ii) holds title to, or valid
leasehold interests in, all of its other properties and assets, and
none of the properties or assets of Borrower or any Subsidiary of
Borrower are subject to any Liens, except Permitted Encumbrances.
Borrower or such Subsidiary of Borrower, as applicable, has
received all deeds, assignments, waivers, consents, non-disturbance
and recognition or similar agreements, bills of sale and other
documents, and duly effected all recordings, filings and other
actions necessary to establish, protect and perfect Borrower's or
such Subsidiary's, as appropriate, right, title and interest in and
to all such real estate and other assets and properties that are
material to the conduct of its business or at which Collateral is
located. Except as described on Schedule 3.7, (i) neither Borrower
or any Subsidiary of Borrower nor, to the knowledge of Borrower,
any other party to any such Lease described on Schedule 3.7 is in
material default of its obligations thereunder or has delivered or
received any notice of termination under any such Lease, and no
event has occurred which, with the giving of notice, the passage of
time or both, would constitute a material default under any such
Lease; (ii) on the Closing Date, neither Borrower nor any Subsid-
iary of Borrower owns or holds, or is obligated under or a party
to, any option, right of first refusal or any other contractual
right to purchase, acquire, sell, assign or dispose of any real
property owned or leased by Borrower or any Subsidiary of Borrower
except as set forth on Schedule 3.7; and (iii) on the Closing Date,
no portion of any real property owned or leased by Borrower or any
Subsidiary of Borrower has suffered any material damage by fire or
other casualty loss or a Release which has not heretofore been
completely repaired and restored to its original condition or is
being remedied. All permits required to have been issued or
appropriate to enable the real property owned or leased by Borrower
and its Subsidiaries, and material to the conduct of their
respective businesses or at which any Collateral is located, to be
lawfully occupied and used for all of the purposes for which they
are currently occupied and used, have been lawfully issued and are,
as of the date hereof, in full force and effect.
3.8 Restrictions; No Default. No contract, lease,
agreement or other instrument to which Borrower or any Subsidiary
of Borrower is a party or by which it or any of its properties or
assets is bound or affected and no provision of applicable law or
governmental regulation has or results in a Material Adverse Effect
or could have or result in a Material Adverse Effect. Neither
Borrower nor any Subsidiary of Borrower is in default, and, to
Borrower's knowledge, no third party is in default, under or with
respect to any contract, agreement, lease or other instrument to
which it is a party where the consequence of such default, either
individually or when considered in the aggregate with all such
defaults, could have or result in a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
3.9 Labor Matters. There are no strikes which have
lasted more than seven (7) Business Days, or, as of the Closing
Date, other material labor disputes, against Borrower or any
Subsidiary of Borrower that are pending or, to Borrower's knowl-
edge, threatened. Hours worked by and payment made to employees of
Borrower and its Subsidiaries have not been in violation of the
Fair Labor Standards Act or any other applicable federal, state,
local or foreign law dealing with such matters. All payments due
from Borrower or any Subsidiary of Borrower on account of employee
health and welfare insurance have been paid or accrued as a
liability on the books of Borrower or the applicable Subsidiary, as
appropriate. As of the Closing Date, neither Borrower nor any
Subsidiary of Borrower has any obligation under any collective
bargaining agreement or any employment agreement except as set
forth on Schedule 3.9 hereto, a true and complete copy of each of
which has been furnished to Agent. As of the Closing Date, there
is no organizing activity involving Borrower or any Subsidiary of
Borrower pending or threatened by any labor union or group of
employees. As of the Closing Date, except as set forth on Schedule
3.9, there are no representation proceedings pending or, to
Borrower's knowledge, threatened with the National Labor Relations
Board, and no labor organization or group of employees of Borrower
or any Subsidiary of Borrower has made a demand for recognition.
As of the Closing Date, except as set forth on Schedule 3.9, there
are no complaints or charges involving an amount in excess of
$400,000 against Borrower or any Subsidiary of Borrower pending or
threatened to be filed with any federal, state, local or foreign
court, governmental agency or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or
termination of employment of any individual by Borrower or any
Subsidiary of Borrower.
3.10 Joint Ventures, Subsidiaries and Affiliates;
Outstanding Stock and Indebtedness. Except as set forth on
Schedule 3.10 or as otherwise expressly permitted by the terms of
this Agreement: (i) Borrower has no Subsidiaries, is not engaged,
directly or indirectly through a Subsidiary or otherwise, in any
joint venture or partnership with any other Person, and is not an
Affiliate of any Person other than a Subsidiary of Borrower; (ii)
there are no outstanding rights to purchase, options, warrants or
similar rights or agreements pursuant to which Borrower may be
required to issue or sell any Stock or other equity security of
Borrower and; (iii) Borrower is the sole direct or indirect
beneficial owner of the stock of all of its Subsidiaries. Except
as set forth on Schedule 3.10, on the Closing Date, to Borrower's
knowledge, no stockholder of Borrower owns more than five percent
(5%) of any class of its Stock. Except as set forth on Schedule
3.10, there are no outstanding rights to purchase, options,
warrants or similar rights or agreements pursuant to which Borrower
or any Subsidiary of Borrower may be required to issue or sell any
Stock or other equity security of any Subsidiary. As of the
Closing Date, all outstanding Indebtedness and all Liens of
Borrower and its Subsidiaries are described on Schedule 6.3 and
Schedule 6.7, respectively.
3.11 Government Regulation. Neither Borrower nor any
Subsidiary of Borrower is an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment
Company Act of 1940, as amended. Neither Borrower nor any Material
Subsidiary is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate
Commerce Act or any other federal, state, local or foreign statute
that restricts or limits its ability to incur Indebtedness or to
perform its obligations hereunder or under any of the other Loan
Documents, and the making of the Term Loan by Lenders, the applica-
tion of the proceeds and repayment thereof by Borrower and the
consummation of the transactions contemplated by this Agreement and
the other Loan Documents does not and will not violate any
provision of any such statute or any rule, regulation or order
issued by the Securities and Exchange Commission or any Governmen-
tal Authority.
3.12 Margin Regulations. Neither Borrower nor any
Subsidiary of Borrower is engaged, nor will it engage, principally
or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin
security" within the respective meanings of each of the quoted
terms under Regulation U or G of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") as now and
from time to time hereafter in effect. None of the proceeds of the
Term Loan will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, for the purpose of
reducing or retiring any indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose
which might cause any of the loans or other extensions of credit
under this Agreement to be considered a "purpose credit" within the
meaning of Regulation G, T, U or X of the Federal Reserve Board.
Neither Borrower nor any Subsidiary of Borrower will take, or
permit any agent acting on its behalf to take, any action which
might cause this Agreement or any other Loan Document or any
document or instrument delivered pursuant hereto or thereto to
violate any regulation of the Federal Reserve Board.
3.13 Taxes. As of the Closing Date, all federal, state,
local and foreign tax returns, reports and statements required to
be filed by Borrower, or any Subsidiary of Borrower, have been
filed with the appropriate Governmental Authority and all Charges
and other impositions shown thereon to be due and payable have been
paid prior to the date on which any fine, penalty, interest or late
charge may be added thereto for nonpayment thereof, or any such
fine, penalty, interest, late charge or loss has been paid.
Borrower and each of its Subsidiaries has paid when due and payable
all Charges required to be paid by it. As of the Closing Date,
proper and accurate amounts have been withheld by Borrower and each
of its Subsidiaries from their respective employees for all periods
in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid
to the respective Governmental Authorities. Schedule 3.13 sets
forth those taxable years for which Borrower's tax returns are
currently being audited by the IRS or any other applicable
Governmental Authority and any assessments or threatened assess-
ments in connection with such audit or otherwise currently
outstanding. As of the Closing Date, except as described on
Schedule 3.13, Borrower has not executed or filed with the IRS or
any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for
assessment or collection of any Charges. Borrower has not filed a
consent pursuant to IRC Section 341(f) or agreed to have IRC
Section 341(f)(2) apply to any dispositions of subsection (f)
assets (as such term is defined in IRC Section 341(f)(4)). None of
the property owned by Borrower or any Subsidiary of Borrower is
property which Borrower or any Subsidiary of Borrower is required
to treat as being owned by any other Person pursuant to the
provisions of IRC 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 or is "tax-exempt use property"
within the meaning of the IRC Section 168(h). As of the Closing
Date, except as set forth on Schedule 3.13, neither Borrower nor
any Subsidiary of Borrower has agreed or been requested to make any
adjustment under IRC Section 481(a) by reason of a change in
accounting method or otherwise. Neither Borrower nor any Subsid-
iary of Borrower has any obligation under any written tax sharing
agreement except as set forth on Schedule 3.13.
3.14 ERISA. (a) Schedule 3.14 lists all Plans main-
tained or contributed to by Borrower or any Subsidiary of Borrower
and all Qualified Plans maintained or contributed to by any ERISA
Affiliate, and separately identifies the Title IV Plans,
Multiemployer Plans, any multiple employer plans subject to Section
4064 of ERISA, unfunded Pension Plans, Welfare Plans and Retiree
Welfare Plans. Each Qualified Plan, if any, has been determined by
the IRS to qualify under Section 401 of the IRC, and the trusts
created thereunder have been determined to be exempt from tax under
the provisions of Section 501 of the IRC, and nothing has occurred
which would cause the loss of such qualification or tax-exempt
status. Each Plan is in compliance with the applicable provisions
of ERISA and the IRC, including the filing of reports required
under the IRC or ERISA, all of which are true and correct as of the
date filed, and with respect to each Plan, other than a Qualified
Plan, all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. Neither Borrower
or any Subsidiary of Borrower nor any ERISA Affiliate, with respect
to any Qualified Plan, has failed to make any contribution or pay
any amount due as required by Section 412 of the IRC or Section 302
of ERISA or the terms of any such Plan. With respect to all
Retiree Welfare Plans, the present value of future anticipated
expenses pursuant to the latest actuarial projections of liabili-
ties does not exceed $50,000 and copies of such latest projections
have been provided to Agent; with respect to Pension Plans, other
than Qualified Plans, the present value of the liabilities for
current participants thereunder using the PBGC interest rate for
immediate annuities in effect on the Closing Date does not exceed
$50,000. Neither Borrower nor any Subsidiary of Borrower has
engaged in a prohibited transaction, as defined in Section 4975 of
the IRC or Section 406 of ERISA, in connection with any Plan.
(b) Except as set forth on Schedule 3.14: (i) no Title
IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or
event described in Section 4062(e) of ERISA with respect to any
Title IV Plan has occurred or is reasonably expected to occur;
(iii) there are no pending or, to the knowledge of Borrower,
threatened claims, actions or lawsuits (other than claims for
benefits in the normal course), asserted or instituted against (x)
any Plan or its assets, (y) any fiduciary with respect to any Plan
or (z) Borrower, any Subsidiary of Borrower or any ERISA Affiliate
with respect to any Plan; (iv) neither Borrower or any Subsidiary
of Borrower nor any ERISA Affiliate has incurred or reasonably
expects to incur any Withdrawal Liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 of ERISA
as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years neither Borrower
or any Subsidiary of Borrower nor any ERISA Affiliate has engaged
in a transaction which resulted in a Title IV Plan with Unfunded
Liabilities being transferred outside of the "controlled group"
(within the meaning of Section 4001(a)(14) of ERISA) of any such
entity; (vi) no Plan which is a Retiree Welfare Plan provides for
continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's termination
of employment (except as may be required by Section 4980B of the
IRC and at the sole expense of the participant or the beneficiary
of the participant); Borrower, each Subsidiary of Borrower and each
ERISA Affiliate have complied with the notice and continuation
coverage requirements of Section 4980B of the IRC and the regula-
tions thereunder; and (vii) no liability under any Plan has been
funded, nor has any such obligation been satisfied, with the
purchase of a contract from an insurance company that is not rated
AAA by the Standard & Poor's Corporation and the equivalent by each
other nationally recognized rating agency.
3.15 No Litigation. Except as set forth in writing to
Agent, on behalf of itself and Lenders, in that certain letter of
even date herewith (the "Disclosure Letter"), as of the Closing
Date, no action, claim or proceeding is now pending or, to the
knowledge of Borrower, threatened against Borrower, or any
Subsidiary of Borrower, at law, in equity or otherwise, before any
court, board, commission, agency or instrumentality of any federal,
state, local or foreign government or of any agency or subdivision
thereof, or before any arbitrator or panel of arbitrators, (i)
which challenges Borrower's or any Domestic Subsidiary's right,
power or competence to enter into or perform any of its obligations
under this Agreement or any of the other Loan Documents, or the
validity or enforceability of any Loan Document or any action taken
thereunder or (ii) which seeks monetary damages in excess of
$400,000 or injunctive relief, nor to the knowledge of Borrower
does a state of facts exist which is reasonably likely to give rise
to such proceedings.
3.16 Brokers. No broker or finder acting on behalf of
Borrower brought about the obtaining, making or closing of the
loans made pursuant to this Agreement or the transactions
contemplated by the Loan Documents and neither Borrower nor any
Subsidiary of Borrower, nor Agent or any Lender by reason of any
action of Borrower, has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.
3.17 Patents, Trademarks, Copyrights and Licenses.
Except as otherwise set forth on Schedule 3.17, Borrower owns all
licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names necessary to
continue to conduct its business as heretofore conducted by it and
its Subsidiaries, now conducted by it and its Subsidiaries and
proposed to be conducted by it or any of its Subsidiaries each of
which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on Schedule
3.17. Schedule 3.17 lists all tradenames or other names under
which Borrower or any Subsidiary of Borrower conducts business.
Except as otherwise set forth in the Disclosure Letter, Borrower
and each of its Subsidiaries conducts its business without
infringement or claim of infringement of any license, patent,
copyright, service mark, trademark, trade name, trade secret or
other intellectual property right of others. Except as otherwise
set forth on Schedule 3.17, there is no infringement or claim of
infringement by others of any license, patent, copyright, service
mark, trademark, trade name, trade secret or other intellectual
property right of Borrower or any Subsidiary of Borrower.
3.18 Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, the Disclosure Letter,
the Financial Statements, the Collateral Reports or any written
statement furnished by or on behalf of Borrower or any Subsidiary
of Borrower pursuant to the terms of this Agreement, which has
previously been delivered to Agent or any Lender, contains any
untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein
not misleading in light of the circumstances under which they were
made. The Liens granted to Agent, on behalf of itself and Lenders,
pursuant to the Collateral Documents will at the Closing Date be
fully perfected first priority Liens in and on the Collateral
described therein, except as expressly permitted otherwise by the
Loan Documents.
3.19 Hazardous Materials. As of the Closing Date,
except as set forth in the Disclosure Letter, all real property
owned or leased by Borrower or any Subsidiary of Borrower is free
of contamination from any Hazardous Material. In addition, the
Disclosure Letter discloses all existing or potential environmental
liabilities of Borrower and its Subsidiaries of which Borrower has
knowledge which could constitute or result in a Material Adverse
Effect or any Environmental Liabilities or Costs. As of the
Closing Date, except as set forth in the Disclosure Letter, neither
Borrower nor any Subsidiary of Borrower has caused or suffered to
occur any Release at, under, above or within any real property
which it owns or leases. As of the Closing Date, except as set
forth in the Disclosure Letter, neither Borrower nor any Subsidiary
of Borrower is involved in any operations which are reasonably
likely to lead to the imposition of any liability or Lien on it or
any of its properties or other assets, or any owner of any premises
which it occupies, under the Environmental Laws, and neither
Borrower nor any Subsidiary of Borrower has permitted any tenant or
occupant of such premises to engage in any such activity.
3.20 Insurance Policies. Schedule 3.20 Part II lists
all insurance of any nature maintained for current occurrences by
Borrower or any Subsidiary of Borrower, as well as a summary of the
terms of such insurance. Borrower covenants that such insurance
complies with and shall at all times comply with the standards set
forth on Schedule 3.20 Part I.
3.21 Deposit and Disbursement Accounts. As of the
Closing Date, Schedule 3.21 lists all banks and other financial
institutions at which Borrower or any Domestic Subsidiary of
Borrower maintains deposits and/or other accounts, and such
Schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a
description of the purpose of the account and the complete account
number.
3.22 Government Contracts. As of the Closing Date,
except as set forth on Schedule 3.22 hereto, neither Borrower nor
any Subsidiary of Borrower is a party to any contract or agreement
with the federal government and none of the Accounts are subject to
the Federal Assignment of Claims Act (31 U.S.C. Section 3727)
relative to the assignment of such Accounts.
3.23 Customer and Trade Relations. There exists no
actual or threatened termination or cancellation of, or any
material adverse modification or change in: (a) the business
relationship of Borrower or any Subsidiary of Borrower with any
customer or group of customers of Borrower whose purchases
individually or in the aggregate are material to the operations of
Borrower, Borrower and its Subsidiaries, taken as a whole, or
Borrower and the Guarantor Subsidiaries, taken as a whole; or (b)
the business relationship of Borrower or any Subsidiary of Borrower
with any supplier material to the operations of Borrower, Borrower
and its Subsidiaries, taken as a whole, or Borrower and the
Guarantor Subsidiaries, taken as a whole.
3.24 Non-Material Subsidiaries. Neither any Non-
Guarantor Domestic Subsidiary nor any other Non-Material Subsidiary
has any assets or liabilities, other than (i) assets or liabilities
consisting solely of intercompany balances and/or intercompany
allocation of tax assets or liabilities, (ii) liabilities (whether
contingent or liquidated) of Zenith Electronics Corporation of
Pennsylvania with respect to environmental matters as disclosed to
Agent and Lenders in the Disclosure Letter (the "Pennsylvania
Liabilities"); (iii) with respect to Zenith Electronics (Ireland)
Limited: (y) assets consisting of cash or cash equivalents not
exceeding $135,000, in the aggregate and (z) liabilities (whether
contingent or liquidated) with respect to accrued accounts payable
not yet due and payable, accrued accounts payable subject to
dispute, liabilities for taxes filed but not yet finalized and
other miscellaneous liabilities and contingencies for which
reserves have been estimated and established, all of which
liabilities shall not exceed $200,000 in the aggregate
(collectively, the "Ireland Assets and Liabilities"); (iv) trade
payables incurred in the ordinary course of business consistent
with past practices by Interocean Advertising Corporation of
California and Interocean Advertising Corporation of Illinois; and
(v) with respect to Non-Material Subsidiaries other than Zenith
Electronics Corporation of Pennsylvania and Zenith Electronics
(Ireland) Limited other assets with a value not in excess of
$50,000. Neither any Non-Guarantor Domestic Subsidiary nor any
other Non-Material Subsidiary, except for Interocean Advertising
Corporation, Interocean Advertising Corporation of California and
Interocean Advertising Corporation of Illinois, carries on any
trade or business.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. (a) Borrower covenants and
agrees that from and after the Closing Date, it shall deliver to
Agent and/or Lenders, as required, the Financial Statements,
notices and Projections at the times, to the Persons and in the
manner set forth on Schedule 4.1(A).
(b) Borrower covenants and agrees that from and after
the Closing Date, it shall deliver to Agent and/or Lenders, as
required, the various Collateral Reports at the times, to the
Persons and in the manner set forth on Schedule 4.1(B).
4.2 Communication with Accountants. Borrower
authorizes Agent, on behalf of Lenders, to communicate either
through Borrower or with Borrower present (and upon the occurrence
and during the continuance of any Default or Event of Default,
directly and without the presence of Borrower) with its independent
certified public accountants and tax advisors and authorizes those
accountants to disclose to Agent, on behalf of Lenders, any and all
financial statements and other supporting financial documents and
schedules including copies of any management letter with respect to
the business, financial condition and other affairs of Borrower or
any of its Subsidiaries.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, unless Agent and
Requisite Lenders shall otherwise consent in writing, from and
after the date hereof:
5.1 Maintenance of Existence and Conduct of Business.
Borrower shall, and shall cause each of its Subsidiaries to: (a)
except as otherwise expressly permitted under this Agreement, do or
cause to be done all things necessary to preserve and keep in full
force and effect Borrower's and each of its Subsidiaries' corporate
existence and its rights and franchises; (b) except as otherwise
expressly permitted under this Agreement, continue to conduct
Borrower's and each of its Subsidiaries' business substantially as
now conducted or as otherwise permitted hereunder; (c) at all times
maintain, preserve and protect all of its United States, Canadian
and Mexican trademarks, patents, trade names, copyrights and all
United States, Canadian and Mexican other intellectual property and
rights as licensee or licensor thereof, including all rights of
Borrower and its Subsidiaries under and pursuant to the Tuning
System Patents and the Tuning System Patent Licenses; (d) at all
times maintain, preserve and protect all the remainder of
Borrower's and each of its Subsidiaries' properties, equipment,
fixtures and other assets in use or useful in the conduct of its
business, and keep the same in good repair, working order and
condition and from time to time make, or cause to be made, all
necessary or appropriate maintenance, service, repairs, replace-
ments and improvements thereto consistent with industry practices,
so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and (e) except
as otherwise expressly permitted under this Agreement, transact
business only in such names as are set forth on Schedule 5.1.
5.2 Payment of Obligations. (a) Borrower shall: (i)
pay and discharge or cause to be paid and discharged all
Obligations; (ii) so long as there shall not be any Default or
Event of Default, pay and discharge, or cause to be paid and
discharged, its Indebtedness other than the Obligations at the time
such amounts are due and payable; and (iii) subject to Section
5.2(b), pay and discharge or cause to be paid and discharged
promptly all (A) Charges imposed upon it, its income and profits,
or any of its property (real, personal or mixed), and (B) lawful
claims for labor, materials, supplies and services or otherwise,
before any thereof shall become in default.
(b) Borrower may in good faith contest, by proper legal
actions or proceedings, the validity or amount of any Charges or
claims arising under Section 5.2 (a) (iii) above; provided, that at
the time of commencement of any such action or proceeding, and
during the pendency thereof (i) no Default or Event of Default
shall have occurred, (ii) adequate reserves with respect thereto
are maintained on the books of Borrower, in accordance with GAAP,
(iii) such contest operates to suspend collection of the contested
Charges or claims and such contest is maintained and prosecuted
continuously and with diligence, (iv) none of the Collateral would
be subject to forfeiture or loss or any Lien by reason of the
institution or prosecution of such contest, (v) no Lien shall
exist, be imposed or be attempted to be imposed for such Charges or
claims during such action or proceeding, (vi) Borrower shall
promptly pay or discharge such contested Charges and all additional
charges, interest, penalties and expenses, if any, and shall
deliver to Agent evidence acceptable to Agent of such compliance,
payment or discharge, if such contest is terminated or discontinued
adversely to Borrower, and (vii) Agent has not advised Borrower in
writing that Agent believes that nonpayment or nondischarge thereof
could have or result in a Material Adverse Effect.
5.3 Books and Records. Borrower shall keep adequate
records and books of account with respect to Borrower's and its
Subsidiaries' business activities, in which proper entries,
reflecting all of their financial transactions (including consoli-
dating transactions), are made in accordance with GAAP and on a
basis consistent with the Financial Statements referred to in
Schedule 3.4.
5.4 Litigation. Borrower shall notify Agent in
writing, promptly upon learning thereof, of any litigation
commenced or, to the knowledge of Borrower, threatened against
Borrower or any Subsidiary of Borrower, and of the institution
against it of any suit or administrative proceeding, that (a) may
involve an amount in excess of $400,000, or (b) seeks injunctive
relief or could have or result in a Material Adverse Effect if
adversely determined.
17.5 Insurance. (a) Borrower shall, at its sole cost
and expense, maintain the policies of insurance described on
Schedule 3.20 in form and with insurers satisfactory to Agent.
Such policies shall be in such amounts as are set forth on Schedule
3.20 and in no event less than the amounts maintained on the
Closing Date, except as otherwise approved in writing in advance by
Agent in its sole discretion. Borrower shall notify Agent promptly
of any occurrence causing a material loss or decline in value of
any real or personal property of Borrower or any of its
Subsidiaries and the estimated (or actual, if available) amount of
such loss or decline. Except as otherwise specified on Schedule
3.20, Borrower hereby directs all present and future insurers under
its "All Risk" policies of insurance to pay all proceeds payable
thereunder directly to Agent, on behalf of Lenders as their
interests may appear; provided, however, that to the extent that
such proceeds are paid solely in respect of the loss of or damage
to Excluded Assets, Agent shall release such proceeds to Borrower
when and as necessary to pay for the repair, replacement or
reconstruction of the Excluded Assets subject to such casualty,
provided that: (i) at the time of any requested release of
insurance proceeds, no Default or Event of Default shall have
occurred and be continuing and (ii) the repair, replacement or
reconstruction of such Excluded Assets shall be reasonably
anticipated to be completed prior to the Commitment Termination
Date. Effective upon the occurrence of any Default or Event of
Default and for so long as any Default or Event of Default shall
have occurred and be continuing, Borrower irrevocably makes,
constitutes and appoints Agent (and all officers, employees or
agents designated by Agent) as Borrower's true and lawful agent and
attorney in-fact for the purpose of making, settling and adjusting
claims under the "All Risk" policies of insurance, endorsing the
name of Borrower on any check, draft, instrument or other item of
payment for the proceeds of such "All Risk" policies of insurance,
and for making all determinations and decisions with respect to
such "All Risk" policies of insurance. In the event Borrower at
any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required above or to pay any premium in
whole or in part relating thereto, Agent, without waiving or
releasing any Obligations or Default or Event of Default hereunder,
may at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium
and take any other action with respect thereto as Agent may deem
advisable. All sums so disbursed, including reasonable attorneys'
fees, court costs and other charges related thereto, shall be
payable, on demand, by Borrower to Agent and shall be additional
Obligations hereunder secured by the Collateral; provided, that, if
and to the extent that Borrower fails to promptly pay any of such
sums upon Agent's demand therefor, Agent is authorized to, and at
its option may, make or cause to be made advances on behalf of
Borrower for payment thereof.
(b) Agent reserves the right at any time, upon review
of Borrower's and/or any Guarantor Subsidiaries' risk profile, to
require additional forms and limits of insurance to, in Agent's
sole opinion, both adequately protect Agent's and Lenders'
interests in all or any portion of the Collateral and to ensure
that Borrower and each Guarantor Subsidiary is protected by
insurance in amounts and with coverage customary for businesses
engaged in their business. Upon the occurrence and during the
continuance of any Default or Event of Default, Agent reserves the
right at any time, upon review of Borrower's and/or any Material
Subsidiaries' risk profile, to require additional forms and limits
of insurance to, in Agent's sole opinion, adequately protect
Agent's and Lenders' interests, including, but not limited to,
their interests in the Collateral. Borrower shall, if so requested
by Agent, deliver to Agent, as often as Agent may request, a report
of a reputable insurance broker, satisfactory to Agent with respect
to its insurance policies.
(c) Borrower shall deliver to Agent endorsements (i) to
all "All Risk" and business interruption insurance naming Agent
loss payee, on behalf of itself and Lenders, and (ii) to all
general liability and other liability policies naming Agent, on
behalf of itself and Lenders, as an additional insured.
5.6 Compliance with Laws. Borrower and each of its
Subsidiaries shall comply with all federal, state, local and
foreign laws and regulations applicable to it, including those
relating to licensing, environmental, consumer credit,
truth-in-lending, ERISA and labor matters, except for those which
if not complied with, either individually or in the aggregate,
could have or result in a Material Adverse Effect.
5.7 Agreements. Borrower and each of its Subsidiaries
shall perform, within all required time periods (after giving
effect to any applicable grace periods), all of its obligations and
enforce all of its rights under each agreement to which it is a
party, including any leases and customer contracts to which it is a
party, where the consequence of failure to so perform could have or
result in a Material Adverse Effect. Neither Borrower nor any
Subsidiary of Borrower shall terminate or modify any provision of
any agreement to which it is a party which termination or
modification could have or result in a Material Adverse Effect.
5.8 Supplemental Disclosure. On the request of Agent
(in the event that such information is not otherwise delivered by
Borrower to Agent pursuant to this Agreement), so long as there are
Obligations outstanding hereunder, but not more frequently than
once every three (3) months, Borrower will supplement each schedule
or representation herein with respect to any matter hereafter
arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in
such schedule or as an exception to such representation or which is
necessary to correct any information in such schedule or represen-
tation which has been rendered inaccurate thereby; provided,
however, that such supplement to such schedule or representation
shall not be deemed an amendment thereof unless expressly consented
to in writing by Agent and Requisite Lenders, and no such
amendments, except as the same may be consented to in a writing
which expressly includes a waiver, shall be or be deemed a waiver
of any Default or Event of Default disclosed therein.
5.9 Employee Plans. Borrower shall notify Agent of (i)
to the extent that any of the following individually, or that all
of the following in the aggregate, exceeds $400,000, any and all
claims, actions, or lawsuits asserted or instituted, and any and
all threatened litigation or claims in connection with any Plan
maintained, at any time, by Borrower, any Subsidiary of Borrower or
any ERISA Affiliate, or to which Borrower, any Subsidiary of
Borrower or any ERISA Affiliate has or had at any time any
obligation to contribute and (ii) the occurrence of any Reportable
Event with respect to any Pension Plan of Borrower, any Subsidiary
of Borrower or any ERISA Affiliate.
5.10 Environmental Matters. Borrower and each
Subsidiary of Borrower shall (i) comply in all respects with the
Environmental Laws applicable to it, where the consequence of
failure to so comply, either individually or when considered in the
aggregate with all such failures to so comply, could have or result
in a Material Adverse Effect, (ii) notify Agent promptly after
Borrower becomes aware of any Release upon any premises owned or
occupied by Borrower or any Subsidiary of Borrower if such Release
requires reporting to a Governmental Authority and (iii) promptly
forward to Agent a copy of any order, notice, permit, application
or any communication or report received by Borrower in connection
with any such Release or any other matter relating to the
Environmental Laws that may affect such premises or Borrower or any
Subsidiary of Borrower. The provisions of this Section 5.10 shall
apply whether or not the Environmental Protection Agency, any other
federal agency or any state, local or foreign environmental or
other agency has taken or threatened any action in connection with
any Release or the presence of any Hazardous Materials.
5.11 Landlords' Agreements and Bailee Letters. Borrower
shall use its best efforts to obtain a landlord's agreement in form
and substance acceptable to Agent from the lessor of each leased
premises currently being used by Borrower or any Guarantor
Subsidiary and the lessor of any new leased premises, in each case
where Collateral is currently or may be located. Borrower shall
use its best efforts to obtain a bailee letter in form and
substance acceptable to Agent with respect to each warehouse
currently being used by Borrower or any Guarantor Subsidiary and
with respect to any warehouse used in the future, in each case
where Collateral is currently or may be located.
5.12 Public Offering Proceeds. Unless Agent shall
otherwise agree, Borrower shall apply the entire net cash proceeds
from any sale of Stock permitted under Section 6.18 hereof, first,
to the Indebtedness outstanding under the Revolving Loan Agreement
and, upon payment in full thereof, for any other legally
permissible purpose.
5.13 Notice of Labor Matters. Borrower shall provide
prompt notice to Agent of (i) any strike or other material labor
dispute against Borrower or any Subsidiary of Borrower, (ii) any
organizing efforts involving Borrower or any Subsidiary of Borrower
by any labor union or group of employees, and (iii) any complaints
or charges against Borrower or any Subsidiary of Borrower filed
with any federal, state, local or foreign court, governmental
agency or arbitrator involving an amount in excess of $400,000 and
based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by Borrower or any
Subsidiary of Borrower of any individual. Borrower shall provide
prompt notice to Agent of any collective bargaining agreement or
employment agreement with any officer entered into by Borrower or
any Material Subsidiary with any other Person and, together with
such notice, shall provide Agent with a copy of any such collective
bargaining agreement or employment agreement.
5.14 Government Contracts. Borrower shall designate in
the monthly report delivered to Agent pursuant to Section 4.1(b)
all Accounts arising out of any contract or agreement entered into
by Borrower or any Subsidiary with the federal government. In
addition, Borrower shall inform Agent, at any time and from time to
time upon Agent's request, as to whether or not such contract or
agreement is subject to the Federal Assignment of Claims Act (31
U.S.C. 3727) and, if subject to the Federal Assignment of Claims
Act, whether or not Borrower or the appropriate Subsidiary has
complied with such Act (providing evidence thereof if it has so
complied). Notwithstanding the foregoing, so long as the Revolving
Credit Loan is outstanding, Borrower's obligations under this
Section 5.14 shall be suspended.
5.15 Intellectual Property. If, upon the payment in
full of the Revolving Credit Loan and termination of the
commitments to make the Revolving Credit Loan, the Term Loan
remains outstanding, Borrower and each Guarantor Subsidiary shall
thereupon enter into Copyright Assignments and Trademark
Assignments in form and substance reasonably acceptable to Agent.
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, without Agent's and
Requisite Lenders' prior written consent, from and after the date
hereof:
6.1 Mergers, Etc. Neither Borrower nor any Subsidiary
of Borrower shall directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise
combine with, any Person or form any Subsidiary, except that so
long as no Default or Event of Default shall have occurred and be
continuing or would result after giving effect thereto: (i) any
Domestic Subsidiary may be merged with and into any other Domestic
Subsidiary or Borrower upon not less than thirty (30) days' prior
written notice to Agent and delivery to Agent of executed UCC-1
financing statements and such other documents and filings as may be
necessary or appropriate to maintain Agent's perfected security
interest in the Collateral; (ii) upon not less than thirty (30)
days prior written notice to Agent, Borrower may form additional
Domestic Subsidiaries if necessary to prudently manage or reduce
state or local tax liabilities; provided that if assets with a
value in excess of $25,000 are contributed to the capital of or
otherwise transferred to such Subsidiary, it shall within ten (10)
days thereafter (A) become a Guarantor Subsidiary, (B) become a
party to the Domestic Subsidiaries Guaranty, the Security Agreement
and the Guarantor Contribution Agreement and (C) shall execute and
deliver to Agent executed UCC-1 financing statements and such other
documents and filings as may be necessary to obtain a first
priority perfected security interest in any Collateral of that
Domestic Subsidiary; and (iii) upon not less than ten (10) days'
prior written notice to Agent, Borrower may form a Domestic
Subsidiary for the purpose of acquiring the finished goods bearing
Borrower's brand name from a distributor of Borrower the
distributor agreement of which has been terminated by Borrower or
such distributor or which distributor is insolvent and is likely to
sell those finished goods at distressed prices, and such Domestic
Subsidiary may acquire those finished goods; provided that (A) the
aggregate net cash outlay made with respect to the acquisitions of
such finished goods shall not exceed $5,000,000, (B) neither
Borrower nor any Subsidiary, including any Subsidiary formed in
connection therewith, shall assume or incur any liability, express
or implied, of such distributor, other than those unsecured
liabilities (other than Indebtedness), if any, which directly
relate to the finished goods Inventory being repurchased, and (C)
Borrower shall within ten (10) days after the formation of that
Domestic Subsidiary cause it to comply with provisions of clause
(ii) above regarding newly formed Domestic Subsidiaries with assets
in excess of $25,000.
6.2 Investments, Loans and Advances. Borrower shall
not, and shall not cause or permit any Subsidiary to, directly or
indirectly, make any investment in, or make or accrue loans or
advances to any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except for the
following:
(A) So long as no Default or Event of Default shall
have occurred and be continuing or would result after giving effect
thereto, intercompany loans by Borrower to any Material Subsidiary
or by any Subsidiary to Borrower; provided that in the case of
intercompany loans to any such Subsidiary: (i) such loans shall be
made solely in the ordinary course of business for the working
capital needs of such Subsidiary or Capital Expenditures made or
committed to by such Subsidiary solely in the ordinary course of
its business; (ii) at the time such intercompany loans are to be
made, those intercompany loans together with cash on hand or on
deposit held by such Subsidiary shall not exceed the cash needs of
that Subsidiary for working capital and Capital Expenditures which
it is contractually obligated to pay during the period of ten (10)
consecutive days following any date of determination; and (iii)
such intercompany loans shall be reflected on the books and records
of Borrower and shall be summarized in the monthly financial
statements delivered to Agent in accordance herewith (collectively,
"Intercompany Loans").
(B) Investments in Subsidiaries permitted in accordance
with Section 6.1 hereof.
(C) Loans to employees permitted in accordance with
Section 6.4 hereof.
(D) Investments in Foreign Subsidiaries arising from
the contribution to capital of Intercompany Loans owing by such
Foreign Subsidiaries to the extent necessary (i) to comply with the
capitalization requirements of the laws of the jurisdictions in
which such Subsidiaries are incorporated and (ii) for tax planning
purposes; provided, that the amount of such Investments in Foreign
Subsidiaries made after the date hereof for tax planning purposes
shall not exceed $20,000,000 in the aggregate.
(E) Investments by Borrower in its Subsidiaries as in
existence on the Closing Date.
(F) So long as no Default or Event of Default shall
have occurred and be continuing, Borrower and its Subsidiaries may
invest in (i) short term obligations of, or fully guaranteed by,
the United States government; (ii) commercial paper rated A-1 or
better by Standard and Poors or P-1 or better by Moody's; or (iii)
certificates of deposit issued by or time deposits with commercial
banks having capital and surplus in excess of $100,000,000 and no
set off rights against Borrower or any Subsidiary (other than for
normal and customary service charges or returned checks), but, in
each case with respect to Domestic Subsidiaries, only to the extent
necessary (a) to invest funds overnight that are not swept from
Borrower's and its Domestic Subsidiaries' cash management systems
maintained in accordance with Schedule C, (b) to the extent
necessary to invest funds which are permitted to be maintained in
bank accounts under Section 6.20(ii) or 6.20(iii) (which funds may
only be invested in investments satisfying the requirements of
(iii) immediately above), or (c) to the extent necessary to invest
funds so long as the advances outstanding under the Revolving
Credit Loan have been reduced to zero.
(G) Joint ventures formed between Borrower or any
Subsidiary and any Person that is not an Affiliate of Borrower;
provided that (i) neither Borrower nor any Subsidiary shall
contribute or be obligated to contribute any cash or cash
equivalents or other assets other than non-exclusive licenses to
use Patents to that joint venture and (ii) neither Borrower nor any
Subsidiary shall guarantee or be liable in any manner for any debts
or liabilities of that joint venture.
(H) Advances by Borrower or any Domestic Subsidiary for
payment of Taxes for up to ten days prior to the due date of such
Taxes in an amount not exceeding $5,250,000 in the aggregate at any
time, to one or more providers of payroll tax payment services
("Service Company") selected by Borrower, and reasonably acceptable
to Agent (such acceptance subject to reasonable prior notice to
Agent of the identity of such Service Company) which Service
Company shall have established, in the reasonable credit judgment
of Borrower, through net worth, insurance, security bond or
otherwise, such Service Company's ability to fulfill the tax
obligation against which funds have been advanced.
6.3 Indebtedness. Borrower shall not and shall not
cause or permit any Subsidiary to, directly or indirectly create,
incur, assume or permit to exist any Indebtedness, except:
(A) The Obligations;
(B) Indebtedness outstanding on the date hereof as set
forth on Schedule 6.3 hereto;
(C) Indebtedness secured by Liens set forth on Schedule
6.7 or Permitted Encumbrances;
(D) Indebtedness incurred in accordance with Section
6.26 hereof;
(E) Intercompany Loans permitted in accordance with
Section 6.2 hereof;
(F) Surety bonds entered into, solely in the ordinary
course of Borrower's or such Subsidiary's business;
(G) Insurance premium financing incurred solely in the
ordinary course of Borrower's business consistent with past
practice;
(H) Subordinated indebtedness on terms and conditions
and subordinated in right of payment to the Obligations in a
manner, satisfactory to Agent in its sole discretion in all
respects;
(I) The Convertible Debentures;
(J) The Revolving Credit Loan; and
(K) Other Indebtedness not to exceed $1,000,000 in the
aggregate.
6.4 Employee Loans and Transactions. Borrower shall
not and shall not cause or permit any Subsidiary to:
(i) make loans or advances to any employee or Affiliate
other than:
(A) Intercompany Loans permitted in accordance with
Section 6.2 hereof, or
(B) advances for travel and related expenses and
for relocation expenses (including any related tax reimbursements)
to Borrower's officers and employees and loans to employees in
Mexico, in each case solely in the ordinary course of business
consistent with past practice, and not to exceed $1,500,000 in the
aggregate for all such amounts outstanding at any time; or
(ii) enter into any transactions with any Affiliate
(excluding transactions between or among Borrower and the Guarantor
Subsidiaries or Borrower and its Subsidiaries in Mexico to the
extent such transactions are in the ordinary course of business in
accordance with past practices) except on an arms' length basis on
fair and reasonable terms no less favorable to Borrower or the
applicable Subsidiary than would be obtained in a transaction with
a Person that is not an Affiliate; or
(iii) except for that certain consulting agreement dated
as of July 1, 1994 between the Thomas Group, Inc. and Borrower, as
in effect as of the Closing Date and a copy of which has been
delivered to Agent, enter into any management consulting, advisory
or similar agreement providing for compensation determined by or as
a percentage of Borrower's or such Subsidiary's operating
performance or income.
6.5 Capital Structure and Business. Neither Borrower
nor any Subsidiary of Borrower shall: (i) make any change in any
of its business objectives, purposes or operations, (ii) make any
change in its capital structure, including the issuance of any
shares of Stock, warrants or other securities convertible into
Stock, other than as set forth on Schedule 6.5 hereto or permitted
under Section 6.18, or any revision of the terms of its outstanding
Stock; or (iii) amend its certificate or articles of incorporation
or bylaws if such amendment would have an adverse effect upon (i)
the Collateral or Agent's security interest therein; (ii) the
ability of Borrower or any Guarantor to repay the Obligations; or
(iii) Borrower's or any Subsidiary's ability to comply with any
provision of any Loan Document. Neither Borrower nor any
Subsidiary of Borrower shall engage in any business other than the
business currently engaged in by it.
6.6 Guaranteed Indebtedness. Neither Borrower nor any
Subsidiary of Borrower shall incur any Guaranteed Indebtedness
except:
(A) by endorsement of instruments or items of payment
for deposit to the general account of Borrower; and
(B) for Guaranteed Indebtedness incurred for the benefit
of Borrower or such Subsidiary of Borrower if the primary
obligation constitutes Indebtedness permitted by this Agreement;
and
(C) for Guaranteed Indebtedness of Borrower or such
Subsidiary of Borrower under Currency Protection Agreements, but
only to the extent entered into solely in the ordinary course of
Borrower's or such Subsidiary's business, which, in any event,
shall not include any speculative or similar investment purpose;
and
(D) guaranties issued by Borrower for the benefit of
any Material Subsidiary solely in the ordinary course of business
consistent with past practice with respect to leases, workmen's
compensation, performance of contracts, trade payables or customs
bonds owing or incurred by such Material Subsidiary solely in the
ordinary course of business of such Material Subsidiary consistent
with past practices; provided that neither such guaranty nor the
underlying obligations so guaranteed constitute Indebtedness or are
secured by a Lien and, provided, further, that, so long as any
Default or Event of Default shall have occurred and be continuing,
Borrower shall not enter into any such guaranty without the prior
written consent of Agent.
6.7 Liens. Neither Borrower nor any Subsidiary of
Borrower shall create or permit to exist any Lien on any of its
properties or other assets, except (A) presently existing or
hereafter created Liens in favor of Agent, on behalf of itself and
Lenders, (B) Liens set forth on Schedule 6.7, (C) Permitted
Encumbrances and (D) Liens created or permitted to be created in
accordance with Section 6.26. In addition, neither Borrower nor
any Subsidiary of Borrower shall become a party to any agreement,
note, indenture or instrument, or take any other action, which
would prohibit the creation of a Lien on any of its properties or
other assets, including on any Excluded Asset, in favor of Agent,
on behalf of itself and Lenders, as additional collateral for the
Obligations.
6.8 Sale of Assets. Neither Borrower nor any
Subsidiary of Borrower shall sell, transfer, convey, assign or
otherwise dispose of any of its properties or other assets
(including, without limitation, the capital stock of any
Subsidiary, any of its Accounts or any of the other Collateral),
other than:
(A) sales of Inventory in the ordinary course of
business;
(B) sales, transfers, conveyances, assignments or other
dispositions of Material Assets permitted in accordance with
Section 6.26; and
(C) sales of equipment or fixtures to Persons that are
not Affiliates of Borrower or any Subsidiary which are obsolete or
not used or usable in the ordinary course of Borrower's or the
applicable Subsidiaries' business, provided, that the fair value of
such assets sold shall not exceed $5,000,000 in the aggregate
during any Fiscal Year; the net cash proceeds thereof shall be
applied to the outstanding Revolving Credit Loan; and, unless Agent
and Requisite Lenders shall otherwise consent in writing, which
consent shall not be unreasonably withheld, such assets shall not
constitute Material Assets listed on Schedule 6.26 hereto.
6.9 Events of Default. Neither Borrower nor any
Subsidiary of Borrower shall take any action or omit to take any
action, which act or omission would constitute (a) a Default or an
Event of Default under, or noncompliance with any of, the terms of
this Agreement or any of the other Loan Documents or (b) a default
or an event of default pursuant to, or noncompliance with, any
other contract, lease, mortgage, deed of trust, instrument or
agreement to which it is a party or by which it or any of its
properties is bound which would have a Material Adverse Effect.
6.10 ERISA. Neither Borrower or any Subsidiary of
Borrower nor any ERISA Affiliate shall without Agent's prior
written consent acquire any new ERISA Affiliate that maintains or
has an obligation to contribute to a Pension Plan that has either
an "accumulated funding deficiency," as defined in Section 302 of
ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(e)(iii) of ERISA, in the case of any Plan other than a
Multiemployer Plan, and in Section 4211 of ERISA, in the case of a
Multiemployer Plan. Additionally, neither Borrower or any
Subsidiary of Borrower nor any ERISA Affiliate shall, without
Agent's prior written consent, terminate any Pension Plan that is
subject to Title IV of ERISA where such termination could
reasonably be anticipated to result in material liability to
Borrower or any Subsidiary of Borrower; permit any accumulated
funding deficiency, as defined in Section 302(a)(2) of ERISA, to be
incurred with respect to any Pension Plan; fail to make any
contributions or fail to pay any amounts due and owing as required
by the terms of any Plan before such contributions or amounts
become delinquent; make a complete or partial withdrawal (within
the meaning of Section 4201 of ERISA) from any Multiemployer Plan;
or at any time fail to provide Agent with copies of any Plan
documents or governmental reports or filings which may be requested
by Agent.
6.11 Financial Covenants. Borrower shall not breach or
fail to comply with any of the Financial Covenants (the "Financial
Covenants") set forth on Schedule 6.11.
6.12 Hazardous Materials. Except as set forth in the
Disclosure Letter, neither Borrower nor any Subsidiary of Borrower
shall, and neither Borrower nor any Subsidiary of Borrower shall
permit any other Person within its control to, cause or permit a
Release or the presence, use, generation, manufacture,
installation, Release, discharge, storage or disposal of any
Hazardous Materials on, under, in, above or about any of its real
estate or the transportation of any Hazardous Materials to or from
any real estate where such Release or such presence, use,
generation, manufacture, installation, Release, discharge, storage
or disposal would violate, or form the basis for liability under,
any Environmental Laws. If an Event of Default shall have occurred
and be continuing, Borrower, at its own expense, shall cause the
performance of such environmental audits and preparation of such
environmental reports as Agent may from time to time request as to
any location at which Collateral is then located, by reputable
environmental consulting firms acceptable to Agent, and in form and
substance acceptable to Agent.
6.13 Sale-Leasebacks. Neither Borrower nor any
Subsidiary of Borrower shall engage in any sale-leaseback or
similar transaction involving any of its assets, except (A) sale-
leaseback transactions with respect to Material Assets permitted in
accordance with Section 6.26 hereof and (B) so long as no Default
or Event of Default shall have occurred and be continuing, sale-
leaseback transactions of equipment or real estate not constituting
Material Assets; provided that (i) such sale-leaseback transactions
shall be subject to the terms governing sale-leaseback transactions
set forth in Section 6.26 hereof and (ii) the aggregate capitalized
liability outstanding with respect to such sale lease-back
transactions shall not exceed $5,000,000 in the aggregate at any
time.
6.14 Cancellation of Indebtedness. Neither Borrower nor
any Subsidiary of Borrower shall cancel any claim or debt owing to
it, except for (A) reasonable consideration negotiated on an arms
length basis and in the ordinary course of its business consistent
with past practices and (B) cancellation of Intercompany Loans
permitted to be cancelled in accordance with Section 6.2 hereof.
6.15 Restricted Payments. Neither Borrower nor any
Subsidiary of Borrower shall make any Restricted Payment except for
the payment of dividends or other distributions by a Subsidiary of
Borrower directly to Borrower; provided, however, that so long as
no Default or Event of Default shall have occurred and be continu-
ing, or would result after giving effect to the payment thereof,
Borrower may pay cash dividends with respect to preferred stock
permitted to be issued by it in accordance with Section 6.18
hereof, if at all; provided, that the amount of cash dividends paid
in respect of such preferred stock as of any date of determination
shall not exceed forty percent (40%) of the cumulative, positive
Net Income (net of all losses) earned by Borrower and its
Subsidiaries, on a consolidated basis, during the period from
April 4, 1993 through such date of determination, less the
aggregate amount of such cash dividends previously paid by Borrower
during such period.
6.16 Fiscal Year. Neither Borrower nor any Subsidiary
of Borrower shall change its Fiscal Year, except that Borrower and
its Subsidiaries may change their Fiscal Year to that date of each
year or the next succeeding year which is the Saturday closest to
December 31st of each year.
6.17 Change of Corporate Name. Neither Borrower nor any
Guarantor Subsidiary shall change its corporate name, except that a
Guarantor Subsidiary may change its name so long as no Default or
Event of Default shall have occurred and be continuing; provided
that at least thirty (30) days prior to such name change, the
Guarantor Subsidiary shall have given written notice thereof to
Agent and shall have delivered to Agent executed UCC-1s and such
other documents and filings as shall be necessary or desirable to
enable Agent to maintain its first priority security interest and
otherwise protect its security interest in the Collateral.
6.18 Sale of Stock. Neither Borrower nor any Subsidiary
of Borrower shall sell (whether in a public or private offering or
otherwise) any of its Stock, other than a sale of common stock of
Borrower solely for cash, and except for preferred stock or
convertible preferred stock on terms and conditions satisfactory to
Agent in its sole discretion.
6.19 Bank Accounts. Borrower shall not, and shall not
cause or permit any Subsidiary of Borrower to establish or maintain
any checking, depository, lock box or similar account other than
those accounts set forth on Schedule 3.21, accounts maintained by
Borrower's Foreign Subsidiaries outside the United States, and
those accounts, if any, in the United States which at all times
contain less than $50,000 per account and less than $250,000 for
all such accounts in the aggregate (without taking into account in
the calculation thereof amounts which are deposited into the cash
management system established and maintained in accordance with
Schedule C); provided that so long as no Default or Event of
Default shall have occurred and be continuing, (A) Borrower or any
Subsidiary may, upon at least fifteen (15) days' prior written
notice to Agent, establish additional disbursement or payroll
accounts; and (B) Borrower or any Subsidiary may, upon at least
thirty (30) days' prior written notice to the Agent, establish
additional depository or lock box accounts at banks acceptable to
Agent; provided, that, all such depository and lock box accounts
are subject to tri-party blocked account and/or lock box agreements
in form and substance satisfactory to Agent, in its sole
discretion, and such accounts are part of Borrower's cash
management systems established and maintained in accordance with
Schedule C.
6.20 Cash Management. Borrower shall not, and shall not
cause or permit any Subsidiary to accumulate or maintain cash (i)
in disbursement or payroll accounts as of any date of determination
in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements;
(ii) in the case of all bank accounts of Borrower or any Subsidiary
(other than those accounts, if any, in the United States which at
all times contain less than $50,000 per account and less than
$250,000 for all such accounts in the aggregate (without taking
into account in the calculation thereof amounts which are deposited
into the cash management system established and maintained in
accordance with Schedule C)), in excess of the cash needs of
Borrower or that Subsidiary for working capital and Capital
Expenditures which it is contractually obligated to pay solely in
the ordinary course of Borrower's or that Subsidiary's business
during the period of ten (10) consecutive days following any date
of determination; (iii) in the case of Zenith Video Tech
Corporation-Florida, in the minimum amount necessary to comply with
applicable laws, rules and regulations of the State of Florida; or
(iv) other than with respect to Zenith Electronics (Ireland)
Limited which shall not exceed $135,000 in the aggregate.
6.21 Non-Material Subsidiaries. Borrower shall not
cause or permit any Domestic Non-Guarantor Subsidiary or any other
Non-Material Subsidiary to own or hold any assets or assume or
incur any liabilities, other than (i) assets or liabilities
consisting solely of intercompany balances and/or intercompany
allocation of tax assets or liabilities, (ii) the Pennsylvania
Liabilities, (iii) the Ireland Assets or Liabilities, (iv) trade
payables incurred in the ordinary course of business consistent
with past practices by Interocean Advertising Corporation of
California and Interocean Advertising Corporation of Illinois, and
(v) with respect to Non-Material Subsidiaries other than Zenith
Electronics Corporation of Pennsylvania and Zenith Electronics
(Ireland) Limited, other assets which do not exceed $50,000 in
value in the aggregate as to each such Subsidiary of Borrower.
Borrower shall not cause or permit any Domestic Non-Guarantor
Subsidiary or any other Non-Material Subsidiary to engage in any
trade or business, except that those Domestic Non-Guarantor
Subsidiaries acting as domestic advertising agencies as of the
Closing Date may continue to do so.
6.22 Foreign Subsidiaries. Borrower shall not cause or
permit any Foreign Subsidiary to (i) sell Inventory to any Account
Debtor located in the United States and agrees that all such sales
to domestic Account Debtors shall be by Borrower or a Guarantor
Subsidiary or (ii) accumulate or maintain more than three (3) days'
supply of finished goods Inventory, other than (a) Partes de
Television de Reynosa, S.A. de C.V. and Productos de Magneticos de
Chihuahua, S.A. de C.V., which may maintain a supply of finished
goods Inventory in the ordinary course of business consistent with
past practices for sale to customers in Mexico and which, in
addition, may maintain a supply of finished goods Inventory in the
ordinary course of business for sale to customers located in
Central America and South America and (b) Zenith Radio Canada,
Ltd./Zenith Radio Canada Ltee., which may maintain a supply of not
more than $6,000,000 of finished goods Inventory in the ordinary
course of business consistent with past practices for sale to
customers in Canada.
Borrower shall cause Zenith Electronics Corporation of
Texas or Zenith Electronics Corporation of Arizona to maintain
ownership of and title to substantially all of the equipment used
by and substantially all of the Inventory processed or assembled by
the Foreign Subsidiaries located in Mexico; provided, however, that
Partes de Television de Reynosa, S.A. de C.V. and Productos de
Magneticos de Chihuahua, S.A. de C.V., may maintain a supply of
finished goods Inventory in the ordinary course of business
consistent with past practices for sale to customers in Mexico.
6.23 No Impairment of Upstreaming. Except in connection
with any current asset financing by a Foreign Subsidiary permitted
by and made in accordance with Section 6.26, Borrower shall not,
and shall not cause or permit any Subsidiary to, directly or
indirectly, enter into or become bound by any agreement,
instrument, indenture or other obligation which could directly or
indirectly restrict, prohibit or require the consent of any Person
with respect to the payment of dividends or distributions or the
making of Intercompany Loans by any Subsidiary to Borrower.
6.24 Amendment of Other Debt. Borrower shall not amend,
modify or permit to be amended or modified any of the documents
evidencing or governing the Subordinated Debt, the Convertible
Debentures, or any other Indebtedness if the documents evidencing
or governing the same were subject to the approval of Agent prior
to the execution thereof in accordance with this Agreement or any
other Loan Document.
6.25 Prepayments of Other Debt. Borrower shall not, and
shall not cause or permit any Subsidiary to, directly or
indirectly, prepay, repurchase, redeem, retire or otherwise prepay
the Subordinated Debt or the Convertible Debentures except (a) that
Borrower may cause the Subordinated Debt or the Convertible
Debentures to be converted into common stock of Borrower or, on
terms satisfactory to Agent in its sole discretion, into preferred
stock or subordinated debt of Borrower and (b) in the case of the
Subordinated Debt, as permitted pursuant to Section 1.5(iv) of the
Revolving Loan Agreement.
6.26 Permitted Asset Dispositions. Notwithstanding any
provision herein contained to the contrary, so long as no Default
or Event of Default has occurred and is continuing or would result
after giving effect thereto, Borrower may or may cause its
Subsidiaries, as applicable, to (i) sell those Material Assets
listed on Schedule 6.26 consisting of vacant or unused land or
buildings; (ii) sell or sell and lease back those Material Assets
designated as "Sale-Lease-Back Properties" on Schedule 6.26;
provided, however, that in the case of a sale and lease back of
real property at which Collateral is or may be kept, Borrower or
such Subsidiary shall have obtained a landlord waiver and consent
from the proposed owner of such property, in form and substance
satisfactory to Agent, in its sole discretion, prior to
consummation of such transaction; (iii) pledge, mortgage or
otherwise encumber those Material Assets and incur Indebtedness
secured by those Material Assets (other than the Tuning System
Patent Licenses) designated as "Pledge Assets" on Schedule 6.26,
subject to the following conditions:
(A) Any Material Assets sold in accordance herewith
shall be offered and sold on an arms' length basis to a Person that
is not an Affiliate of Borrower or any of its Subsidiaries; the
structure of any such Material Asset sale may be through a stock
sale, asset sale or any similar structure or combination thereof;
Borrower shall fully disclose the terms of any such sale to Agent
in writing not less than fifteen (15) Business Days prior to
becoming legally bound or committed thereto; all sales shall be
either for cash consideration only or for a combination of cash
consideration and non-cash consideration such that no more than
thirty-five percent (35%) of the total consideration shall consist
of non-cash consideration, unless Agent shall otherwise consent,
which consent shall not be unreasonably withheld, and all non-cash
consideration, if any, shall be pledged to Agent for the benefit of
the Lenders;
(B) In the case of sale-lease-back transactions of
Material Assets permitted hereby, Borrower shall fully disclose the
terms of any such transaction to Agent in writing not less than
fifteen (15) Business Days prior to becoming legally bound or
committed thereto; the terms of any such sale-lease-back
transaction shall be reasonably acceptable to Agent; and, in the
case of any such transaction involving lease or other payments by
Borrower and/or any of its Subsidiaries in excess of $5,000,000 in
the aggregate over the life of any such lease, the purchaser/lessor
shall have entered into an intercreditor agreement with Agent and
Lenders on terms reasonably satisfactory to Agent; and
(C) In the case of Indebtedness incurred pursuant to
clause (iii) above with respect to Pledge Assets, Borrower shall
fully disclose the terms of any transaction involving Pledge Assets
to Agent in writing not less than fifteen (15) Business Days prior
to becoming legally bound or committed thereto; the terms of any
such transaction involving Pledge Assets, including the terms of
any Indebtedness incurred in connection therewith, shall be
reasonably acceptable to Agent; and, in the case of any such
Indebtedness in excess of $5,000,000, the creditor holding the same
shall have entered into an intercreditor agreement with Agent and
Lenders on terms reasonably satisfactory to Agent.
7. TERM
7.1 Termination. Subject to the terms hereof, the
financing arrangement contemplated hereby shall be in effect until
the Commitment Termination Date; provided, however, that in the
event of a prepayment of any part of the Obligations, other than a
prepayment made in compliance with Section 6.26 in connection with
a Material Asset Disposition or from the proceeds of Indebtedness
permitted under Section 6.3(D), (H), (I), (J) or (K) prior to the
Commitment Termination Date with funds borrowed from any Person
other than Lenders pursuant to this Agreement, Borrower shall
simultaneously therewith pay to Agent, on behalf of Lenders, in
full, in immediately available funds all Obligations arising under
this Agreement or any of the other Loan Documents.
7.2 Survival of Obligations Upon Termination of
Financing Arrangement. Except as otherwise expressly provided for
in this Agreement or the other Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair
the obligations, duties and liabilities of Borrower or the rights
of Agent and Lenders relating to any unpaid Obligation, due or not
due, liquidated, contingent or unliquidated, or any transaction or
event occurring prior to such termination, or any transaction or
event the performance of which is not required until after the
Commitment Termination Date. Except as otherwise expressly
provided herein or in any other Loan Document, all undertakings,
agreements, covenants, warranties and representations of or binding
upon Borrower or any Subsidiary of Borrower, and all rights of
Agent and Lenders, all as contained in this Agreement or any of the
other Loan Documents shall not terminate or expire, but rather
shall survive such termination or cancellation and shall continue
in full force and effect until such time as all of the Obligations
have been indefeasibly paid in full or performed in accordance with
the terms of the agreements creating such Obligations.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or
more of the following events (regardless of the reason therefor)
shall constitute an "Event of Default" hereunder:
(a) Borrower shall fail to make any payment of
principal in respect of the Term Loan when due or declared due, or
Borrower shall fail to make any other payment in respect of the
Obligations within five days after such payment is due or declared
due.
(b) Borrower or any Subsidiary of Borrower shall fail
or neglect to perform, keep or observe any of the provisions of
Section 1.10, Section 5.5(a), Section 5.12, or any of Sections 6.1
through 6.26, inclusive, including any of the provisions set forth
on Schedule C or Schedule 6.11.
(c) Borrower or any Subsidiary of Borrower shall fail
or neglect to perform, keep or observe any term or provision of
this Agreement (other than any such term or provision referred to
in paragraph (a) or (b) above) or any of the other Loan Documents,
and the same shall remain unremedied for a period ending thirty
(30) days after Borrower shall become aware thereof.
(d) A default shall occur and be continuing under any
other agreement, document or instrument to which Borrower or any
Subsidiary of Borrower is a party or by which Borrower or any
Subsidiary of Borrower or any of Borrower's or any Subsidiary of
Borrower's properties or other assets is bound and such default (i)
involves an event of default under the Revolving Loan Agreement,
(ii) involves any default or event of default under the
Subordinated Debt or Convertible Debentures, or (iii) causes, or
permits any holder of such Indebtedness or any trustee to cause,
such Indebtedness or a portion thereof in an amount exceeding
$5,000,000 for all such Indebtedness in the aggregate, to become
due prior to its stated maturity or prior to its regularly
scheduled dates of payment.
(e) Any representation or warranty herein or in any
other Loan Document or in any written statement pursuant hereto or
thereto, any report, financial statement or certificate made or
delivered to Agent or any Lender by Borrower or any Subsidiary of
Borrower shall be untrue or incorrect in any material respect, as
of the date when made or deemed made.
(f) Any of the assets of Borrower or any Material
Subsidiary of Borrower (including any Collateral) shall be
attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors of Borrower or
any Material Subsidiary of Borrower and shall remain unstayed or
undismissed for forty (40) consecutive days; or any Person other
than Borrower shall apply for the appointment of a receiver,
trustee or custodian for any of Borrower's or any of its Material
Subsidiaries' assets and shall remain unstayed or undismissed for
forty (40) consecutive days; or Borrower or any Material Subsidiary
of Borrower shall have concealed, removed or permitted to be
concealed or removed, any part of its properties or other assets
with intent to hinder, delay or defraud its creditors or any of
them or made or suffered a transfer of any of its properties, or
obligation, which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced
against Borrower or any Material Subsidiary of Borrower in a court
having competent jurisdiction seeking a decree or order (i) under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar
official) of Borrower or any Material Subsidiary of Borrower or of
any substantial part of Borrower's or any Material Subsidiary of
Borrower's properties, or other assets, or (iii) ordering the
winding up or liquidation of the affairs of Borrower or any
Material Subsidiary of Borrower and such case or proceeding shall
remain undismissed or unstayed for forty (40) consecutive days or
such court shall enter a decree or order granting the relief sought
in such case or proceeding.
(h) Borrower or any Material Subsidiary of Borrower
shall (i) file a petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other applicable federal, state or foreign bankruptcy or other
similar law, (ii) make an assignment for the benefit of creditors,
(iii) consent to the institution of proceedings thereunder or to
the filing of any such petition or to the appointment of or taking
of possession by a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of Borrower or any
Material Subsidiary of Borrower or of any substantial part of
Borrower's or any of its Material Subsidiaries' properties or other
assets, (iv) fail generally to pay its debts as such debts become
due, or (v) take any corporate action in furtherance of any such
action.
(i) A final judgment or judgments (after the expiration
of all times to appeal therefrom) for the payment of money in
excess of $5,000,000 in the aggregate during any Fiscal Year shall
be rendered against Borrower or any Subsidiary of Borrower unless
the same shall be (i) fully covered by insurance in accordance with
Section 5.5 and the insurer shall have accepted liability therefor
in writing or (ii) vacated, stayed, bonded, paid or discharged
within a period of fifteen (15) days from the date of such
judgment.
(j) Any other event shall have occurred which has a
Material Adverse Effect.
(k) Any provision of any Collateral Document, after
delivery thereof pursuant to Section 2.1, shall for any reason
cease to be valid, binding and enforceable in accordance with its
terms, or any security interest created under any Collateral
Document shall cease to be a valid and perfected security interest
or Lien having the first priority as to all of the Collateral
purported to be covered thereby, subject only to Liens permitted in
accordance with the terms of the Security Agreement.
(l) There shall be any Change in Control of Borrower.
8.2 Remedies. If any Default or Event of Default shall
have occurred and be continuing, Agent may, without notice, and, at
the request of the Requisite Lenders, shall, take any one or more
of the following actions: (a) increase the rate of interest
applicable to the Term Loan to the Default Rate, as provided in
Section 1.7(e), or (b) declare all or any portion of the
Obligations to be forthwith due and payable, whereupon such
Obligations shall become and be due and payable, without
presentment, demand, protest or further notice of any kind, all of
which are expressly waived by Borrower, and exercise any rights and
remedies provided to Agent under this Agreement and the other Loan
Documents and/or at law or equity, including all remedies provided
under the Code; provided, however, that upon the occurrence of an
Event of Default specified in Section 8.1(f), (g) or (h), all
Obligations shall automatically become immediately due and payable
without any declaration, notice or demand by Agent.
8.3 Waivers by Borrower. Except as otherwise provided
for in this Agreement, Borrower waives: (i) presentment, demand and
protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of
any or all Loan Documents, Term Notes, commercial paper, accounts,
contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent or any Lender on which
Borrower may in any way be liable, and hereby ratifies and confirms
whatever Agent may do in this regard on behalf of Lenders, (ii) all
rights to notice and a hearing prior to Agent's taking possession
or control of, or to Agent's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any
court prior to allowing Agent to exercise any of its or any
Lender's remedies, and (iii) the benefit of all valuation,
appraisal and exemption laws. Borrower acknowledges that it has
been advised by counsel of its choice with respect to this
Agreement, the other Loan Documents and the transactions evidenced
by this Agreement and the other Loan Documents and has knowingly
entered into this Agreement and each of the other Loan Documents.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations. GE Capital may
assign its rights and delegate its obligations as a Lender under
this Agreement and, further, may assign, or sell participations in,
all or any part of its Pro Rata Share of the Term Loan or any other
interest herein or in its Term Note to an Affiliate or to any
another Person.
Unless Agent shall have otherwise agreed in writing, no
other Lender shall assign any of its rights or delegate any of its
obligations under this Agreement or any of the other Loan Documents
or assign, or sell any participation in, all or any part of its Pro
Rata Share of the Term Loan or any other interest herein or in its
Term Note to any Affiliate or other Person.
In the case of an assignment by GE Capital under this
Section 9.1, (or in the event, if any, that Agent shall so agree in
writing, an assignment by another Lender), the assignee shall have,
to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder. The
assigning Lender shall be relieved of its obligations hereunder
with respect to its Term Loan. Borrower hereby acknowledges and
agrees that any assignment will give rise to a direct obligation of
Borrower to the assignee and that the assignee shall be considered
to be a "Lender."
GE Capital may (or, in the event, if any, that Agent
shall so agree in advance in writing, another Lender may) sell
participations in all or any part of its Pro Rata Share of the Term
Loan to an Affiliate or any other Person; provided that all amounts
payable by Borrower hereunder shall be determined as if that Lender
had not sold such participation and the holder of any such
participation shall not be entitled to require such Lender to take
or omit to take any action hereunder except action directly
affecting (a) any reduction in the principal amount, interest rate
or fees payable with respect to the Term Loan; (b) any extension of
the final Scheduled Installment; and (c) any release of any
Collateral with a value in excess of $2,500,000 in the aggregate
(other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents). Borrower hereby
acknowledges and agrees that any participation will give rise to a
direct obligation of Borrower to the participant and the
participant shall for purposes of Sections 1.14, 1.16 and 9.3 be
considered to be a "Lender."
Any Lender permitted to sell assignments and
participations under this Section 9.1 may furnish any information
concerning Borrower and its Subsidiaries in the possession of that
Lender from time to time to assignees and participants (including
prospective assignees and participants).
Borrower shall assist any Lender permitted to sell
assignments or participations under this Section 9.1 in whatever
manner necessary in order to enable or effect any such assignment
or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall
be requested and the preparation of informational materials for,
and the participation of relevant management in meetings with,
potential assignees or participants. Borrower shall certify the
correctness, completeness and accuracy of all descriptions of
Borrower and its affairs contained in any selling materials and all
information provided by it and included in such materials. No
information provided to potential co-Lenders or participants shall
be provided unless and until such potential co-Lenders or
participants have signed a confidentiality agreement substantially
in the form provided to Borrower and used by Agent prior to the
Closing Date.
9.2 Appointment of Agent. GE Capital is hereby
appointed Agent hereunder to act on behalf of all Lenders as Agent
under this Agreement and the other Loan Documents. The provisions
of this Section 9.2 are solely for the benefit of Agent and Lenders
and neither Borrower or any Subsidiary of Borrower nor any other
Person shall have any rights as a third party beneficiary of any of
the provisions hereof. In performing its functions and duties
under this Agreement and the other Loan Documents, Agent shall act
solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of
agency or trust with or for Borrower, any Subsidiary of Borrower or
any other Person. Agent shall have no duties or responsibilities
except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and
administrative in nature and Agent shall not have, or be deemed to
have, by reason of this Agreement, any other Loan Document or
otherwise a fiduciary relationship in respect of any Lender.
Neither Agent nor any of its officers, directors, employees, agents
or representatives shall be liable to any Lender for any action
taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, unless
caused by its or their own gross negligence or willful misconduct
as finally determined by a court of competent jurisdiction after
all possible appeals have been exhausted.
The agency hereby created shall in no way impose any of
the rights and powers of, or impose any duties or obligations upon,
Agent in its individual capacity as a Lender hereunder. Agent
shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not performing the
duties and functions delegated to it hereunder. Agent may resign
at any time by giving thirty (30) days prior written notice thereof
to Lenders and Borrower. Upon any such resignation, Requisite
Lenders shall have the right, upon five (5) days notice to
Borrower, to appoint a successor Agent. Upon acceptance of
appointment, the successor Agent shall succeed to and become vested
with all rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from all of its
duties and obligations under this Agreement and the other Loan
Documents.
If Agent shall request instructions from Requisite
Lenders with respect to any act or action (including failure to
act) in connection with this Agreement or any other Loan Document,
then Agent shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions
from Requisite Lenders; and Agent shall not incur liability to any
Person by reason of so refraining. Agent shall be fully justified
in failing or refusing to take any action hereunder or under any
other Loan Document (a) if such action would, in the opinion of
Agent, be contrary to law or the terms of this Agreement or any
other Loan Document or (b) if Agent shall not first be indemnified
to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any
such action. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders.
9.3 Set Off and Sharing of Payments. In addition to
any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and
during the continuance of any Event of Default, each Lender and
each holder of any Term Note is hereby authorized at any time or
from time to time, without notice to Borrower or to any other
Person, any such notice being hereby expressly waived, to set off
and to appropriate and to apply any and all balances held by it at
any of its offices for the account of Borrower or any Guarantor
Subsidiary (regardless of whether such balances are then due to
Borrower or such Guarantor Subsidiary) and any other properties or
assets any time held or owing by that Lender or that holder to or
for the credit or for the account of Borrower or any Guarantor
Subsidiary against and on account of any of the Obligations which
are not paid when due. Any Lender or holder of any Term Note
having a right to set off shall, to the extent the amount of any
such set off exceeds its Pro Rata Share of the Obligations,
purchase for cash (and the other Lenders or holders shall sell)
such participations in each such other Lender's or holder's Pro
Rata Share of the Obligations as would be necessary to cause such
Lender to share such excess with each other Lender or holder in
accordance with their respective Pro Rata Shares. Borrower agrees,
to the fullest extent permitted by law, that (a) any Lender or
holder may exercise its right to set off with respect to amounts in
excess of its Pro Rata Share of the Obligations and may sell
participations in such excess to other Lenders and holders and (b)
any Lender or holders so purchasing a participation in any Pro Rata
Share of the Term Loan or other Obligations held by other Lenders
or holders may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation
as fully as if such Lender or holder were a direct holder of such
Pro Rata Share of the Term Loan and other Obligations in the amount
of such participation.
9.4 Disbursements of Payments and Information. (a) The
Agent shall disburse by wire transfer of good funds to each Lender
its Pro Rata Share of all principal, interest, and, if applicable,
Fees received by Agent with respect to the Term Loan within one (1)
Business Day after Agent's receipt of the corresponding payment
from Borrower.
(b) Return of Payments.
(1) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related
payment is not received by Agent, then Agent will be entitled to
recover such amount from such Lender on demand without set-off,
counterclaim or deduction of any kind.
(2) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to
Borrower or paid to any other Person pursuant to any insolvency law
or otherwise, then, notwithstanding any other term or condition of
this Agreement or any other Loan Document, Agent will not be
required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together
with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without set-off, counterclaim or
deduction of any kind.
(c) Dissemination of Information.
Agent will use reasonable efforts to provide Lenders
with any information received by Agent from Borrower which is
required to be provided to Lenders hereunder, with any notice of
Default or Event of Default received by Agent from Borrower, with
any notice of Default or Event of Default delivered by Agent to
Borrower, with notice of any Default or Event of Default of which
Agent has become aware and with notice of any action taken by Agent
following any Default or Event of Default; provided, however, that
Agent shall not be liable to any Lender for any failure to do so,
except to the extent that such failure is attributable to Agent's
gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction after all possible appeals have
been exhausted.
10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns. This Agreement and the
other Loan Documents shall be binding on and shall inure to the
benefit of Borrower, the Domestic Subsidiaries, Agent, Lenders and
their respective successors and assigns, except as otherwise
provided herein or therein. Neither Borrower nor any Domestic
Subsidiary shall assign, transfer, hypothecate or otherwise convey
any of its rights, benefits, obligations or duties hereunder or
under any of the other Loan Documents to any Person without the
prior express written consent of Agent and Requisite Lenders. Any
such purported assignment, transfer, hypothecation or other
conveyance by Borrower or any Domestic Subsidiary without the prior
express written consent of Agent shall be void. The terms and
provisions of this Agreement are for the purpose of defining the
relative rights and obligations of Borrower, the Domestic
Subsidiaries, Agent and Lenders with respect to the transactions
contemplated hereby and there shall be no third party beneficiaries
of any of the terms or provisions of this Agreement or any of the
other Loan Documents.
11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement.
This Agreement and the other Loan Documents constitute the complete
agreement between the parties with respect to the subject matter
thereof and may not be modified, altered or amended except as set
forth in Section 11.2 below. Any letter of interest or commitment
letter between Borrower and GE Capital or any of its affiliates, or
between Borrower and BNYCC, predating this Agreement and relating
to a financing of substantially similar form, purpose or effect
shall be superseded by this Agreement.
11.2 Amendments and Waivers. (a) Except as otherwise
provided herein, no amendment, modification, termination or waiver
of any provision of this Agreement or any of the Term Notes, or
consent to any departure by Borrower or any Subsidiary of Borrower
therefrom, shall in any event be effective unless the same shall be
in writing and signed by Requisite Lenders and Borrower.
(b) Except to the extent permitted by any applicable
Lender Addition Agreement, no amendment, modification, termination
or waiver shall, unless in writing and signed by each affected
Lender, do any of the following: (a) reduce the principal of, rate
of interest on or Fees payable with respect to the Term Loan; (b)
extend the final scheduled maturity date of the principal amount of
the Term Loan; (c) waive, forgive, defer, extend or postpone any
payment required hereunder; (d) release any Guarantor with gross
assets in excess of $2,500,000; (e) except as otherwise
contemplated herein or in one of the other Loan Documents, permit
Borrower or any Guarantor Subsidiary to sell or otherwise dispose
of any Collateral with a value exceeding $2,500,000 in the
aggregate; (f) change the percentage of the Term Loan or of the
aggregate unpaid principal amount of the Term Loan which shall be
required for Lenders or any of them to take any action hereunder;
(g) release Collateral with a value exceeding $2,500,000 in the
aggregate (except if the sale or other disposition of such
Collateral is permitted under the Loan Documents); (h) amend or
waive Section 1.3(b); (i) amend or waive clause (ii) of the
definition of "Enforcement Period" contained in the Intercreditor
Agreement; and (j) amend or waive this Section 11.2 or the
definitions of the terms used in this Section 11.2 insofar as the
definitions affect the substance of this Section 11.2; and
provided, further, that no amendment, modification, termination or
waiver affecting the rights or duties of Agent under this Agreement
or any other Loan Document shall in any event be effective, unless
in writing and signed by Agent, in addition to Lenders required
hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given. No
amendment, modification, termination or waiver shall be required
for Agent to take additional Collateral pursuant to any Loan
Document. No amendment, modification, termination or waiver of any
provision of any Term Note shall be effective without the written
concurrence of the holder of that Term Note . No notice to or
demand on Borrower in any case shall entitle Borrower to any other
or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in
accordance with this Section 11.2 shall be binding upon each holder
of the Term Notes at the time outstanding and each future holder of
the Term Notes.
11.3 Fees and Expenses. Borrower shall reimburse Agent
for all of its out-of-pocket expenses incurred in connection with
(i) the preparation of this Agreement and the other Loan Documents
(including the fees and expenses of Agent's counsel, advisors,
consultants and auditors retained in connection with this Agreement
and the other Loan Documents and the transactions contemplated
hereby and thereby and advice in connection therewith), and (ii)
wire transfers to the account of Borrower. Borrower shall
reimburse Agent for all fees, costs and expenses, including the
fees, costs and expenses of counsel and other advisors (including
environmental and management consultants), for advice, assistance
or other representation in connection with:
(a) any amendment, modification or waiver of, or
consent with respect to, this Agreement or any of the other Loan
Documents or advice in connection with the administration of the
loans made pursuant hereto or Agent's or any Lender's rights
hereunder or thereunder;
(b) any litigation, contest, dispute, suit, proceeding
or action (whether instituted by Agent, any Lender, Borrower, any
Subsidiary of Borrower or any other Person) in any way relating to
the Collateral, this Agreement or any of the other Loan Documents
or any other agreement to be executed or delivered in connection
therewith or herewith, whether as a party, witness or otherwise,
including any litigation, contest, dispute, suit, case, proceeding
or action, and any appeal or review thereof, in connection with a
case commenced by or against Borrower, any Subsidiary of Borrower
or any other Person that may be obligated to Agent or Lenders by
virtue of this Agreement or any of the other Loan Documents;
(c) any attempt to enforce any rights of Agent or any
Lender against Borrower, any Subsidiary of Borrower or any other
Person that may be obligated to Agent or any Lender by virtue of
this Agreement or any of the other Loan Documents; or
(d) any attempt to (i) monitor the Obligations, (ii)
evaluate, observe or assess Borrower, any of its Subsidiaries or
Borrower's or any of its Subsidiaries' affairs or (iii) verify,
protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral;
including all the attorneys' and other professional and service
providers' fees arising from such services, including those in
connection with any appellate proceedings; and all expenses, costs,
charges and other fees incurred by such counsel and others in any
way or respect arising in connection with or relating to any of the
events or actions described in this Section 11.3 shall be payable,
on demand, by Borrower to Agent. Without limiting the generality
of the foregoing, such expenses, costs, charges and fees shall
include: fees, costs and expenses of environmental advisors to
advise Agent, but not to conduct any on site environmental review
or testing, appraisers, management and other consultants,
paralegals, court costs and expenses, photocopying and duplication
expenses, court reporter fees, costs and expenses, long distance
telephone charges, air express charges, telegram charges,
secretarial overtime charges, expenses for travel, lodging and food
paid or incurred in connection with the performance of such legal
or other advisory services, and, in accordance with the GE Capital
Fee Letter, fees, costs and expenses of Agent's internal collateral
auditors, provided that so long as no Default or Event of Default
has occurred and is continuing such collateral audits or
examinations shall be conducted not more frequently than four (4)
times in any Fiscal Year; and, following the occurrence and during
the continuance of any Default or Event of Default, environmental
advisors for any reason, including to conduct on site environmental
reviews and testing, outside accountants, and investment bankers.
11.4 No Waiver. Agent's or any Lender's failure, at any
time or times, to require strict performance of any provision of
this Agreement or any of the other Loan Documents shall not waive,
affect or diminish any right of Agent or such Lender thereafter to
demand strict compliance and performance therewith. Any suspension
or waiver of an Event of Default under the Loan Documents shall not
suspend, waive or affect any other Event of Default under this
Agreement or any of the other Loan Documents whether the same is
prior or subsequent thereto and whether of the same or a different
type. None of the undertakings, agreements, warranties, covenants
and representations of Borrower and its Subsidiaries contained in
this Agreement or any of the other Loan Documents and no Default or
Event of Default under this Agreement and no defaults or events of
default under any of the other Loan Documents shall be deemed to
have been suspended or waived by Agent or any Lender, unless such
waiver or suspension is by an instrument in writing signed by an
officer of or other authorized employee of Agent and Requisite
Lenders and directed to Borrower specifying such suspension or
waiver.
11.5 Remedies. Agent's and Lenders' rights and remedies
under this Agreement shall be cumulative and nonexclusive of any
other rights and remedies which Agent or any Lender may have under
any other agreement, including the Loan Documents, by operation of
law or otherwise. Recourse to the Collateral shall not be
required.
11.6 Severability. Wherever possible, each provision of
this Agreement and the other Loan Documents shall be interpreted in
such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement or any other Loan Document
shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibi-
tion or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement and the
other Loan Documents.
11.7 Conflict of Terms. Except as otherwise provided in
this Agreement or any of the other Loan Documents by specific
reference to the applicable provisions of this Agreement, if any
provision contained in this Agreement is in conflict with, or
inconsistent with, any provision contained in any of the other Loan
Documents, the provision contained in this Agreement shall govern
and control.
11.8 Authorized Signature. Until Agent shall be
notified by Borrower to the contrary, the signature upon any
document or instrument delivered pursuant hereto of an officer of
Borrower or a Guarantor Subsidiary, as appropriate, listed on
Schedule 11.8 shall bind Borrower or such Guarantor Subsidiary, as
the case may be, and be deemed to be the act of Borrower or such
Guarantor Subsidiary, as the case may be, affixed pursuant to and
in accordance with resolutions duly adopted by Borrower's Board of
Directors or such Guarantor Subsidiary's Board of Directors, as
appropriate. Agent shall be entitled to assume the authenticity of
each signature and the authority of each Person whose signature it
is or appears to be unless the responsible Person of Agent acting
in reliance thereupon shall have actual knowledge, at the time of
reliance thereon, of the fact that such signature is false or the
Person whose signature or purported signature is presented is
without authority.
11.9 GOVERNING LAW; CONSENT TO JURISDICTION. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUC-
TION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE, AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA. BORROWER, AGENT AND LENDERS HEREBY
CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN COOK
COUNTY, ILLINOIS, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER, ANY GUARANTOR
SUBSIDIARY, AGENT OR ANY LENDER PERTAINING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
PROVIDED, THAT AGENT, LENDERS, BORROWER AND EACH GUARANTOR
SUBSIDIARY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE
TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS
AND, PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING
OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT OR LENDERS.
BORROWER, EACH GUARANTOR SUBSIDIARY, AGENT AND LENDERS EXPRESSLY
SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER, EACH GUARANTOR
SUBSIDIARY, AGENT AND LENDERS HEREBY WAIVE ANY OBJECTION WHICH THEY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS AND HEREBY CONSENT TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
BORROWER, EACH GUARANTOR SUBSIDIARY, AGENT AND LENDERS HEREBY WAIVE
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED
IN ANY SUCH ACTION OR SUIT AND AGREE THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED, IN THE CASE OF NOTICE TO BORROWER OR ANY GUARANTOR
SUBSIDIARY, TO BORROWER, IN THE CASE OF NOTICE TO AGENT, TO AGENT,
IN THE CASE OF NOTICE TO A LENDER, TO SUCH LENDER, AT THEIR
RESPECTIVE ADDRESSES SET FORTH ON SCHEDULE 11.10 OF THIS AGREEMENT
AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE
U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 Notices. Except as otherwise provided herein,
whenever it is provided herein that any notice, demand, request,
consent, approval, declaration or other communication shall or may
be given to or served upon any of the parties by any other party,
or whenever any the parties desires to give or serve upon any other
party any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been
validly served, given or delivered (i) upon the earlier of actual
receipt and three (3) days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper
postage prepaid, (ii) upon transmission, when sent by telecopy or
other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this
Section 11.10), (iii) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid or (iv) when
delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or
facsimile number indicated on Schedule 11.10 or to such other
address (or facsimile number) as may be substituted by notice given
as herein provided. The giving of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communica-
tion to any Person (other than Borrower or Agent) designated on
Schedule 11.10 to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
11.11 Section Titles. The Section titles and Table of
Contents contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto.
11.12 Counterparts. This Agreement may be executed in
any number of separate counterparts, each of which shall collec-
tively and separately constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE
PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER
THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM
AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN
AGENT, LENDERS, BORROWER OR ANY DOMESTIC SUBSIDIARY ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
11.14 Confidentiality. Each of the Lenders and Agent
agrees to exercise reasonable efforts to keep any non-public
information delivered or made available to it pursuant to this
Agreement or any other Loan Document, which Borrower has identified
in writing as confidential information, confidential from any
Person other than officers, employees, agents, designees or
representatives of such Lender or Agent who are or are expected to
become engaged in evaluating, approving, structuring or
administering this Agreement or any of the other Loan Documents or
any other transaction contemplated hereby or thereby; provided,
that, nothing herein shall prevent Agent or any Lender from
disclosing such information to any bona fide assignee, transferee
or participant that has agreed in writing to comply with this
Section 11.14 in connection with the contemplated assignment or
transfer of any portion of the Term Loan or participations therein;
to any of its Affiliates to the extent any such Affiliates require
such information in the ordinary course of Agent's or such Lender's
credit committee or asset management procedures; or as required or
requested by any Governmental Authority or representative thereof
or pursuant to legal process or as required in connection with the
exercise of any remedy under this Agreement or any of the other
Loan Documents.
[signature pages follow]
IN WITNESS WHEREOF, this Term Loan Agreement has been
duly executed as of the date first written above.
ZENITH ELECTRONICS CORPORATION
By:/s/ Willard C. McNitt
________________________________
Title: Vice President
_____________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By:/s/ Robert Battle
________________________________
Title: Authorized Signatory
____________________________
THE BANK OF NEW YORK COMMERCIAL
CORPORATION
By:/s/ Stephen Mangiante
________________________________
Title: Vice President
____________________________
CONGRESS FINANCIAL CORPORATION
By:/s/ Kenneth Donahue
________________________________
Title: Assistant Vice President
____________________________
ACKNOWLEDGED AND AGREE TO BE
BOUND BY ANY AND ALL PROVISIONS
HEREOF AFFECTING THEM:
ZENITH DISTRIBUTING CORPORATION
OF ILLINOIS
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION -
MIDSTATES
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION
OF NEW ENGLAND
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION
OF NEW YORK
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION -
SOUTHEAST
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH DISTRIBUTING CORPORATION -
WEST
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH/INTEQ, INC.
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH ELECTRONICS CORPORATION
OF ARIZONA
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH ELECTRONICS CORPORATION
OF TEXAS
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH MICROCIRCUITS CORPORATION
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH VIDEO TECH CORPORATION
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENITH VIDEO TECH CORPORATION -
FLORIDA
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
ZENTRANS, INC.
By: /s/ Willard C. McNitt
____________________________
Title: Treasurer
_________________________
EXHIBIT (10a)
RETIREMENT AND CONSULTING AGREEMENT
---------------------------------------
This Retirement and Consulting Agreement (this
"Agreement") is entered into as of April 10, 1995 between Zenith
Electronics Corporation, a Delaware corporation (the "Company"),
and Jerry K. Pearlman (the "Executive").
WHEREAS, the Executive currently serves as Chairman and
Chief Executive Officer and a director of the Company and has
served in various capacities with the Company since November 22,
1971;
WHEREAS, the Company and the Executive have entered
into an Amended and Restated Agreement dated January 21, 1991
(the "Employment Agreement") pursuant to which the Company has
agreed to continue the employment of the Executive upon the terms
set forth therein; and
WHEREAS, the Company and the Executive desire to set
forth herein their mutual agreement with respect to all matters
relating to the Executive's retirement and cessation of
employment with the Company, and the Company desires to retain
the services of the Executive as a consultant and to obtain a
covenant not to compete from the Executive, upon the terms set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises
and agreements contained herein, the adequacy and sufficiency of
which are hereby acknowledged, the Company and the Executive
hereby agree as follows:
1. Resignation; Termination of Employment. (a) On
the date hereof, the Executive shall execute and deliver to the
Company a resignation in the form attached hereto as Exhibit A,
effective as of April 25, 1995 (the "Effective Date"), and the
Executive shall as of the Effective Date cease to be the Chief
Executive Officer of the Company. The Executive shall continue
to be employed by the Company from the date hereof until the
close of business on April 30, 1995 (the "Employment Termination
Date"), at which time the Executive shall cease to be an employee
of the Company, but shall continue to be the Chairman and a
director of the Company. During the period commencing on the
Effective Date and ending on the Employment Termination Date the
duties of the Executive shall be as mutually agreed by the
Executive and the Company. The Executive's base salary through
the Employment Termination Date shall continue to be paid at the
annual rate of $475,000. On the date hereof, the Employment
Agreement shall be terminated and shall have no further force or
effect.
(b) Prior to May 1, 1995, the Executive shall execute
and deliver to the Company a resignation in the form attached
hereto as Exhibit B, effective as of December 31, 1995, and the
Executive shall as of such date cease to be the Chairman and a
director of the Company.
2. Payment of Accrued Amounts. The Company shall pay
to the Executive on the Employment Termination Date all amounts
due to the Executive for salary accrued for services rendered
through the Employment Termination Date, plus a lump sum cash
amount equal to $76,730.64, being the amount of the payment for
vacation days unused by the Executive during the period ending on
the date hereof, determined in accordance with Company policy,
which amount shall be reduced by $1,826.92 per day for each day
of vacation taken by the Executive between the date hereof and
the Employment Termination Date.
3. Incentive Compensation. If the Company's pre-tax
earnings for the year ending on December 31, 1995 ("1995
Earnings") are greater than the Profit Before Tax Threshold ("PBT
Threshold") approved by the Organization and Compensation
Committee (the "Committee") of the Board of Directors of the
Company (the "Board") for the Company's 1995 Management Incentive
Plan (the "Incentive Plan"), the Company shall pay to the
Executive an amount equal to one-third of the amount he would
have been entitled to receive under the Incentive Plan had he
remained the Chief Executive Officer of the Company through
December 31, 1995. Such payment shall be made not later than the
date upon which such payments under the Incentive Plan are made
to other officers of the Company. Under the Incentive Plan and
pursuant to this Section 3:
(a) if 1995 Earnings are equal to or less than the PBT
Threshold approved by the Committee, the Executive shall receive
no payment;
(b) if 1995 Earnings are equal to the Profit Before
Tax Target (the "PBT Target") approved by the Committee for the
Incentive Plan, the Executive shall receive $91,667;
(c) if 1995 Earnings exceed the PBT Threshold but are
less than the PBT Target, the Executive shall receive an amount
equal to $91,667 multiplied by a fraction, the numerator of which
is the amount by which 1995 Earnings exceeded the PBT Threshold
and the denominator of which is the difference between the PBT
Threshold and the PBT Target;
(d) if 1995 Earnings are equal to or greater than the
Profit Before Tax Maximum (the "PBT Maximum") approved by the
Committee for the Incentive Plan, the Executive shall receive
$137,500; and
(e) if 1995 Earnings exceed the PBT Target but are
less than the PBT Maximum, the Executive shall receive (i) the
amount of $91,667, plus (ii) an amount equal to $45,833
multiplied by a fraction, the numerator of which is the amount by
which 1995 Earnings exceeded the PBT Target and the denominator
of which is the difference between the PBT Target and the PBT
Maximum.
4. Federal and State Withholding. The Company shall
deduct from the amounts payable to the Executive pursuant to
Sections 2 and 3 hereof the amount of all required federal and
state withholding taxes in accordance with the Executive's Form
W-4 on file with the Company and all applicable social security
taxes.
5. Stock Options. (a) Prior to the Employment
Termination Date, the Committee shall exercise its discretion
pursuant to Sections 1.4 and 1.7 of the 1987 Zenith Stock
Incentive Plan (the "Stock Plan") to accelerate the
exercisability of options granted to the Executive to purchase
17,500 shares of Common Stock, $1 par value, of the Company
("Common Stock"), constituting all options granted to the
Executive by the Company which would otherwise be unexercisable
at the Employment Termination Date such that the Executive may
exercise such options from and after the Employment Termination
Date. Prior to the Employment Termination Date, the Committee
shall, pursuant to Sections 1.7 and 3.2 of the Stock Plan, amend
all stock options granted to the Executive which remain
unexercised at the date of such amendment (currently options to
purchase 205,000 shares of Common Stock) to provide that such
options may be exercised at any time prior to April 30, 1998.
(b) The Executive agrees that if the Board or any
committee of the Board is advised by any underwriter of
securities of the Company that because of such underwriting
activities stock options held by executive officers of the
Company should not be exercised during one or more specified
periods (each a "Black-Out Period") occurring at any time during
the period commencing on the date hereof and ending on December
31, 1995 and the Company notifies the Executive of the existence
of such a Black-Out Period, the Executive shall refrain from
exercising any stock options granted to him by the Company during
the duration of such Black-Out Period.
6. Restricted Stock. In accordance with the terms of
the Restricted Stock Agreement dated December 3, 1986, as
amended, and the Restricted Stock Award Agreement dated July 26,
1994, between the Company and the Executive, 81,081 shares of
restricted stock awarded to the Executive by the Company,
constituting all shares of restricted stock held by the Executive
at the date hereof, shall be forfeited on the Employment
Termination Date. The certificates representing such restricted
stock shall be assigned by the Executive to the Company as of the
Employment Termination Date.
7. Supplemental Retirement Benefit. The benefit which
would have been payable to the Executive upon his retirement
pursuant to the Company's Supplemental Executive Retirement Plan
shall be forfeited by the Executive and, in lieu of such benefit,
the Company shall pay to the Executive a supplemental retirement
benefit which shall consist of monthly amounts payable at the
beginning of each month during a 15-year period commencing May 1,
1995, each of which monthly payments shall be in the amount of
$6,480.40. In the event of the death of the Executive prior to
April 30, 2010, the then present value, using a discount rate of
7.8 percent, of the remaining unpaid monthly payments hereunder
shall be paid by the Company to the beneficiary or beneficiaries
designated in writing by the Executive.
8. Profit Sharing. The Executive shall be entitled to
participate in the Zenith Salaried Profit Sharing Retirement
Plan, as amended through December 19, 1994, and the Zenith
Supplemental Salaried Profit Sharing Retirement Plan
(collectively, the "Plans") through the Employment Termination
Date and the Executive shall be entitled to the distribution of
all amounts credited to his accounts in which he is vested on
such date, which distributions shall be made pursuant to the
direction of the Executive, provided that such direction is in
accordance with the terms of the Plans.
9. Insurance Benefits.
(a) Group Life, Group Disability and Group AD&D. The
coverage of the Executive under the Company's group life
insurance, group disability insurance and group accidental death
and dismemberment insurance policies shall terminate on the
Employment Termination Date in accordance with the terms of such
insurance policies, and the Executive shall have the option to
convert his coverage under the group life insurance policy and
group accidental death and dismemberment insurance policy to
individual coverage pursuant to the respective terms of such
policies.
(b) Executive Life. The coverage of the Executive
under the Company's executive death benefit program shall
continue in effect in accordance with the terms of such program,
as in effect from time to time, with the death benefit thereof
equal to $712,500 until May 1, 1996, on which date such death
benefit shall be reduced by $71,250, and the death benefit shall
be reduced on each succeeding May 1, through May 1, 2005, by an
additional $71,250. In the event of the death of the Executive
prior to May 1, 2005, the Company shall pay to the beneficiary or
beneficiaries designated in writing by the Executive the amount
of the death benefit then payable under such program.
(c) Medical and Dental. The coverage of the Executive
and his spouse under the Company's medical and dental insurance
policies, as such policies are in effect from time to time, shall
continue until March 31, 2004. The Company shall pay all
premiums relating to such policies until the Employment
Termination Date. During the period commencing on May 1, 1995
and ending on March 31, 2004, the Company shall, at the request
of the Executive, continue to pay all premiums relating to such
policies, provided that the Company is able to deduct from the
monthly amounts of Consulting Compensation (as defined in Section
12(b) hereof) paid to the Executive an amount equal to the
monthly cost to the Company of such insurance premiums plus an
amount equal to two percent of such premiums representing an
administration fee relating to such policies.
10. Automobile. During the period commencing on the
date hereof and ending on January 1, 1996, the Executive shall be
entitled to the full use of the 1993 Cadillac Seville STS owned
by the Company and used by the Executive. During such period,
the Company shall make all payments relating to the operation and
maintenance thereof and insurance thereon on the same terms as
such payments are made on the date hereof. As soon as
practicable following January 1, 1996, the Company shall assign
to the Executive ownership of such automobile, free and clear of
all liens, claims and encumbrances.
11. Other Benefits.
(a) Financial Planning. The Company shall, promptly
after a request from the Executive, pay the fees and expenses
incurred by the Executive, up to an aggregate maximum amount of
$4,000, in connection with (i) the review of the Executive's
estate plan, including existing documentation, by legal counsel
selected by the Executive and (ii) the services of legal counsel
and accountants selected by the Executive in connection with the
formation of a personal service corporation by the Executive.
(b) 1995 Personal Income Tax Returns. The Company
shall, promptly after a request from the Executive, pay the
customary fees and expenses of Arthur Andersen LLP incurred by
the Executive in connection with the preparation of his 1995
personal federal and Illinois income tax returns.
(c) Expenses of this Agreement. The Company shall,
promptly after a request from the Executive, pay the fees and
expenses incurred by the Executive, up to an aggregate maximum
amount of $10,000, in connection with the review of this
Agreement and related documents by legal counsel and other
advisors selected by the Executive.
(d) Products. The Executive shall be entitled to
retain the Company's products which are in his possession on the
date hereof for purposes of home observation until April 30,
1997. At such time, the Executive may, at his election, purchase
such products at their fair market value at such time, as
reasonably determined by the Company. If the Executive elects to
purchase such products, he shall pay to the Company the purchase
price therefor, as so determined by the Company, and the Company
shall transfer to the Executive all right, title and interest in
and to such products, free and clear of all liens, claims and
encumbrances.
12. Consulting Services.
(a) Performance of Services. The Company hereby
engages the Executive as a consultant for the period commencing
on May 1, 1995 and ending on March 31, 2004 (the "Consulting
Period"), during which period of engagement the Executive shall
make himself available to perform consulting services for the
Company with respect to the businesses conducted, or in
development, by the Company on the Employment Termination Date.
Such consulting services shall be related to such projects and
matters as the Board or the Chief Executive Officer of the
Company may designate from time to time and as are commensurate
with the Executive's years of experience and level of skill.
During the period commencing on May 1, 1995 and ending on
December 31, 1995, the Executive shall be available to perform
such consulting services on a part-time or full-time basis, as
the Company may request. During the period commencing on January
1, 1996 and ending on March 31, 2004, the Executive shall be
available to perform such consulting services at such times as
the Company and the Executive shall mutually agree; provided,
however, that the Executive shall not be required to devote more
than 10 days during any calendar quarter to the performance of
such consulting services.
(b) Compensation. As compensation for the consulting
services to be performed by the Executive hereunder, the Company
shall pay to the Executive on a monthly basis at the end of each
month for each of the 107 months during the Consulting Period an
amount equal to $18,000 per month (the "Consulting
Compensation"); provided, that if the Executive requests pursuant
to Section 9(c) hereof that the Company pay the premiums relating
to the medical and dental insurance policies described in Section
9(c), each monthly payment of Consulting Compensation shall be
reduced by the Company's monthly cost of such medical and dental
insurance premiums and the administration fee described in
Section 9(c). In the event of the death of the Executive during
the Consulting Period, the then present value, using a discount
rate of 7.8 percent, of the remaining unpaid Consulting
Compensation payable through the remainder of the Consulting
Period (i.e., through March 31, 2004) shall be paid by the
Company as a death benefit to the beneficiary or beneficiaries
designated in writing by the Executive.
(c) Grantor Trust. To ensure the payment of the
Consulting Compensation pursuant to Section 12(b) hereof, the
Company shall establish a grantor trust for the benefit of the
Executive and shall deposit an amount, representing the present
value of the Consulting Compensation, into such trust in three
installments as follows: (i) $70,845 shall be deposited on
January 2, 1996, (ii) $500,000 shall be deposited on May 1, 1996
and (iii) $835,305 shall be deposited on May 1, 1997. After
January 1, 1996, monthly payments of the Consulting Compensation
shall be made by the trustee of such trust as such payments
become due. In the event that the amounts deposited into such
trust are insufficient to pay the Consulting Compensation in
full, any portion of the Consulting Compensation not paid by the
trustee of the trust when due shall be paid by the Company. Any
amounts remaining in such trust after payment in full of the
Consulting Compensation shall be distributed to the Company. The
Executive acknowledges that such trust shall provide that in the
event of the insolvency of the Company, the assets of such trust
shall be subject to the claims of all of the Company's creditors.
(d) Special Bonus. The Company may, in the sole
discretion of the Board, pay a cash bonus to the Executive in
such amount as the Board shall deem appropriate based upon the
contributions of the Executive to special projects in which the
Executive shall participate during the period commencing on
May 1, 1995 and ending on December 31, 1995.
(e) Waiver of Director Compensation. The Executive
hereby waives payment of all fees to which he would otherwise be
entitled as a non-employee director of the Company and
acknowledges that he is not entitled to the grant of options or
the award of shares granted or awarded by the Company to
directors who are neither officers nor employees of the Company.
13. Noncompetition; Nonsolicitation. During the
Consulting Period, except with the prior written consent of the
Board, the Executive shall not:
(a) engage in any activities, whether as employer,
proprietor, partner, stockholder (other than the holder of less
than 2% of the stock of a corporation the securities of which are
traded on a national securities exchange or on the Nasdaq
National Market System), director, officer, employee, consultant
or otherwise, in competition with the businesses conducted, or in
development, by the Company at the Employment Termination Date,
which covenant not to compete shall be on a worldwide basis and
shall include all consumer home entertainment electronic
industries in which the Company competes on the Employment
Termination Date;
(b) directly or indirectly solicit, in competition
with the Company, any person who is a customer or prospective
customer of the businesses conducted, or in development, by the
Company at the Employment Termination Date; and
(c) induce or attempt to persuade any employee of the
Company to terminate his employment relationship with the
Company.
The Company and the Executive agree that in the event that the
Company does not request the Executive to perform consulting
services for more than 10 days during the 12-month period between
any May 1 and April 30, beginning on May 1, 1998, the
noncompetition covenant contained in this Section 13 shall
terminate at the end of such 12-month period and be of no further
force or effect.
14. Confidentiality. The Executive shall not, at any
time during the Consulting Period or thereafter, make use of or
disclose, directly or indirectly, any trade secret or other
confidential or secret information of the Company or other
technical, business, proprietary or financial information of the
Company not available to the public or to the competitors of the
Company ("Confidential Information"), except to the extent that
such Confidential Information (a) becomes a matter of public
record or is published in a newspaper, magazine or other
periodical available to the general public, (b) is required to be
disclosed by any law, regulation or order of any court or
regulatory commission, department or agency, or (c) as the Board
may so authorize in writing. Promptly following the Employment
Termination Date, the Executive shall surrender to the Company
all records and other documents obtained by him or entrusted to
him during the course of his employment by the Company (together
with all copies thereof); provided, however, that the Executive
may retain copies of such documents as are necessary for the
performance of consulting services pursuant to Section 12(a)
hereof or for the preparation of his federal or state income tax
returns.
15. Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of the Executive
contained in Sections 13 and 14:
(a) the covenants contained in Section 13 shall apply
on a worldwide basis, which is the basis on which the Company is
actively engaged in the conduct of its businesses and in which
customers are being solicited;
(b) without limiting the right of the Company to
pursue all other legal and equitable remedies available for
violation by the Executive of the covenants contained in Sections
13 and 14, it is expressly agreed by the Executive and the
Company that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be
entitled to injunctive relief to prevent any such violation or
any continuing violation thereof; and
(c) the Company and the Executive each intends and
agrees that the covenants contained in Sections 13 and 14 are
reasonably designed to protect the Company's legitimate business
interests without unnecessarily or unreasonably restricting the
Executive's business opportunities during or after the
termination of the Consulting Period, but that if in any action
before any court or agency legally empowered to enforce the
covenants contained in Sections 13 and 14 any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency.
16. Release. The Executive, on behalf of himself and
anyone claiming through him, including, but not limited to, his
past, present and future spouses, family members, relatives,
agents, attorneys, representatives, heirs, executors and
administrators, and the predecessors, successors and assigns of
each of them, hereby releases and agrees not to sue the Company
or any of its divisions, subsidiaries, affiliates, other related
entities (whether or not such entities are wholly owned) or the
officers, directors, agents, attorneys or representatives
thereof, or the predecessors, successors or assigns of each of
them (hereinafter jointly referred to as the "Released Parties"),
with respect to any and all known or unknown claims which the
Executive now has, has ever had, or may in the future have,
against any of the Released Parties for or related in any way to
anything occurring from the beginning of time up to and including
the Employment Termination Date, including, without limiting the
generality of the foregoing, any and all claims which in any way
result from, arise out of, or relate to, the Executive's
employment by the Company or the termination of such employment,
including, but not limited to, any and all claims for severance
or termination payments under any program or arrangement of the
Company or any claims that could have been asserted by the
Executive or on his behalf against any of the Released Parties in
any federal, state or local court, commission, department or
agency under any fair employment, contract or tort law, or any
other federal, state or local law, regulation or ordinance,
including, without limitation, Title VII of the Civil Rights Act
of 1964, the Employee Retirement Income Security Act, the
Americans with Disabilities Act or the Age Discrimination in
Employment Act, or under any compensation, bonus, severance,
retirement or other benefit plan; provided, however, that nothing
contained in this Section 16 shall apply to, or release the
Released Parties from, any obligation contained in this
Agreement. The Executive expressly represents and warrants that
he has not transferred or assigned any rights or causes of action
that he might have against any of the Released Parties.
17. Authorization. The execution, delivery and
performance of this Agreement have been duly authorized by all
requisite corporate action by the Company.
18. Successors; Binding Agreement. This Agreement
shall inure to the benefit of and be enforceable by the Executive
and by his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and
legatees. In the event of the death of the Executive while any
amounts are payable to the Executive hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons
designated in writing by the Executive to receive such amounts
or, if no person is so designated, to the Executive's estate.
19. Notices. All notices and other communications
required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given when personally
delivered or five days after deposit in the United States mail,
postage prepaid, addressed (a) if to the Executive, to Jerry K.
Pearlman, 21 Linden, Wilmette, Illinois 60091, with a copy to
Marshall E. Eisenberg, Esq., Neal Gerber & Eisenberg, Two North
LaSalle Street, Chicago, Illinois 60602, and if to the Company,
to Zenith Electronics Corporation, 1000 Milwaukee Avenue,
Glenview, Illinois 60025, attention Richard F. Vitkus, Esq., with
a copy to Thomas A. Cole, Esq., Sidley & Austin, One First
National Plaza, Chicago, Illinois 60603, or (b) to such other
address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
20. Governing Law; Validity. The interpretation,
construction and performance of this Agreement shall be governed
by and construed and enforced in accordance with the internal
laws of the State of Illinois without regard to the principle of
conflicts of laws. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any of the other provisions of this Agreement,
which other provisions shall remain in full force and effect.
21. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an original
and all of which together shall constitute one and the same
instrument.
22. Miscellaneous. No provision of this Agreement may
be modified or waived unless such modification or waiver is
agreed to in writing and executed by the Executive and by a duly
authorized officer of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at
any prior or subsequent time. Failure by the Executive or the
Company to insist upon strict compliance with any provision of
this Agreement or to assert any right which the Executive or the
Company may have hereunder shall not be deemed to be a waiver of
such provision or right or any other provision or right of this
Agreement.
23. Acknowledgment by Executive. By executing this
Agreement, the Executive expressly acknowledges that he has read
this Agreement carefully, that he fully understands its terms and
conditions, that he has been advised of his rights and has
consulted an attorney prior to executing this Agreement, that he
has been advised that he has at least 21 days within which to
decide whether or not to execute this Agreement and that he
intends to be legally bound by it. During a period of seven days
following the date of his execution of this Agreement, the
Executive shall have the right to revoke his release under
Section 16 of this Agreement of claims under the Age
Discrimination in Employment Act by serving within such period
written notice of revocation. If the Executive exercises his
rights under the preceding sentence, he shall forfeit the amount
payable to him pursuant to Section 12(b) of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agree-
ment to be executed by a duly authorized officer or director of
the Company and the Executive has executed this Agreement as of
the day and year first above written.
ZENITH ELECTRONICS CORPORATION
By /s/ Richard F. Vitkus
_________________________________
EXECUTIVE:
/s/ Jerry K. Pearlman
___________________________________
Jerry K. Pearlman
EXHIBIT (10b)
ADDENDUM NUMBER TWO TO
SUPPLEMENTAL LETTER AGREEMENT
This document is a Second Addendum to the
Supplemental Letter Agreement dated October 21, 1991, between Zenith
Electronics Corporation (the "Company"), Glenview, Illinois and ALBIN
F. MOSCHNER (the "Employee").
1. Purpose. The purpose of this Second Addendum is to
supplement and amend the Supplemental Letter Agreement between the
parties dated October 21, 1991, (the "Letter Agreement") as supplemented
and amended by the Addendum to Supplemental Letter Agreement
between the parties dated October 21, 1991 (the "First Addendum").
Except to the extent amended by this Second Addendum, all provisions of
the Letter Agreement and the First Addendum shall remain in full force
and effect.
2. Definitions. All capitalized terms used herein that are
not defined herein shall have the respective meanings assigned to such
terms by the Letter Agreement or the First Addendum, as the case may be.
3. Accelerated Vesting of Long-Term Incentive Awards.
(a) Options and Restricted Stock. Notwithstanding anything in the Letter
Agreement, the First Addendum or any other contract or agreement
between the parties to the contrary, upon the occurrence of a Change in
Control, (i) any options then held by the Employee which are not then
exercisable shall thereupon become and thereafter remain exercisable in
full for the remainder of their respective terms, and (ii) any shares of
Zenith stock then owned by the Employee but subject to restrictions on
transferability or a risk of forfeiture shall thereupon become transferable,
fully vested and no longer subject to any restrictions.
(b) Other Long-Term Incentive Awards. In the event
the Employee is a participant in any long-term incentive program
maintained by the Company at the date on which a Change in Control
occurs, a lump sum cash payment shall be made to the Employee equal to
(i) the value of any Zenith shares (exclusive of any Zenith shares
theretofore distributed to the Employee pursuant to the award) and (ii) any
cash (exclusive of any cash theretofore distributed to Employee pursuant to
the award) to which Employee would have been entitled for the full
measuring period specified in the long-term incentive award determined as
if the Employee will continue in the employ of the Company for such full
measuring period and as if all target levels specified in the award will be
achieved. For purposes of this paragraph, the value of any Zenith shares
shall be determined pursuant to the second sentence of Section 6B.(1)(e) of
the First Addendum. Upon receipt by the Employee of the payment
required under this Section 3(b), any such award and the provisions of
Section 6b.1(c) of the Letter Agreement shall be deemed to be satisfied in
their entirety.
4. Certain Additional Payments by the Company.
(a) Notwithstanding anything in the Letter Agreement, the First
Addendum (including Section 7 thereof) or any other contract or
agreement to the contrary, in the event it shall be determined that any
payment (including the acceleration of any stock option or other award) or
distribution by the Company or its affiliated companies to or for the benefit
of Employee (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Section 4) (a
"Payment") would be subject to the excise tax imposed by Section 4999 of
the Code, or any interest or penalties are incurred by Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then Employee shall be entitled to receive an additional payment (a "Gross-
Up Payment") in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 4(c), all
determinations required to be made under this Section 4, including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's public accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the Company and Employee within 15 business days of the receipt
of notice from Employee that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, Employee shall appoint another nationally
recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 4, shall be paid by the Company to
Employee within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is
payable by Employee, it shall furnish Employee with a written opinion that
failure to report the Excise Tax on Employee's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon
the Company and Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-
Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to
be made hereunder. In the event that the Company exhausts its remedies
pursuant to Section 4(c) and Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit
of Employee.
(c) Employee shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than 10 business days
after Employee is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. Employee shall not pay such claim prior to the
expiration of the 30-day period following the date on which Employee
gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee shall:
(1) give the Company any information reasonably
requested by the Company relating to such claim,
(2) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 4(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct Employee to pay the
tax claimed and sue for a refund or contest the claim in any permissible
manner, and Employee agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided
further, that if the Company directs Employee to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to
Employee on an interest-free basis and shall indemnify and hold Employee
harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and provided further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Employee
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by Employee of an amount
advanced by the Company pursuant to Section 4(c), Employee becomes
entitled to receive, and receives, any refund with respect to such claim,
Employee shall (subject to the Company's complying with the requirements
of Section 4(c)) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by Employee of an amount advanced by the
Company pursuant to Section 4(c), a determination is made that Employee
shall not be entitled to any refund with respect to such claim and the
Company does not notify Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
5. Miscellaneous. The provisions of Sections 8, 9, 10,
11, 12, 13, 14 and 15 are hereby incorporated herein by cross-reference
and shall be applicable as if set forth herein.
Dated: April 4, 1995
ZENITH ELECTRONICS CORPORATION
By /s/ Michael J. Kaplan
___________________________
Title Vice President-Human Resources
/s/ Albin F. Moschner
_______________________________
Employee
EXHIBIT (10c)
ADDENDUM NUMBER TWO TO
SUPPLEMENTAL LETTER AGREEMENT
This document is a Second Addendum to the
Supplemental Letter Agreement dated October 27, 1986, between Zenith
Electronics Corporation (the "Company"), Glenview, Illinois and
GERALD M. McCARTHY (the "Employee").
Purpose. The purpose of this Second Addendum is to supplement and
amend the Supplemental Letter Agreement between the parties dated
October 27, 1986, (the "Letter Agreement") as supplemented and amended
by the Addendum to Supplemental Letter Agreement between the parties
dated October 27, 1986, and amended on February 29, 1988, May 19, 1989
and July 24, 1991 (the "First Addendum"). Except to the extent amended
by this Second Addendum, all provisions of the Letter Agreement and the
First Addendum shall remain in full force and effect.
Definitions. All capitalized terms used herein that are not defined herein
shall have the respective meanings assigned to such terms by the Letter
Agreement or the First Addendum, as the case may be.
Accelerated Vesting of Long-Term Incentive Awards. (a) Options and
Restricted Stock. Notwithstanding anything in the Letter Agreement, the
First Addendum or any other contract or agreement between the parties to
the contrary, upon the occurrence of a Change in Control, (i) any options
then held by the Employee which are not then exercisable shall thereupon
become and thereafter remain exercisable in full for the remainder of their
respective terms, and (ii) any shares of Zenith stock then owned by the
Employee but subject to restrictions on transferability or a risk of forfeiture
shall thereupon become transferable, fully vested and no longer subject to
any restrictions.
(b) Other Long-Term Incentive Awards. In the event
the Employee is a participant in any long-term incentive program
maintained by the Company at the date on which a Change in Control
occurs, a lump sum cash payment shall be made to the Employee equal to
(i) the value of any Zenith shares (exclusive of any Zenith shares
theretofore distributed to the Employee pursuant to the award) and (ii) any
cash (exclusive of any cash theretofore distributed to Employee pursuant to
the award) to which Employee would have been entitled for the full
measuring period specified in the long-term incentive award determined as
if the Employee will continue in the employ of the Company for such full
measuring period and as if all target levels specified in the award will be
achieved. For purposes of this paragraph, the value of any Zenith shares
shall be determined pursuant to the second sentence of Section 6B.(1)(e) of
the First Addendum. Upon receipt by the Employee of the payment
required under this Section 3(b), any such award and the provisions of
Section 6b.1(c) of the Letter Agreement shall be deemed to be satisfied in
their entirety.
Miscellaneous. The provisions of Sections 8, 9, 10, 11, 12, 13, 14 and 15
are hereby incorporated herein by cross-reference and shall be applicable as
if set forth herein.
Dated: April 4, 1995
ZENITH ELECTRONICS CORPORATION
By /s/ Michael J. Kaplan
____________________________
Title Vice President-Human Resources
/s/ Gerald M. McCarthy
_______________________________
Employee
EXHIBIT (10d)
ADDENDUM NUMBER TWO TO
SUPPLEMENTAL LETTER AGREEMENT
This document is a Second Addendum to the
Supplemental Letter Agreement dated April 26, 1988, between Zenith
Electronics Corporation (the "Company"), Glenview, Illinois and
____________ (the "Employee").
Purpose. The purpose of this Second Addendum is to supplement and
amend the Supplemental Letter Agreement between the parties dated April
26, 1988, (the "Letter Agreement") as supplemented and amended by the
Addendum to Supplemental Letter Agreement between the parties dated
April 26, 1988 and amended May 19, 1989 and July 24, 1991 (the "First
Addendum"). Except to the extent amended by this Second Addendum, all
provisions of the Letter Agreement and the First Addendum shall remain
in full force and effect.
Definitions. All capitalized terms used herein that are not defined herein
shall have the respective meanings assigned to such terms by the Letter
Agreement or the First Addendum, as the case may be.
Accelerated Vesting of Long-Term Incentive Awards. (a) Options and
Restricted Stock. Notwithstanding anything in the Letter Agreement, the
First Addendum or any other contract or agreement between the parties to
the contrary, upon the occurrence of a Change in Control, (i) any options
then held by the Employee which are not then exercisable shall thereupon
become and thereafter remain exercisable in full for the remainder of their
respective terms, and (ii) any shares of Zenith stock then owned by the
Employee but subject to restrictions on transferability or a risk of forfeiture
shall thereupon become transferable, fully vested and no longer subject to
any restrictions.
(b) Other Long-Term Incentive Awards. In the event
the Employee is a participant in any long-term incentive program
maintained by the Company at the date on which a Change in Control
occurs, a lump sum cash payment shall be made to the Employee equal to
(i) the value of any Zenith shares (exclusive of any Zenith shares
theretofore distributed to the Employee pursuant to the award) and (ii) any
cash (exclusive of any cash theretofore distributed to Employee pursuant to
the award) to which Employee would have been entitled for the full
measuring period specified in the long-term incentive award determined as
if the Employee will continue in the employ of the Company for such full
measuring period and as if all target levels specified in the award will be
achieved. For purposes of this paragraph, the value of any Zenith shares
shall be determined pursuant to the second sentence of Section 6B.(1)(e) of
the First Addendum. Upon receipt by the Employee of the payment
required under this Section 3(b), any such award and the provisions of
Section 6b.1(c) of the Letter Agreement shall be deemed to be satisfied in
their entirety.
Provisional Reduction in Benefits. (a) Notwithstanding anything in the
Letter Agreement, the First Addendum, this Second Addendum or any
other contract or agreement between the parties to the contrary, in the
event it shall be determined that any payment or distribution by the
Company or its affiliated companies to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to
any adjustment required under this Section 4) (in the aggregate, the "Total
Payments") would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), then the payments due hereunder shall be
reduced so that the Total Payments are One Dollar ($1) less than such
maximum amount.
(b) All determinations required to be made under this
Section 4, including whether and when a reduction in the amount payable
hereunder pursuant to Section 4(a) is required and the amount of any such
reduction and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's public accounting firm (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business days of the
receipt of notice from the Employee that there has been a Payment, or such
earlier time as is requested by the Company or the Employee. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Employee
shall appoint another nationally recognized public accounting firm to make
the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that no Excise Tax is payable by the
Employee, it shall furnish the Employee with a written opinion that failure
to report the Excise Tax on the Employee's applicable federal income tax
return would not result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding upon the
Company, the Subsidiary and the Employee. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the
reduction in the amount payable hereunder pursuant to Section 4(a) will
not have been made consistent with the calculations required to be made
hereunder. In that event the Employee thereafter shall promptly pay to the
Company the amount of the required reduction.
Miscellaneous. The provisions of Sections 8, 9, 10, 11, 12, 13, 14 and 15
are hereby incorporated herein by cross-reference and shall be applicable as
if set forth herein.
ZENITH ELECTRONICS CORPORATION
By____________________________
Title: Vice President-Human Resources
_______________________________
Employee
EXHIBIT (10e)
ZENITH ELECTRONICS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENT
THIS AGREEMENT was made this ____ day of ______, 199__,
between ZENITH ELECTRONICS CORPORATION, a Delaware
corporation, (hereinafter called the Company), and
_____________________________, an employee of the Company,
(hereinafter called Employee).
WHEREAS the Board of Directors and the Stockholders of the
Company have duly adopted the 1987 Zenith Stock Incentive Plan (the
"Plan") a copy of which is attached hereto and by this reference made a
part hereof, and
WHEREAS, the Organization and Compensation Committee, in
accordance with the provisions of the Plan, has selected Employee as an
individual upon whose judgment, initiative and efforts the Company is in
part dependent for the successful conduct of its business, and has on this
date determined that, as an inducement to continue his services to the
Company and to encourage stock ownership in, and increase through his
proprietary interest his incentive to contribute to the success of the
Company, he be granted the right to purchase shares of the common stock
of the company in the amount, at the price and during the option period
hereinafter specified and has prescribed the terms and conditions
hereinafter set forth, and
WHEREAS, on the date of this Agreement the fair market value
of said shares of common stock of the Company as defined in the Plan is
$___________ per share;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter set forth, the Company hereby irrevocably
grants to Employee the right and option to purchase from the Company at
the time or times specified herein and subject to the terms and conditions
hereof all or any part of an aggregate of _______ shares of said stock at a
price of $____________ per share, and the parties hereto agree as follows:
1. This Agreement is intended to grant an option meeting
all the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, subject to and upon the terms,
conditions and provisions of the 1987 Zenith Stock Incentive Plan and
each and every provision of this Agreement shall be administered,
construed and interpreted so that the option granted herein shall comply
with the requirements of said Rule 16b-3 and any provision of this
Agreement that cannot be so administered, construed and interpreted shall
be disregarded.
2. The Employee shall have the right and option to
purchase such shares in whole or in part in lots of not less than ten shares
each, as follows, but in no event more than ten years from the date of this
Agreement.
Percentage of Earliest Date After This Agreement Upon
Shares Which Option To Purchase May Be Exercised
--------------- --------------------------------------
50 One Year
100 Two Years
3. Employee agrees to render to the Company services, well
and faithfully performing the duties and discharging the responsibilities of
his position, so acting at all times as to protect and promote the Company's
affairs and interests, but this Agreement shall not be deemed to limit or
restrict the right of the Company to terminate Employee's employment at
any time.
4. Such right and option to purchase shall not be
transferable by Employee otherwise than by will or the laws of descent and
distribution and shall be exercisable during his lifetime only by him.
5. Exercise of Employee's right and option to purchase shall
be governed by this Section 5.
A. Definitions. For purposes of this Agreement the
following terms shall be defined as follows:
(1) "Retirement" shall mean any
termination other than by death after Employee has attained the age of
fifty-five years and after he has been employed by the Company for ten or
more years.
(2) "Determination of total and permanent
disability" shall mean a determination by the Company's medical director
or by a physician designated by the Company that the employee is
permanently and totally disabled.
(3) "Representative" shall mean the person
or persons to whom Employee's rights under this Agreement shall pass
upon death whether by will or by the applicable laws of descent and
distribution.
B. Exercise. The right and option to purchase
granted under this Agreement may be exercised as follows:
(1) Employee may exercise his right and
option to purchase during his full time period of employment, subject to the
one and two year limitations set forth in Section 2.
(2) Employee may exercise his right and
option to purchase within a period of three months following his
termination (other than by retirement or determination of permanent and
total disability), but only to the extent the option was exercisable by him on
the date of his termination.
(3) Employee may exercise his right and
option to purchase within a period of two years following his retirement or
a determination of his permanent and total disability, but only to the extent
that the option was exercisable by him on the date of his retirement or the
determination that he is totally and permanently disabled.
(4) If Employee dies during the period of
his full time employment, then his Representative may exercise Employee's
right and option to purchase for a period of two years from the date of his
death but only to the extent the option was exercisable by him on the date
of his death, provided however, that if Employees dies during the full time
period of his employment and less than two years from the grant of the
option, his Representative shall also be entitled to exercise the option to
purchase a proportionate part of the fifty percent (50%) of the shares
applicable to the one-year period in which he dies, which proportion shall
be determined by the ratio of that part of said one-year period which shall
have elapsed by the time of his death to said one-year period, except that
any fractional share resulting from this computation shall not be subject to
such exercise.
(5) If Employee dies within three months
of termination (other than by retirement or because of a determination of
permanent and total disability), then his Representative may exercise
Employee's right and option to purchase for a period of two years from the
date of his death but only to the extent the option was exercisable by him
on the date of his termination.
(6) If Employee dies within two years after
his retirement or after a determination that he is permanently and totally
disabled, then his Representative may exercise employee's right and option
to purchase before the later of one year after the date of death or two years
after the date of his retirement or the determination that he is totally and
permanently disabled, but only to the extent the option was exercisable by
him on the date of his retirement or the determination that he is totally and
permanently disabled.
C. Breach, Disloyalty, etc. Anything in this
Agreement to the contrary notwithstanding, if Employee is discharged by
reason or is guilty of a breach of this Agreement, or disloyalty, or theft, or
embezzlement, or any other act or acts which tend to reflect discredit upon
the Company or to render the Employee unfit to perform his duties, then
the right and option to purchase granted hereunder shall be forfeited and
Employee shall have no further rights hereunder.
6. Anything to the contrary herein notwithstanding, this
option shall in all events expire and may not be exercised by any person
whomsoever more than ten years from the date of this Agreement, even
though the three-month period, one-year period or two-year period referred
to in paragraph 5 above, as the case may be, may expire after such ten
years have elapsed.
7. This option to purchase and the rights granted hereunder
may not be assigned, transferred (except as aforesaid), pledged or
hypothecated in any way, whether by operation of law or otherwise, and
shall not be subject to execution, attachment or similar process. Any
attempt at assignment, transfer, pledge, hypothecation or other disposition
contrary to the provisions hereof and the levy of any execution, attachment
or similar process upon this option to purchase shall be null and void.
8. This option to purchase may be exercised only by notice
given to the Treasurer of the Company (according to procedures in effect at
the time of exercise), accompanied by the full option price of the shares
being purchased. Payment of the option price shall be in cash, by cashier's
check, certified check, wire transfer or other method of immediately
crediting the Company's account which has been approved by the
Treasurer, provided however that the Organization and Compensation
Committee may, in its discretion, permit payment of all or part of the
option price in the form of shares of the Company's stock registered solely
in the name of the Employee exercising the option and properly endorsed
and delivered in accordance with procedures in effect at the time of
exercise. Shares of the Company's stock received in payment of the option
price shall be valued at the fair market value on the date of exercise. For
purposes of the foregoing sentence, the fair market value is defined as the
closing price of the Company's stock on the New York Stock Exchange on
the date of exercise. In the event the option to purchase is being exercised
by any person other than the Employee, the notice of exercise shall also be
accompanied by appropriate proof of the right of such person to exercise
the option to purchase. A certificate or certificates for the shares as to
which the option to purchase is so exercised shall thereafter be issued
promptly by the Company in the name of the person so exercising and
shall be delivered to or upon the order of such person. The Company shall
pay all original issue or transfer taxes with respect to the issue or transfer
of such shares to the person exercising the option to purchase and all of the
fees and expenses necessarily incurred by the Company in connection
therewith.
9. The Company may require as a condition of the exercise
of this option, that the person exercising this option pay to the Company in
addition to the option price, an amount equal to any federal, state and local
taxes required to be withheld by reason of the exercise of this option.
10. Any notice which either party hereto may be required or
permitted to give the other shall be in writing and may be delivered
personally or by postage paid registered mail with return receipt requested
addressed to the Company in care of its Secretary at its principal office and
to the Employee at his address as it is shown on the records of the
Company or to such other address as Employee by notice to the Company
may designate in writing from time to time and such notice shall be
effective upon receipt.
11. This contract shall be governed by the laws of the State
of Illinois.
12. The option evidenced by this Agreement shall not be
treated as an incentive stock option within the meaning of section 422 of
the Internal Revenue Code of 1986 as amended.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its Secretary and Employee has hereunto set
his hand and seal, all on the day and year first above written.
ZENITH
ELECTRONICS CORPORATION
By___________________________________
_______________________________
Employee
EXHIBIT (10f)
AMENDMENT TO
ZENITH ELECTRONICS CORPORATION
EMPLOYEE STOCK OPTION AGREEMENTS
Agreement made and entered into as of the _______ day of
__________________, 1995, between Zenith Electronics Corporation, a
Delaware corporation, (hereinafter called the "Company"), and Jerry K.
Pearlman, an employee of the Company (hereinafter called "Employee").
WHEREAS, the Board of Directors and the stockholders of the
Company have duly adopted the 1987 Zenith Stock Incentive Plan (the
"Plan"); and
WHEREAS, the Organization and Compensation Committee, in
accordance with the provisions of the Plan, has previously granted
Employee the right to purchase shares of common stock of the company in
the amounts, at the prices and under prescribed terms and conditions as set
forth in agreements dated February 20, 1990, February 25, 1992, February
23, 1993 and April 7, 1994 (the "Agreements"); and
WHEREAS, the Organization and Compensation Committee, in
accordance with the provisions of the Plan hereby amends the Agreements
as follows:
1. Agreement dated April 7, 1994:
(a) Section 2 is modified by changing "Two Years"
to "April 30, 1995".
(b) Subsection B(1) of Section 5 is modified by deleting the words
"one and two year".
2. All of the Agreements:
(a) Subsection B(3) of Section 5 is modified by deleting the word
"two" and substituting the word "three" therefor.
(b) Subsection B(6) of Section 5 is modified by deleting each word
"two" and substituting the word "three" therefor.
(c) Section 6 is modified by deleting the words "or two-year period"
and substituting the words ", two-year period or three-year period"
therefor.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its Secretary and Employee has hereunto set
his hand and seal, all on the day and year first above written.
ZENITH ELECTRONICS CORPORATION
By_____________________________________
____________________________________
Employee
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