<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM___________ TO ____________
Commission file number 0-12628
-------
CML GROUP, INC.
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2451745
-------- ----------
(State of Incorporation) (IRS Employer Identification Number)
524 Main Street, Acton, Massachusetts 01720
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508)264-4155
-------------
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report.)
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 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
--- ---
Number of shares outstanding of each of the issuer's classes of common stock:
49,219,704 shares of common stock, $.10 par value, as of June 6, 1996.
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<PAGE> 2
CML GROUP, INC. AND SUBSIDIARIES
--------------------------------
Form 10-Q
Index
-----
Page
----
Part I: Financial Information
Item 1: Financial Statements
Consolidated Condensed Balance Sheets as of
April 27, 1996 and July 31, 1995 3 - 4
Consolidated Condensed Statements of Operations for the
three-month and nine-month periods ended April 27, 1996
and April 29, 1995 5
Consolidated Condensed Statements of Cash Flows for the
nine-month periods ended April 27, 1996
and April 29, 1995 6
Notes to Consolidated Condensed Financial Statements 7 -11
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 14
Part II: Other Information
Item 1: Legal Proceedings 15 - 17
Item 6: Exhibits and Reports on Form 8-K 17
Signatures 17
Exhibit Index 18
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Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
<TABLE>
CML GROUP, INC. & SUBSIDIARIES
Consolidated Condensed Balance Sheets
-------------------------------------
ASSETS
<CAPTION>
April 27, 1996 July 31, 1995
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,475,000 $ 8,338,000
Accounts receivable 16,529,000 51,949,000
Refundable income taxes 36,647,000 --
Prepaid income taxes 17,667,000 8,710,000
Inventories:
Raw materials 2,942,000 12,970,000
Work in process 1,302,000 3,096,000
Finished goods 26,070,000 49,378,000
------------ ------------
Total inventories 30,314,000 65,444,000
Other current assets 16,390,000 30,286,000
Net assets of businesses held for sale 39,870,000 34,314,000
------------ ------------
Total current assets 160,892,000 199,041,000
------------ ------------
Property, plant and equipment, at cost:
Land and buildings 19,337,000 19,865,000
Machinery and equipment 42,649,000 77,522,000
Leasehold improvements 31,093,000 80,710,000
------------ ------------
93,079,000 178,097,000
Less accumulated depreciation 32,799,000 65,057,000
------------ ------------
60,280,000 113,040,000
------------ ------------
Goodwill 8,841,000 12,521,000
Other assets 11,811,000 15,479,000
------------ ------------
$241,824,000 $340,081,000
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
<PAGE> 4
CML GROUP, INC. & SUBSIDIARIES
<TABLE>
Consolidated Condensed Balance Sheets
-------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
April 27, 1996 July 31, 1995
-------------- -------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 160,000 $ 203,000
Accounts payable 20,386,000 35,156,000
Accrued compensation 6,075,000 6,905,000
Accrued advertising 7,338,000 4,381,000
Accrued sales returns 4,680,000 4,572,000
Accrued income taxes 132,000 1,892,000
Accrued expenses of businesses held for sale 8,782,000 --
Accrued expenses related to discontinued
operations 6,710,000 3,234,000
Other accrued expenses 32,597,000 26,165,000
------------ ------------
Total current liabilities 86,860,000 82,508,000
------------ ------------
Noncurrent liabilities:
Long-term debt 2,876,000 10,082,000
Convertible subordinated debentures 41,593,000 41,593,000
Other noncurrent liabilities 6,746,000 17,346,000
------------ ------------
Total noncurrent liabilities 51,215,000 69,021,000
------------ ------------
Stockholders' equity:
Common stock, par value $.10 per share
Authorized - 120,000,000 shares
Issued - 52,215,924 shares and
52,076,674 shares 5,222,000 5,207,000
Additional paid-in capital 79,715,000 79,805,000
Retained earnings 56,668,000 140,444,000
------------ ------------
141,605,000 225,456,000
Less treasury stock, at cost,
2,966,941 shares and 2,797,791 shares 37,856,000 36,904,000
------------ ------------
103,749,000 188,552,000
------------ ------------
$241,824,000 $340,081,000
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
<PAGE> 5
CML GROUP, INC. & SUBSIDIARIES
<TABLE>
Consolidated Condensed Statements of Operations
-----------------------------------------------
<CAPTION>
For the periods ended April 27, 1996
and April 29, 1995
Three Months Nine Months
------------ -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $138,341,000 $179,525,000 $469,753,000 $587,715,000
------------ ------------ ------------ ------------
Less costs and expenses:
Cost of goods sold 63,952,000 70,998,000 220,039,000 227,570,000
Selling, general and administrative expenses 98,882,000 110,655,000 318,659,000 299,027,000
Loss on disposition of assets 30,824,000 -- 30,824,000 --
Interest expense (income) 520,000 (147,000) 2,093,000 806,000
------------ ------------ ------------ ------------
194,178,000 181,506,000 571,615,000 527,403,000
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income taxes and extraordinary credit (55,837,000) (1,981,000) (101,862,000) 60,312,000
Provision (benefit) for income taxes (19,592,000) (1,301,000) (36,161,000) 22,557,000
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before extraordinary credit (36,245,000) (680,000) (65,701,000) 37,755,000
------------ ------------ ------------ ------------
Discontinued operations:
Loss from operations, net of income tax benefit -- (4,345,000) -- (1,346,000)
Provision for loss on disposal, net of
income tax benefit -- (35,678,000) (15,615,000) (35,678,000)
------------ ------------ ------------ ------------
-- (40,023,000) (15,615,000) (37,024,000)
------------ ------------ ------------ ------------
Income (loss) before extraordinary credit (36,245,000) (40,703,000) (81,316,000) 731,000
Extraordinary credit - early extinguishment
of debt, net of income taxes -- 1,073,000 -- 2,198,000
------------ ------------ ------------ ------------
Net income (loss) $(36,245,000) $(39,630,000) $(81,316,000) $ 2,929,000
============ ============ ============ ============
Earnings (loss) per share:
Income (loss) from continuing operations
before extraordinary credit:
Primary $ (0.74) $ (0.01) $ (1.33) $ 0.75
============ ============ ============ ============
Fully diluted $ (0.74) $ (0.01) $ (1.33) $ 0.75
============ ============ ============ ============
Income (loss) before extraordinary credit:
Primary $ (0.74) $ (0.82) $ (1.65) $ 0.01
============ ============ ============ ============
Fully diluted $ (0.74) $ (0.82) $ (1.65) $ 0.01
============ ============ ============ ============
Net income (loss):
Primary $ (0.74) $ (0.80) $ (1.65) $ 0.06
============ ============ ============ ============
Fully diluted $ (0.74) $ (0.80) $ (1.65) $ 0.06
============ ============ ============ ============
Weighted average number of shares outstanding 49,470,085 50,216,999 49,600,446 50,565,802
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
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CML GROUP, INC. & SUBSIDIARIES
<TABLE>
Consolidated Condensed Statements of Cash Flows
-----------------------------------------------
<CAPTION>
For the Nine Months Ended
-------------------------
April 27, 1996 April 29, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(81,316,000) $ 2,929,000
------------ ------------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for loss on disposition of assets 30,824,000 --
Provision for loss on disposal of discontinued operations 24,023,000 40,988,000
Gain on early extinguishment of debt -- (2,198,000)
Depreciation and amortization 23,682,000 22,432,000
Loss on disposal of property, plant and equipment 3,831,000 2,367,000
Changes in working capital items 12,497,000 (26,663,000)
(Increase) decrease in other assets 2,341,000 (2,657,000)
Decrease in other noncurrent liabilities (2,414,000) (264,000)
------------ ------------
Total adjustments 94,784,000 34,005,000
------------ ------------
Net cash provided by operating activities 13,468,000 36,934,000
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (18,987,000) (26,818,000)
Net proceeds from sale of discontinued operation 11,516,000 --
Reduction in notes receivable 44,000 72,000
------------ ------------
Net cash used in investing activities (7,427,000) (26,746,000)
------------ ------------
Cash flows from financing activities:
Decrease in long-term debt (7,249,000) (1,169,000)
Acquisition of convertible debentures -- (11,991,000)
Dividends paid (2,460,000) (2,998,000)
Exercise of stock options 101,000 529,000
Acquisition of treasury stock (1,296,000) (8,236,000)
------------ ------------
Net cash used in financing activities (10,904,000) (23,865,000)
------------ ------------
Net decrease in cash and cash equivalents during the period (4,863,000) (13,677,000)
Cash and cash equivalents at the beginning of the period 8,338,000 28,929,000
------------ ------------
Cash and cash equivalents at the end of the period $ 3,475,000 $ 15,252,000
============ ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
6
<PAGE> 7
CML GROUP, INC & SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
----------------------------------------------------
Note 1
- ------
The accompanying consolidated condensed financial statements and notes should be
read in conjunction with the financial statements contained in the Company's
Annual Report on Form 10-K. In the opinion of management, the accompanying
consolidated condensed financial statements include all adjustments necessary
for a fair presentation of the results of the interim periods presented and,
except for the adjustments relating to the sale of Britches of Georgetowne (see
Note 2) and the planned divestitures of The Nature Company and Hear Music (see
Note 3), all such adjustments are of a normal recurring nature. The retail
industry is seasonal in nature and the results of operations for the interim
periods presented may not be indicative of the results for a full year.
Certain 1995 amounts have been reclassified to conform to the 1996 presentation.
Note 2 - Discontinued Operations
- --------------------------------
On April 12, 1996, the Company sold the common stock of its Britches of
Georgetowne subsidiary for $13,400,000 (including $1,884,000 placed in escrow)
in cash plus the assumption of certain liabilities. Included in the Company's
net loss for the nine month period ended April 27, 1996 is an additional
$15,615,000 provision for loss on disposal, net of an $8,408,000 income tax
benefit, to write-down Britches' net assets to net realizable value and accrue
for operating losses through the disposal date.
Note 3 - Divestiture of The Nature Company and Hear Music
- ---------------------------------------------------------
During the third quarter of fiscal 1996, the Company decided to divest its
Nature Company and Hear Music subsidiaries. The Nature Company, Hear Music and
Smith & Hawken comprise the Nature Company Segment ("NC Segment"). Included in
the loss from continuing operations for the third quarter of fiscal 1996 is a
pretax charge of $30,824,000 to write-down The Nature Company and Hear Music's
net assets to estimated net realizable value and to accrue estimated operating
losses until disposition, estimated lease termination and assignment costs and
other transaction costs. In June 1996, the Company sold substantially all of the
assets of The Nature Company for a cash purchase price of $39,870,000 plus the
assumption of certain liabilities. The estimated net realizable value of The
Nature Company and Hear Music's net assets have been included in current assets
on the accompanying consolidated condensed balance sheet at April 27, 1996.
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Note 4 - Long-term Debt
- -----------------------
<TABLE>
Consolidated long-term debt is summarized as follows:
<CAPTION>
April 27, 1996 July 31, 1995
-------------- -------------
<S> <C> <C>
Revolving credit loan $2,835,000 $10,000,000
Note payable 92,000 199,000
Obligations under capital leases 109,000 86,000
---------- -----------
3,036,000 10,285,000
Less current portion 160,000 203,000
---------- -----------
Long-term debt $2,876,000 $10,082,000
========== ===========
</TABLE>
On April 17, 1996, the Company entered into a new senior secured revolving
credit agreement with two banks. The revolving credit agreement allows the
Company to borrow up to $80.0 million through April 15, 1999. The agreement,
which is secured by the Company's assets and the shares and guarantees of the
Company's subsidiaries, requires the Company to comply with certain financial
and operating covenants. The agreement also requires the Company to pay the
outstanding loan balance down to a specified level for a period of forty-five
consecutive days each fiscal year and provides for a reduction in the
commitment for net cash proceeds received from the sale of assets not in the
ordinary course of business or from the issuance of subordinated debt or equity
securities. Advances outstanding under the agreement bear interest at the prime
rate plus 0.75%.
Note 5 - Contingencies
- ----------------------
Litigation
----------
In May 1994, ICON Health & Fitness, Inc. ("ICON") commenced a civil suit
against NordicTrack in the United States District Court for the District of Utah
alleging infringement of three patents arising out of NordicTrack's design of
its WalkFit treadmill and certain other similar products. Discovery has been
completed. In November 1995, the Court granted NordicTrack's Motion for Summary
Judgement relating to one of ICON's three patent infringement claims. ICON's
other two claims have been scheduled for trial during the summer of 1996. While
the Company believes it has meritorious defenses, no assurance can be given of a
favorable outcome in the ICON lawsuit. An unfavorable outcome could have a
material adverse effect on the Company's operating results for the period in
which such decision occurs and could also have a material adverse effect on the
Company's financial condition.
In January 1995, an individual, William Wilkinson, filed a demand for
arbitration and statement of claim alleging that NordicTrack breached the terms
of a licensing and product development agreement by failing to compensate him
with royalties for certain design features of its WalkFit treadmill and certain
similar products. Included in the Company's loss from continuing operations for
the nine month period ended April 27, 1996 is a $4.0 million pretax charge for
the settlement of this claim in January 1996.
On October 25, 1994, four stockholders, owning an aggregate of 2,400
shares of CML Group, Inc. Common Stock, filed a class action lawsuit in U.S.
District Court for the District of Massachusetts against the Company and its
Chairman, Charles M. Leighton, and President, G. Robert Tod. The complaint
alleged that the Company failed to properly disclose the extent of its
NordicTrack advertising expenditures and the impact of those expenditures on its
future operating results, thereby violating federal securities laws. On December
19, 1994, the defendants filed a motion to dismiss the complaint, and on April
7, 1995, the plaintiffs responded by filing an amended complaint which added an
allegation that Messrs. Leighton and Tod violated the securities laws by selling
CML stock in the Spring of
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1994. In April 1995, the defendants filed a motion to dismiss this lawsuit. The
court allowed defendants' motion and dismissed the lawsuit on March 21, 1996.
The plaintiffs did not appeal.
In February 1996, the proposed consent that NordicTrack agreed to with the
Federal Trade Commission ("FTC") was published. The purpose of the proposed
consent was to settle allegations that NordicTrack made false and
unsubstantiated weight loss and weight maintenance claims in advertising its
cross-country ski exercise machines. The FTC alleged that NordicTrack based
these claims on studies with various methodological flaws. The proposed consent
agreement would prohibit NordicTrack from misrepresenting the existence or
results of any study or survey relating to weight loss and making certain claims
with respect to its exercise equipment without reliable supporting evidence. One
public comment was received by the FTC during the permitted public comment
period which ended on April 29, 1996. No civil penalties have been imposed by
the FTC pursuant to the proposed consent agreement.
On or about February 23, 1996, an alleged purchaser of a NordicTrack
cross-country ski exercise machine filed a Class Action Complaint, entitled
Elissa Crespi, on behalf of Herself and All Others Similarly Situated v.
NordicTrack, Inc., against NordicTrack in the Supreme Court of the State of New
York, County of New York (the "Crespi Complaint"). On or about February 26,
1996, another alleged purchaser of a cross-country ski exercise machine filed a
Class Action Complaint in the same court, entitled Wendy Perel, on behalf of
Herself and All Others Similarly Situated, v. NordicTrack, Inc. (the "Perel
Complaint"). On or about April 10, 1996, another alleged purchaser of a
NordicTrack cross-country ski exercise machine filed a Class Action Complaint in
the Superior Court of Fulton County, Georgia, entitled John Lucien Ward, Jr. v.
NordicTrack, Inc. (the "Ward Complaint"). The Crespi Complaint alleges that
NordicTrack made false and misleading claims concerning the weight loss of
persons using its ski-exerciser and thereby defrauded its customers, breached
warranties and violated Section 349 of the New York General Business Law. The
Perel Complaint and Ward Complaint allege that NordicTrack misrepresented the
results of a weight loss study and made unsubstantiated claims regarding weight
loss and/or weight maintenance benefits from the use of NordicTrack's
cross-country ski exercise machines. The Perel Complaint and Ward Complaint
assert claims of negligent misrepresentation, breach of an express warranty and
common law fraud. Ms. Crespi seeks to represent a class consisting of all
persons in the United States who purchased NordicTrack ski exercisers on or
after January 1, 1994, excluding NordicTrack and its employees. Ms. Perel and
Mr. Ward seek to represent a class consisting of all persons in the United
States who purchased one or more NordicTrack cross-country ski exercise
machines, excluding the officers and directors of NordicTrack. The plaintiff in
the Crespi Complaint seeks for herself and the alleged class unspecified actual
and punitive damages with interest, rescission, attorneys' fees, costs, an order
requiring NordicTrack to make corrective disclosures and the imposition of a
constructive trust. The plaintiffs in the Perel Complaint and Ward Complaint
seek restitution of all amounts paid by them and the alleged class members for
NordicTrack cross-country ski exercise machines, together with interest,
attorneys' fees, costs, and any additional and consequential damages for
injuries suffered by the plaintiff and alleged class members. Both the Crespi
Complaint and the Perel Complaint have been removed to the United States
District Court for the Southern District of New York. The parties to the actions
have stipulated to the entry of a pre-trial order consolidating them, which they
have filed, but the Court has not yet entered. The plaintiffs have not yet filed
their consolidated complaint or moved for class certification. The Ward
Complaint has been removed to the United States District Court for the Northern
District of Georgia. On May 29, 1996, NordicTrack moved
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<PAGE> 10
to dismiss it. NordicTrack believes it has meritorious defenses to these
complaints and intends to vigorously contest these lawsuits. These lawsuits are
in the earliest stages and the Company is unable to determine the likelihood and
possible impact on the Company of unfavorable outcomes.
The Company is involved in various other legal proceedings which have
arisen in the ordinary course of business. Management believes the outcome of
such proceedings will not have a material adverse impact on the Company's
financial condition or results of operations.
Environmental Matters
---------------------
On June 3, 1991, the Company received from the United States Environmental
Protection Agency ("EPA") a Special Notice Letter containing a formal demand on
the Company as a Potentially Responsible Party ("PRP") for reimbursement of the
costs incurred and expected to be incurred in response to environmental problems
at a so-called "Superfund" site in Conway, New Hampshire. The EPA originally
estimated the costs of remedial action and future maintenance and monitoring
programs at the site at about $7.3 million. The Superfund site includes a vacant
parcel of land owned by a subsidiary of the Company as well as adjoining
property owned by a third party. No manufacturing or other activities involving
hazardous substances have ever been conducted by the Company or its affiliates
on the Superfund site in Conway. The environmental problems affecting the land
resulted from activities by the owners of the adjoining parcel. Representatives
of the Company have engaged in discussions with the EPA regarding responsibility
for the environmental problems and the costs of cleanup. The owners of the
adjoining parcel are bankrupt. The EPA commenced cleanup activities at the site
in July 1992.
The EPA expended approximately $1.4 million for the removal phase of the
site cleanup, which has now been completed. The EPA had estimated that the
removal costs would exceed $3.0 million, but only a small portion of the solid
waste removed from the site was ultimately identified as hazardous waste.
Therefore, the EPA's actual response costs for the removal phase were less than
the EPA originally estimated. The EPA has implemented the groundwater phase of
the cleanup, which the EPA originally estimated would cost approximately $4.0
million.
The Company believes that the EPA's estimated cost for cleanup, including
the proposed remedial actions, is excessive and involves unnecessary actions. In
addition, a portion of the proposed remedial cost involves cleanup of the
adjoining property that is not owned by the Company or any of its affiliates.
Therefore, the Company believes it is not responsible for that portion of the
cleanup costs. The Company has reserves and insurance coverage (from its primary
insurer) for environmental liabilities at the site in the amount of
approximately $2.3 million. The Company also believes that it is entitled to
additional insurance from its excess insurance carriers. However, if excess
liability coverage is not available to the Company and the ultimate liability
substantially exceeds the primary insurance amount and reserves, the liability
would have a material adverse effect upon the Company's operating results for
the period in which the resolution of the claim occurs and could have a
material adverse effect upon the Company's financial condition.
In June 1992, the EPA notified the Company it may be liable for the release
of hazardous substances by the Company's former Boston Whaler subsidiary at a
hazardous waste treatment and storage facility in Southington, Connecticut. The
EPA has calculated the Company's volumetric contribution at less than two tenths
of one percent. The EPA has not completed its
10
<PAGE> 11
Remedial Investigation/Feasibility Study and, therefore, an estimate of cleanup
costs is not available.
Tax Matters
-----------
The Internal Revenue Service ("IRS") has been engaged in an examination of
the Company's tax returns for the fiscal years 1987 through 1991. The Company
has been advised by the IRS that the examination will be completed in the near
future. Although the Company has not received an official notice, based on
discussions with IRS personnel, the Company expects that the IRS will propose
certain adjustments which, if sustained by the IRS, would result in a tax
deficiency for the years under examination. The adjustments expected to be
proposed by the IRS primarily relate to: (i) the disallowance of deductions
taken by the Company with respect to incentive compensation payments made to the
former owners of NordicTrack (acquired in June 1986) and to the former owners of
Britches of Georgetowne (acquired in August 1983); and (ii) the valuation of
certain assets acquired in connection with the acquisition of Britches.
The Company believes that the tax deductions taken were valid and in
accordance with the Internal Revenue Code. However, at this stage no assurance
can be given of a favorable outcome on these matters. If the IRS proposed
adjustments are sustained, any back taxes owed and associated interest could
have a material adverse effect on the Company's operating results for the period
in which such issues are finally resolved and could also have a material adverse
effect on the Company's financial condition.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
--------------
Introduction
- ------------
After reviewing their performance and strategic fit with the Company's other
businesses, the Company decided to divest The Nature Company and Hear Music
subsidiaries during the third quarter of fiscal 1996. The Nature Company, Hear
Music and Smith & Hawken comprise the Nature Company Segment ("NC Segment").
Accordingly, the planned dispositions of The Nature Company and Hear Music are
accounted for in continuing operations in the accompanying consolidated
condensed financial statements. The dispositions of The Nature Company and Hear
Music will enable the Company to focus on businesses which have the greatest
growth prospects and offer the greatest potential return on investment.
Financial Condition
- -------------------
Stockholders' equity at April 27, 1996 decreased $84.9 million to $103.7 million
from $188.6 million at July 31, 1995 due primarily to a net loss of $81.3
million, including a $15.6 million loss from discontinued operations, net of an
income tax benefit, relating to the sale of Britches of Georgetowne. Britches
was sold in April 1996 for $13.4 million in cash (including $1.9 million placed
in escrow) plus the assumption of certain liabilities. The net loss for the
three and nine month periods ended April 27, 1996 also includes a pretax loss
of $30.8 million resulting from the planned dispositions of The Nature Company
and Hear Music, an early stage retail concept included within the Nature
Company Segment. In June 1996, the Company sold The Nature Company for
$39.9 million in cash plus the assumption of certain liabilities. The Company's
working capital decreased to $74.0 million at April 27, 1996 from $116.5
million at July 31, 1995. The decrease in working capital is primarily
attributable to decreases in accounts receivable, inventories and other current
assets and increases in accrued advertising, accrued expenses of businesses
held for sale, accrued expenses related to discontinued operations and other
accrued expenses partially offset by increases in refundable and prepaid income
taxes and decrease in accounts payable. During the first nine months of fiscal
1996, the Company spent approximately $19.0 million on additions to property,
plant and equipment, received $11.6 million in cash, net of amounts held in
escrow, for the sale of Britches of Georgetowne and repaid $7.2 million of
long-term debt. In April 1996, the Company entered into a new three-year $80.0
million revolving credit facility with two banks which will be secured by the
assets of the Company. The credit facility provides for a reduction in the
commitment for net cash proceeds received from the sale of assets not in the
ordinary course of business.
Results of Operations
- ---------------------
The Company's continuing operations consist of two segments, NordicTrack and the
NC Segment. The NC Segment includes The Nature Company, Smith & Hawken and Hear
Music. During the third quarter of fiscal 1996, the Company decided to divest
The Nature Company and Hear Music.
During the third quarter of fiscal 1996, net sales of the Company's continuing
operations decreased by $41.2 million to $138.3 million, or 23.0%, over the
third quarter of fiscal 1995. The Company incurred a loss of $36.2 million from
continuing operations in the third quarter of fiscal 1996 compared with a loss
of $0.7 million from continuing operations during the same period of fiscal
1995. The increase in the loss from continuing operations is primarily due lower
sales and gross profits at NordicTrack and the $30.8 million pretax loss
recorded in connection with the planned dispositions of The Nature Company and
Hear Music partially offset by a reduction in selling, general and
administrative expenses.
12
<PAGE> 13
For the first nine months of fiscal 1996, sales from continuing operations
decreased by $118.0 million to $469.8 million, or 20.1%, compared with the first
nine months of fiscal 1995. Income from continuing operations during the first
nine months of fiscal 1996 declined by $103.5 million over the same period in
fiscal 1995, resulting in a loss from continuing operations of $65.7 million in
fiscal 1996. The decline in income from continuing operations is primarily
attributable to lower sales and gross profits at NordicTrack, the pretax loss
recorded in connection with the planned dispositions of The Nature Company and
Hear Music and higher selling, general and administrative expenses.
Retail sales decreased by $1.8 million to $93.2 million, or 1.9%, over the third
quarter of fiscal 1995 primarily due to a decrease in Nordic Advantage
comparable store sales partially offset by an increase in the NC Segment's
comparable store sales. During the third quarter of fiscal 1996, comparable
store sales decreased by 24.6%. Direct response and mail order sales in the
third quarter of fiscal 1996 decreased by $39.4 million to $45.1 million, or
46.6%, over the third quarter of fiscal 1995 primarily due to lower direct
response sales at NordicTrack.
Retail sales during the first nine months of fiscal 1996 increased by 3.6%, to
$329.4 million, over the same period in fiscal 1995 primarily due to the
addition of new Smith & Hawken stores and Nordic Advantage stores and kiosks.
Comparable store sales declined 20.8% in the first nine months of fiscal 1996.
Direct response and mail order sales declined by $129.4 million, or 48.0%, to
$140.4 million during the first nine months of fiscal 1996 over the comparable
period in fiscal 1995 primarily due to lower direct response sales at
NordicTrack.
Cost of goods sold increased as a percentage of sales from 39.5% in the third
quarter of fiscal 1995 to 46.2% in the third quarter of fiscal 1996. For the
first nine months in fiscal 1996, cost of goods sold increased to 46.8% from
38.7% in fiscal 1995. Cost of goods sold increased as a percentage of sales
primarily due to increased sales promotions offered by NordicTrack and the NC
Segment in response to a more competitive consumer environment, higher materials
prices, higher overhead rate and labor costs at NordicTrack and an increase in
the proportion of NordicTrack's sales which are accounted for by products with
higher costs of goods sold.
Selling, general and administrative expenses increased as a percentage of sales
from 61.6% in the third quarter of fiscal 1995 to 71.5% in the third quarter of
fiscal 1996, and from 50.9% in the first nine months of fiscal 1995 to 67.8% in
the first nine months of fiscal 1996. The increase in selling, general and
administrative expenses as a percentage of sales is due to less efficient
advertising at NordicTrack, fixed costs at stores which experienced a decrease
in comparable store sales, and higher operating expenses attributable to the
increased number of kiosks.
During the third quarter of fiscal 1996, the Company decided to divest The
Nature Company and Hear Music subsidiaries. The loss from continuing operations
for the three months ended April 27, 1996 includes a pretax charge of
$30.8 million to write-down The Nature Company and Hear Music's net assets to
estimated net realizable value and to accrue estimated operating losses until
disposition and estimated lease termination and assignment costs and other
transaction costs. In June 1996, the Company sold substantially all of the
assets of The Nature Company for a cash purchase price of $39.9 million plus the
assumption of certain liabilities.
13
<PAGE> 14
The Company incurred net interest expense of $0.5 million, or 0.4% of sales, in
the third quarter of fiscal 1996 compared to net interest income of $0.1 million
in the third quarter of fiscal 1995. For the first nine months of the year, net
interest expense was $0.8 million, or 0.1% of sales, in fiscal 1995 and $2.1
million, or 0.4% of sales, in fiscal 1996.
The Company's income tax benefit as a percentage of pretax loss was 35.1% in the
third quarter of fiscal 1996 compared to 65.7% during the third quarter of
fiscal 1995. During the first nine months of fiscal 1996, the Company's income
tax benefit as a percentage of pretax loss was 35.5% compared to a 37.4% income
tax provision as a percentage of pretax income during the first nine months of
fiscal 1995.
During the third quarter of fiscal 1996, NordicTrack's total sales decreased by
$44.2 million to $102.3 million, or 30.2%, over the third quarter of fiscal
1995. NordicTrack sales declined by $109.6 million to $316.7 million in the
first nine months of fiscal 1996 compared with the same period in fiscal 1995.
The decrease in NordicTrack's total sales during the third quarter and first
nine months was primarily attributable to a decrease in direct response sales.
Approximately 61.8% and 63.7% of NordicTrack's total sales in the third quarter
and first nine months of fiscal 1996, respectively, were accounted for by sales
at its Nordic Advantage subsidiary which operates retail stores and mall kiosks.
Nordic Advantage's retail sales decreased from $68.7 million in the third
quarter of fiscal 1995 to $63.2 million in the similar fiscal 1996 quarter due
primarily to the decline in comparable store sales by 37.5%. Nordic Advantage's
retail sales increased from $189.6 million in the first nine months of fiscal
1995 to $201.8 million in the first nine months of fiscal 1996 primarily due to
the opening of new mall kiosks partially offset by the decline in comparable
store sales by 29.5%. At the end of the third fiscal quarter of 1996, Nordic
Advantage operated 214 mall kiosks, up from 115 at the end of the third quarter
of fiscal 1995. Nordic Advantage also had 128 stores open at the end of the
third quarter of fiscal 1996 compared with 110 stores at the end of the third
quarter of fiscal 1995. In the third quarter of fiscal 1996, direct response
sales decreased $38.7 million to $39.1 million, or 49.7%, and decreased $121.8
million to $114.9 million, or 51.5%, in the first nine months of fiscal 1996
compared to the similar periods in fiscal 1995. The decrease in direct response
sales is primarily attributable to a reduction in advertising expenditures
combined with less effective advertisements.
The NC Segment sales increased by $3.0 million, or 9.1%, to $36.0 million,
during the third quarter of fiscal 1996 and declined by $8.4 million to $153.1
million, or by 5.2%, during the first nine months of fiscal 1996 over the same
period in fiscal 1995. Retail sales for the third quarter of fiscal 1996,
increased $3.7 million to $30.0 million, or 14.1%, compared with retail sales
for the third quarter of fiscal 1995. The increase in retail sales during the
third quarter of fiscal 1996 is primarily attributable to the addition of new
Smith & Hawken stores and an increase in comparable store sales for the NC
Segment by 2.3%. During the first nine months of fiscal 1996, retail sales
decreased by $0.7 million, or 0.5%, to $127.5 million compared to $128.2 million
during the first nine months of fiscal 1995. Comparable store sales for the NC
Segment decreased by 10.4% in the first nine months of fiscal 1996. The NC
Segment operated 157 stores at the end of the third quarter of fiscal 1996. In
the third quarter, the NC Segment's mail order sales declined by $0.7 million to
$6.0 million and in the first nine months of fiscal 1996 decreased by $7.7
million to $25.6 million, compared to the similar periods in fiscal 1995.
14
<PAGE> 15
PART II: OTHER INFORMATION
Item 1: Legal Proceedings.
Environmental Matters
---------------------
Note 5 of Notes to Consolidated Condensed Financial Statements in
Item 1 of Part I hereof is hereby incorporated by reference for
information concerning environmental matters.
Litigation
----------
In May 1994, ICON Health & Fitness, Inc. ("ICON") commenced a
civil suit against NordicTrack in the United States District Court
for the District of Utah alleging infringement of three patents
arising out of NordicTrack's design of its WalkFit treadmill and
certain other similar products. Discovery has been completed. In
November 1995, the Court granted NordicTrack's Motion for Summary
Judgement relating to one of ICON's three patent infringement claims.
ICON's other two claims have been scheduled for trial during the
summer of 1996. While the Company believes it has meritorious
defenses, no assurance can be given of a favorable outcome in the
ICON lawsuit. An unfavorable outcome could have a material adverse
effect on the Company's operating results for the period in which
such decision occurs and could also have a material adverse effect on
the Company's financial condition.
In January 1995, an individual, William Wilkinson, filed a demand
for arbitration and statement of claim alleging that NordicTrack
breached the terms of a licensing and product development agreement
by failing to compensate him with royalties for certain design
features of its WalkFit treadmill and certain similar products.
Included in the Company's loss from continuing operations for the
nine month period ended April 27, 1996 is a $4.0 million pretax
charge for the settlement of this claim in January 1996.
On October 25, 1994, four stockholders, owning an aggregate of
2,400 shares of CML Group, Inc. Common Stock, filed a class action
lawsuit in U.S. District Court for the District of Massachusetts
against the Company and its Chairman, Charles M. Leighton, and
President, G. Robert Tod. The complaint alleged that the Company
failed to properly disclose the extent of its NordicTrack advertising
expenditures and the impact of those expenditures on its future
operating results, thereby violating federal securities laws. On
December 19, 1994, the defendants filed a motion to dismiss the
complaint, and on April 7, 1995, the plaintiffs responded by filing
an amended complaint which added an allegation that Messrs. Leighton
and Tod violated the securities laws by selling CML stock in the
Spring of 1994. In April 1995, the defendants filed a motion to
dismiss this lawsuit. The court allowed defendants' motion and
dismissed the lawsuit on March 21, 1996. The plaintiffs did not
appeal.
In February 1996, the proposed consent that NordicTrack agreed to
with the Federal Trade Commission ("FTC") was published. The purpose
of the proposed consent was to settle allegations that NordicTrack
made false and unsubstantiated weight loss and weight maintenance
claims in advertising its cross-country ski exercise machines. The
FTC alleged that NordicTrack based these claims on studies with
various methodological flaws. The proposed consent agreement would
prohibit NordicTrack from misrepresenting the existence or results
of any study or survey relating to weight loss and making certain
claims with respect to its exercise equipment without reliable
supporting evidence. One public comment was received by the FTC
during the permitted public comment period which ended on April 29,
1996. No civil penalties have been imposed by the FTC pursuant to the
proposed consent agreement.
15
<PAGE> 16
On or about February 23, 1996, an alleged purchaser of a
NordicTrack cross-country ski exercise machine filed a Class Action
Complaint, entitled Elissa Crespi, on behalf of Herself and All
Others Similarly Situated v. NordicTrack, Inc., against NordicTrack
in the Supreme Court of the State of New York, County of New York
(the "Crespi Complaint"). On or about February 26, 1996, another
alleged purchaser of a cross-country ski exercise machine filed a
Class Action Complaint in the same court, entitled Wendy Perel, on
behalf of Herself and All Others Similarly Situated, v. NordicTrack,
Inc. (the "Perel Complaint"). On or about April 10, 1996, another
alleged purchaser of a NordicTrack cross-country ski exercise
machine filed a Class Action Complaint in the Superior Court of
Fulton County, Georgia, entitled John Lucien Ward, Jr. v.
NordicTrack, Inc. (the "Ward Complaint"). The Crespi Complaint
alleges that NordicTrack made false and misleading claims concerning
the weight loss of persons using its ski-exerciser and thereby
defrauded its customers, breached warranties and violated Section
349 of the New York General Business Law. The Perel Complaint and
Ward Complaint allege that NordicTrack misrepresented the results of
a weight loss study and made unsubstantiated claims regarding weight
loss and/or weight maintenance benefits from the use of
NordicTrack's cross-country ski exercise machines. The Perel
Complaint and Ward Complaint assert claims of negligent
misrepresentation, breach of an express warranty and common law
fraud. Ms. Crespi seeks to represent a class consisting of all
persons in the United States who purchased NordicTrack ski
exercisers on or after January 1, 1994, excluding NordicTrack and
its employees. Ms. Perel and Mr. Ward seek to represent a class
consisting of all persons in the United States who purchased one or
more NordicTrack cross-country ski exercise machines, excluding the
officers and directors of NordicTrack. The plaintiffs in the Crespi
Complaint seeks for herself and the alleged class unspecified
actual and punitive damages with interest, rescission, attorneys'
fees, costs, an order requiring NordicTrack to make corrective
disclosures and the imposition of a constructive trust. The
plaintiffs in the Perel Complaint and Ward Complaint seek
restitution of all amounts paid by them and the alleged class members
for NordicTrack cross-country ski exercise machines, together with
interest, attorneys' fees, costs, and any additional and
consequential damages for injuries suffered by the plaintiff and
alleged class members. Both the Crespi Complaint and the Perel
Complaint have been removed to the United States District Court for
the Southern District of New York. The parties to the actions have
stipulated to the entry of a pre-trial order consolidating them,
which they have filed, but the Court has not yet entered. The
plaintiffs have not yet filed their consolidated complaint or moved
for class certification. The Ward Complaint has been removed to the
United States District Court for the Northern District of Georgia. On
May 29, 1996, NordicTrack moved to dismiss it. NordicTrack believes
it has meritorious defenses to these complaints and intends to
vigorously contest these lawsuits. These lawsuits are in the earliest
stages and the Company is unable to determine the likelihood and
possible impact on the Company of unfavorable outcomes.
The Company is involved in various other legal proceedings which
have arisen in the ordinary course of business. Management believes
the outcome of such proceedings will not have a material adverse
impact on the Company's financial condition or results of operations.
Tax Matters
-----------
The Internal Revenue Service ("IRS") has been engaged in an
examination of the Company's tax returns for the fiscal years 1987
through 1991. The Company has been advised by the IRS that the
examination will be completed in the near future. Although the
Company has not received an official notice, based on discussions
with IRS personnel, the Company expects that the IRS will propose
certain adjustments which, if sustained by the IRS, would result in
a tax deficiency for the years under examination. The adjustments
expected to be proposed by the IRS primarily relate to: (i) the
disallowance of deductions taken by the Company with respect to
incentive compensation payments made to the former owners of
NordicTrack
16
<PAGE> 17
(acquired in June 1986) and to the former owners of Britches of
Georgetowne (acquired in August 1983); and (ii) the valuation of
certain assets acquired in connection with the acquisition of
Britches.
The Company believes that the tax deductions taken were valid and
in accordance with the Internal Revenue Code. However, at this stage
no assurance can be given of a favorable outcome on these matters. If
the IRS proposed adjustments are sustained, any back taxes owed and
associated interest could have a material adverse effect on the
Company's operating results for the period in which such issues are
finally resolved and could also have a material adverse effect on the
Company's financial condition.
Items 2-5: None
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits - See Exhibit Index.
(b) Reports on Form 8-K:
On March 11, 1996, the Company filed a Current Report on
Form 8-K, dated February 22, 1996, announcing under Item 5
(Other Events) of the Form the election by the Company's
Board of Directors of Messrs. Robert J. Samuelson and Glenn
E. Davis and Ms. Nancy S. Wang as the Company's Executive
Vice President; Vice President, Finance and Chief Financial
Officer; and Vice President, Investor Relations and
Controller, respectively.
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.
CML GROUP, INC.
---------------
(Registrant)
Date: June 11, 1996 /s/Glenn E. Davis
------------- ---------------------------
Glenn E. Davis
Vice President, Finance
Principal Financial Officer
17
<PAGE> 18
<TABLE>
EXHIBIT INDEX
<CAPTION>
Page No.
-------
<S> <C> <C> <C>
10(a) The Company's Revolving Credit Agreement dated as of April 17, 1996 by
and among CML Group, Inc., NordicTrack, Inc., Nordic Advantage,
Inc., The Nature Company, Smith & Hawken, Ltd., Biscuit Factory
Publications Incorporated (D/B/A Hear Music), The First National
Bank of Boston and BankAmerica Business Credit, Inc. 19-141
11 -- Statement Regarding Computation of Earnings (Loss) Per Share 142
27 -- Financial Data Schedule 143
</TABLE>
18
<PAGE> 1
REVOLVING CREDIT AGREEMENT
--------------------------
Dated as of April 17, 1996
among
CML GROUP, INC.,
NORDICTRACK, INC., NORDIC ADVANTAGE, INC., THE NATURE
COMPANY, SMITH & HAWKEN, LTD. AND BISCUIT FACTORY
PUBLICATIONS INCORPORATED (D/B/A HEAR MUSIC)
AS BORROWERS
THE FIRST NATIONAL BANK OF BOSTON, BANKAMERICA BUSINESS CREDIT, INC.,
AND THE OTHER LENDING INSTITUTIONS LISTED ON SCHEDULE 1 HERETO
AS LENDERS
THE FIRST NATIONAL BANK OF BOSTON
AND
BANKAMERICA BUSINESS CREDIT, INC.
AS CO-AGENTS
and
THE FIRST NATIONAL BANK OF BOSTON,
AS ADMINISTRATIVE AGENT
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION. ....................................................... 1
1.1. Definitions. ........................................................................ 1
1.2. Rules of Interpretation. ............................................................ 24
2. THE REVOLVING CREDIT FACILITIES. ............................................................... 25
2.1. Commitment to Lend. ................................................................. 25
2.1.1. Commitment to Lend NordicTrack Loans. .................................... 25
2.1.2. Commitment to Lend TNC Loans. ............................................ 26
2.1.3. Commitment to Lend S&H Loans. ............................................ 26
2.1.4. Commitment to Lend Hear Music Loans. ..................................... 27
2.1.5. Overadvance Facility. .................................................... 27
2.2. Commitment Fee. ..................................................................... 29
2.3. Reallocation and Reduction of Total Commitment. ..................................... 29
2.3.1. Reallocation of Total Commitment. ........................................ 29
2.3.2. Reduction of Sub-Commitment. ............................................. 30
2.3.3. Mandatory Reduction of Total Commitment. ................................. 30
2.4. The Notes. .......................................................................... 30
2.4.1. The NordicTrack Notes. ................................................... 30
2.4.2. The TNC Notes. ........................................................... 31
2.4.3. The S&H Notes. ........................................................... 31
2.4.4. The Hear Music Notes. .................................................... 32
2.5. Interest on Loans. .................................................................. 32
2.6. Requests for Loans. ................................................................. 33
2.6.1. Loan Requests. ........................................................... 33
2.6.2. Daily Borrowings. ........................................................ 33
2.6.3. Citibank Advances. ....................................................... 34
2.7. Conversion Options. ................................................................. 34
2.7.1. Conversion to Different Type of Loan. .................................... 34
2.7.2. Continuation of Type of Loan. ............................................ 35
2.7.3. Eurodollar Rate Loans. ................................................... 35
2.8. Settlement; Failure to Make Funds Available. ........................................ 35
2.8.1. Settlement and Funding Procedures. ....................................... 35
2.8.2. Advances by Administrative Agent. ........................................ 36
2.8.3. Failure to Make Funds Available. ......................................... 37
2.9. Change in Borrowing Bases. .......................................................... 37
3. REPAYMENT OF THE LOANS. ........................................................................ 37
3.1. Maturity. ........................................................................... 37
3.2. Mandatory Repayments of Loans. ...................................................... 37
3.2.1. NordicTrack Loans. ....................................................... 37
3.2.2. TNC Loans. ............................................................... 38
3.2.3. S&H Loans. ............................................................... 38
3.2.4. Hear Music Loans. ........................................................ 39
3.2.5. Annual Clean-Down. ....................................................... 39
3.3. Depository Arrangements. ............................................................ 39
3.3.1. The Borrowers' Depository Arrangements. .................................. 39
3.3.2. CML's Depository Arrangements. ........................................... 41
</TABLE>
<PAGE> 3
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3.3.3. The Other Guarantors' Depository Arrangements. ........................... 42
3.3.4. Fees and Expenses; Application of Payment. ............................... 43
3.4. Optional Repayments of Loans. ....................................................... 44
4. LETTERS OF CREDIT. ............................................................................. 44
4.1. Letter of Credit Commitments.......................................................... 44
4.1.1. Commitment to Issue Letters of Credit. ................................... 44
4.1.2. Letter of Credit Applications. ........................................... 45
4.1.3. Terms of Letters of Credit. .............................................. 45
4.1.4. Reimbursement Obligations of Lenders. .................................... 45
4.1.5. Participations of Lenders. ............................................... 46
4.2. Reimbursement Obligation of CML and the Borrowers. .................................. 46
4.3. Letter of Credit Payments. .......................................................... 47
4.4. Obligations Absolute. ............................................................... 47
4.5. Reliance by Issuer. ................................................................. 48
4.6. Letter of Credit Fee. ............................................................... 48
5. CERTAIN GENERAL PROVISIONS. .................................................................... 49
5.1. Closing Fee. ........................................................................ 49
5.2. Administrative Agent's Fee. ......................................................... 49
5.3. Funds for Payments. ................................................................. 49
5.3.1. Payments to Administrative Agent. ........................................ 49
5.3.2. No Offset, etc. .......................................................... 49
5.4. Computations. ....................................................................... 49
5.5. Inability to Determine Eurodollar Rate. ............................................. 50
5.6. Illegality. ......................................................................... 50
5.7. Additional Costs, etc. .............................................................. 50
5.8. Capital Adequacy. ................................................................... 52
5.9. Certificate. ........................................................................ 52
5.10. Indemnity. ......................................................................... 52
5.11. Interest After Default. ............................................................ 53
5.11.1. Overdue Amounts. ........................................................ 53
5.11.2. Amounts Not Overdue. .................................................... 53
6. COLLATERAL SECURITY AND GUARANTIES. ............................................................ 53
6.1. Security of Borrowers. .............................................................. 53
6.2. Guaranty, Foreign Guaranties and Security of Guarantors. ............................ 53
7. GUARANTY. ...................................................................................... 54
7.1. Guaranty of Payment and Performance. ................................................ 54
7.2. Guarantors' Agreement to Pay Enforcement Costs, etc. ................................ 54
7.3. Waivers by the Guarantors; Lenders' Freedom to Act. ................................. 54
7.4. Unenforceability of Obligations Against Borrowers. .................................. 55
7.5. Subrogation; Subordination. ......................................................... 56
7.5.1. Postponement of Rights Against Borrowers. ................................ 56
7.5.2. Subordination. ........................................................... 56
7.5.3. Provisions Supplemental. ................................................. 57
7.6. Security; Setoff. ................................................................... 57
7.7. Further Assurances. ................................................................. 57
7.8. Termination. ........................................................................ 57
7.9. Successors and Aigns. ............................................................... 57
</TABLE>
<PAGE> 4
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8. REPRESENTATIONS AND WARRANTIES. ................................................................ 58
8.1. Corporate Authority. ................................................................ 58
8.1.1. Incorporation; Good Standing. ............................................ 58
8.1.2. Authorization. ........................................................... 58
8.1.3. Enforceability. .......................................................... 58
8.2. Governmental Approvals. ............................................................. 59
8.3. Title to Properties; Leases. ........................................................ 59
8.4. Financial Statements and Projections. ............................................... 59
8.4.1. Financial Statements. .................................................... 59
8.4.2. Projections. ............................................................. 59
8.5. No Material Changes, etc.; Solvency. ................................................ 60
8.5.1. Changes. ................................................................. 60
8.5.2. Solvency. ................................................................ 60
8.6. Franchises, Patents, Copyrights, etc. ............................................... 60
8.7. Litigation. ......................................................................... 60
8.8. No Materially Adverse Contracts, etc. ............................................... 61
8.9. Compliance with Other Instruments, Laws, etc. ....................................... 61
8.10. Tax Status. ........................................................................ 61
8.11. No Event of Default. ............................................................... 61
8.12. Holding Company and Investment Company Acts. ....................................... 61
8.13. Absence of Financing Statements, etc. .............................................. 62
8.14. Perfection of Security Interest. ................................................... 62
8.15. Certain Affiliate Transactions. .................................................... 62
8.16. Employee Benefit Plans. ............................................................ 62
8.16.1. In General. ............................................................. 62
8.16.2. Terminability of Welfare Plans. ......................................... 62
8.16.3. Guaranteed Pension Plans. ............................................... 63
8.16.4. Multiemployer Plans. .................................................... 63
8.17. Regulations U, X and G. ............................................................ 63
8.18. Environmental Compliance. .......................................................... 63
8.19. Subsidiaries, etc. ................................................................. 65
8.20. Bank Accounts. ..................................................................... 65
8.21. Chief Executive Offices. ........................................................... 65
8.22. Fiscal Year. ....................................................................... 65
8.23. Disclosure ......................................................................... 65
8.24. Insurance. ......................................................................... 65
9. AFFIRMATIVE COVENANTS OF CML AND THE BORROWERS. ................................................ 66
9.1. Punctual Payment. ................................................................... 66
9.2. Maintenance of Office. .............................................................. 66
9.3. Records and Accounts. ............................................................... 66
9.4. Financial Statements, Certificates and Information. ................................. 66
9.5. Notices. ............................................................................ 68
9.5.1. Defaults. ................................................................ 68
9.5.2. Environmental Events. .................................................... 69
9.5.3. Notification of Claim against Collateral. ................................ 69
9.5.4. Notice of Litigation and Judgments. ...................................... 69
9.5.5. Notice of Tax Refunds. ................................................... 70
</TABLE>
<PAGE> 5
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<TABLE>
<S> <C> <C>
9.5.6. Notice of Sale of TNC. ................................................... 70
9.6. Corporate Existence; Maintenance of Properties. ..................................... 70
9.7. Insurance. .......................................................................... 70
9.8. Taxes. .............................................................................. 71
9.9. Inspection of Properties and Books, etc. ............................................ 71
9.9.1. General. ................................................................. 71
9.9.2. Inventory Reports and Appraisals. ........................................ 71
9.9.3. Commercial Finance Examinations. ......................................... 72
9.9.4. Appraisals. .............................................................. 72
9.9.5. Environmental Assements. ................................................. 72
9.9.6. Communications with Accountants. ......................................... 73
9.9.7. Consultants. ............................................................. 73
9.10. Compliance with Laws, Contracts, Licenses, and Permits. ............................ 73
9.11. Inventory Restrictions. ............................................................ 74
9.12. Use of Proceeds. ................................................................... 74
9.13. Additional Mortgaged Property. ..................................................... 74
9.14. Agency Account Agreements. ......................................................... 74
9.15. Machinery and Equipment Appraisals. ................................................ 74
9.16. Intellectual Property Appraisals. .................................................. 74
9.17. Investments in Borrowers. .......................................................... 75
9.18. Ownership of Subsidiaries. ......................................................... 75
9.19. Private Label Credit Card Program. ................................................. 75
9.20. Collateral Notes. .................................................................. 75
9.21 Further Assurances; Additional Locations. ........................................... 75
9.21.1. Further Assurances. ..................................................... 75
9.21.2. Additional Locations. ................................................... 76
10. CERTAIN NEGATIVE COVENANTS OF CML AND THE BORROWERS. .......................................... 76
10.1. Restrictions on Indebtedness. ...................................................... 76
10.2. Restrictions on Liens. ............................................................. 77
10.3. Restrictions on Investments. ....................................................... 79
10.4. Distributions and Restricted Payments. ............................................. 80
10.4.1. Intercompany Distributions and Restricted Payments. ..................... 80
10.4.2. CML Distributions. ...................................................... 81
10.5. Merger, Consolidation and Disposition of Assets. ................................... 82
10.5.1. Mergers and Acquisitions. ............................................... 82
10.5.2. Disposition of Assets. .................................................. 82
10.6. Sale and Leaseback. ................................................................ 82
10.7. Compliance with Environmental Laws. ................................................ 83
10.8. Subordinated Debt. ................................................................. 83
10.9. Employee Benefit Plans. ............................................................ 83
10.10. Bank Accounts. .................................................................... 83
10.11. Transactions with Affiliates. ..................................................... 84
10.12. Restrictive or Inconsistent Agreements. ........................................... 84
10.13. Business Activities. .............................................................. 84
10.14. Private Label Credit Card Programs. ............................................... 85
</TABLE>
<PAGE> 6
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<S> <C> <C>
11. FINANCIAL COVENANTS OF CML AND THE BORROWERS. ................................................. 85
11.1. Minimum Quarterly Consolidated EBITDA. ............................................. 85
11.2. Minimum Consolidated EBITDA to Interest Ratio. ..................................... 85
11.3. Capital Expenditures. .............................................................. 86
11.4. Total Liabilities to Tangible Net Worth Ratio. ..................................... 86
11.5. Minimum Quarterly EBITDA (NordicTrack). ............................................ 87
11.6. Minimum Quarterly EBITDA (TNC). .................................................... 87
11.7. Maximum Inventory Value.............................................................. 87
12. CLOSING CONDITIONS. ........................................................................... 88
12.1. Loan Documents. .................................................................... 88
12.2. Certified Copies of Charter Documents. ............................................. 88
12.3. Corporate Action. .................................................................. 88
12.4. Incumbency Certificate. ............................................................ 88
12.5. Validity of Liens. ................................................................. 88
12.6. Perfection Certificates and UCC Search Results. .................................... 89
12.7. Appraisals; Taxes. ................................................................. 89
12.8. Title Insurance. ................................................................... 89
12.9. Certificates of Insurance. ......................................................... 89
12.10. Agency Account Agreements. ........................................................ 89
12.11. Borrowing Base Report. ............................................................ 89
12.12. Accounts Receivable Aging Report. ................................................. 89
12.13. Hazardous Waste Assessments. ...................................................... 90
12.14. Solvency Certificate. ............................................................. 90
12.15. Opinion of Counsel. ............................................................... 90
12.16. Payment of Fees. .................................................................. 90
12.17. Payoff Letter. .................................................................... 90
12.18. Disbursement Instructions. ........................................................ 91
12.19. Updated Collateral Examinations. .................................................. 91
12.20. Landlord Lien Waivers. ............................................................ 91
12.21. Borrowing Availability. ........................................................... 91
13. CONDITIONS TO ALL BORROWINGS. ................................................................. 91
13.1. Representations True; No Event of Default. ......................................... 91
13.2. No Legal Impediment. ............................................................... 91
13.3. Governmental Regulation. ........................................................... 92
13.4. Proceedings and Documents. ......................................................... 92
13.5. Borrowing Base Report. ............................................................. 92
13.6. Borrowing Availability. ............................................................ 92
14. EVENTS OF DEFAULT; ACCELERATION; ETC. ......................................................... 92
14.1. Events of Default and Acceleration. ................................................ 92
14.2. Termination of Commitments. ........................................................ 96
14.3. Remedies. .......................................................................... 96
14.4. Distribution of Collateral Proceeds. ............................................... 96
15. SETOFF. ....................................................................................... 97
16. THE AGENTS. ................................................................................... 98
16.1. Authorization. ..................................................................... 98
16.2. Employees and Agents. .............................................................. 99
16.3. No Liability. ...................................................................... 99
</TABLE>
2
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<TABLE>
<S> <C> <C>
16.4. No Representations. ................................................................ 99
16.5. Payments. .......................................................................... 100
16.5.1. Payments to Administrative Agent. ....................................... 100
16.5.2. Distribution by Administrative Agent. ................................... 100
16.5.3. Delinquent Lenders. ..................................................... 100
16.6. Holders of Notes. .................................................................. 101
16.7. Indemnity. ......................................................................... 101
16.8. Agents as Lender. .................................................................. 101
16.9. Resignation. ....................................................................... 101
16.10. Notification of Defaults and Events of Default. ................................... 102
16.11. Duties in the Case of Enforcement. ................................................ 102
16.12. Duties of Co-Agents. .............................................................. 102
17. EXPENSES. ..................................................................................... 102
18. INDEMNIFICATION. .............................................................................. 103
19. SURVIVAL OF COVENANTS, ETC. ................................................................... 104
20. ASSIGNMENT AND PARTICIPATION. ................................................................. 105
20.1. Conditions to Assignment by Lenders. ............................................... 105
20.2. Certain Representations and Warranties; Limitations; Covenants. .................... 105
20.3. Register. .......................................................................... 106
20.4. New Notes. ......................................................................... 107
20.5. Participations. .................................................................... 107
20.6. Disclosure. ........................................................................ 108
20.7. Assignee or Participant Affiliated with the Borrowers. ............................. 108
20.8. Miscellaneous Assignment Provisions. ............................................... 108
20.9. Assignment by Borrowers or Guarantors .............................................. 109
21. NOTICES, ETC. ................................................................................. 109
22. GOVERNING LAW. ................................................................................ 110
23. HEADINGS. ..................................................................................... 110
24. COUNTERPARTS. ................................................................................. 110
25. ENTIRE AGREEMENT, ETC. ........................................................................ 111
26. WAIVER OF JURY TRIAL. ......................................................................... 111
27. CONSENTS, AMENDMENTS, WAIVERS, ETC. ........................................................... 111
28. SEVERABILITY. ................................................................................. 113
</TABLE>
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Schedules and Exhibits
----------------------
Schedule 1 Lenders and Commitments
Schedule 2 Permitted Inventory Locations
Schedule 8.3 Title to Properties; Leases
Schedule 8.5 Distributions since Balance Sheet Date
Schedule 8.7 Litigation
Schedule 8.10 Tax Status
Schedule 8.18 Environmental Matters
Schedule 8.19 Subsidiaries; Joint Ventures
Schedule 8.20 Bank Accounts
Schedule 8.21 Chief Executive Offices
Schedule 8.24 Insurance
Schedule 10.1 Existing Indebtedness
Schedule 10.2 Existing Liens
Schedule 10.3 Existing Investments
Schedule 10.6 Sale and Leasebacks Transactions
Exhibit A-1 Form of NordicTrack Note
Exhibit A-2 Form of TNC Note
Exhibit A-3 Form of S&H Note
Exhibit A-4 Form of Hear Music Note
Exhibit B Form of Loan Request
Exhibit C Form of Borrowing Base Report
Exhibit D Form of Compliance Certificate
Exhibit E Form of Agency Account Agreement
Exhibit F Form of Landlord Waiver
Exhibit G Form of Assignment and Acceptance
Exhibit H-1 Form of Overadvance Reallocation Request
Exhibit H-2 Form of Commitment Reallocation Request
Exhibit I Form of Supplement to Schedule 2
<PAGE> 9
REVOLVING CREDIT AGREEMENT
--------------------------
This REVOLVING CREDIT AGREEMENT is made as of April 17, 1996, by and
among (a) CML GROUP, INC., a Delaware corporation ("CML"), (b) NORDICTRACK,
INC., a Minnesota corporation ("NT"), NORDIC ADVANTAGE, INC., a Minnesota
corporation ("NA" and, on a consolidated basis with NT, "NordicTrack"), THE
NATURE COMPANY, a California corporation ("TNC"), SMITH & HAWKEN, LTD., a
Delaware corporation ("S&H") and BISCUIT FACTORY PUBLICATIONS INCORPORATED
(d/b/a HEAR Music), a Massachusetts corporation ("Hear Music" and, together with
NordicTrack, TNC and S&H, the "Borrowers"), (c) THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, BANKAMERICA BUSINESS CREDIT, INC., a
Delaware corporation, and the other lending institutions that may become Lenders
hereunder, (d) THE FIRST NATIONAL BANK OF BOSTON and BANKAMERICA BUSINESS
CREDIT, INC., as co-agents for the Lenders, and (e) THE FIRST NATIONAL BANK OF
BOSTON as administrative, collateral and documentation agent for the Lenders.
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. DEFINITIONS. The following terms shall have the meanings set
forth in this [Section] 1 or elsewhere in the provisions of this Credit
Agreement referred to below:
ACCOUNTS RECEIVABLE. All rights of any of the Borrowers to payment for
goods sold, leased or otherwise marketed in the ordinary course of business and
all rights of any of the Borrowers to payment for services rendered in the
ordinary course of business and all sums of money or other proceeds due thereon
pursuant to transactions with account debtors, except for that portion of the
sum of money or other proceeds due thereon that relate to sales, use or property
taxes in conjunction with such transactions, recorded on books of account in
accordance with generally accepted accounting principles.
ADMINISTRATIVE AGENT. The First National Bank of Boston acting as
administrative, collateral and documentation agent for the Lenders and the
Co-Agents.
ADMINISTRATIVE AGENT'S HEAD OFFICE. The Administrative Agent's head
office located at 100 Federal Street, Boston, Massachusetts 02110, or at such
other location as the Administrative Agent may designate from time to time.
ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Bingham, Dana & Gould LLP or
such other counsel as may be approved by the Administrative Agent.
AFFILIATE. With respect to any Person (a) any Person which directly, or
indirectly, controls or is controlled by, or is under common control with, the
Person specified, or (b) any other Person who is a Relative, director, officer
or
<PAGE> 10
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general partner of such Person or of any Person described in clause (a). For
purposes of this definition, control of a Person shall include the power,
whether direct or indirect, (x) to vote five percent (5%) or more of the equity
securities having ordinary voting power for the election of directors or other
managers of such Person or (y) to direct or cause the direction, of the
management and policies of such Person whether by contract or otherwise.
AGENCY ACCOUNT AGREEMENTS. The several Agency Account Agreements in the
form of EXHIBIT E hereto (or a form otherwise approved by the Administrative
Agent in its sole discretion) entered into by any of the Borrowers, any of the
Guarantors, the Administrative Agent and the Agency Account Institutions or
other depository institutions satisfactory to the Administrative Agents.
AGENCY ACCOUNT INSTITUTIONS. Citibank, N.A., NorWest Bank Minnesota,
N.A., Fifth Third Bank and any other financial institutions which receive
deposits directly or indirectly (as a result of interim concentration of
depository accounts), from an aggregate eight or more retail stores of the
Borrowers and their Subsidiaries.
AGENCY ACCOUNTS. The depository accounts maintained by the Borrowers
and the Guarantors with the Agency Account Institutions or other depository
institutions satisfactory to the Administrative Agent, the funds from which are
periodically transferred to the applicable Concentration Account pursuant to the
Agency Account Agreements.
AGENTS. Collectively, the Co-Agents and the Administrative Agent.
AGGREGATE BORROWING BASE. The sum of the NordicTrack Borrowing
Base, the TNC Borrowing Base, the S&H Borrowing Base and the Hear Music
Borrowing Base.
ASSIGNMENT AND ACCEPTANCE. See [Section]20.1.
BALANCE SHEET DATE. July 31, 1995, the date of the most recent
audited financial statements of CML and its Subsidiaries.
BANKAMERICA. BankAmerica Business Credit, Inc., a Delaware corporation,
in its individual capacity.
BASE RATE. The higher of (i) the annual rate of interest announced from
time to time by FNBB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
<PAGE> 11
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Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three funds brokers of
recognized standing selected by the Administrative Agent.
BASE RATE LOANS. Loans bearing interest calculated by reference to the
Base Rate.
BORROWERS. As defined in the preamble hereto.
BORROWING BASE. Collectively, the NordicTrack Borrowing Base, the
TNC Borrowing Base, the S&H Borrowing Base, the Hear Music Borrowing Base and
the Overadvance Borrowing Base.
BORROWING BASE REPORT. A Borrowing Base Report signed by the chief
financial officer of CML and in substantially the form of Exhibit C hereto.
BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.
CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by any
Person or any of its Subsidiaries in connection with the purchase or lease by
any such Person or any of its Subsidiaries of Capital Assets that would be
required to be capitalized and shown on the balance sheet of such Person in
accordance with generally accepted accounting principles.
CAPITALIZED LEASES. Leases under which CML or any of its Subsidiaries
is the lessee or obligor, the discounted future rental payment obligations under
which are required to be capitalized on the balance sheet of the lessee or
obligor in accordance with generally accepted accounting principles.
CERCLA. See [Section]8.18.
CITIBANK. Citibank, N.A., in its capacity as agent for the lenders
under the Citibank Facility.
CITIBANK CONTROLLED DISBURSEMENT ACCOUNT. As defined in the Citibank
Payoff Letter.
CITIBANK FACILITY. The revolving credit facility among CML, certain
lenders party thereto and Citibank as agent for such lenders.
<PAGE> 12
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CITIBANK PAYOFF LETTER. The letter agreement dated as of April 16,
1996 among Citibank, FNBB, as Administrative Agent, CML and its Subsidiaries
party thereto, in form and substance satifactory to the Lenders and the Agents.
CLOSING DATE. The first date on which the conditions set forth
in [Section]12 have been satisfied and any Loans are to be made or any Letter
of Credit is to be issued hereunder.
CML. As defined in the preamble hereto.
CO-AGENTS. Collectively, The First National Bank of Boston and
BankAmerica Business Credit, Inc., acting as co-agents for the Lenders.
CODE. The Internal Revenue Code of 1986.
Collateral. All of the property, rights and interests of CML and its
Subsidiaries that are or are intended to be subject to the security interests
and mortgages created by the Security Documents.
COLLATERAL NOTES. Any promissory notes issued by one or more of the
Borrowers in favor of FNBB as agent under such notes, executed and delivered
pursuant to [Section]9.20, and assigned to the Administrative Agent, each of
which such notes shall be secured by one of the Mortgages.
COMMITMENT. With respect to each Lender, the amount set forth on
Schedule 1 hereto as the amount of such Lender's commitment to make Loans to,
and to participate in the issuance, extension and renewal of Letters of Credit
for the account of, the Borrowers, as the same may be reduced from time to time;
or if such commitment is terminated pursuant to the provisions hereof, zero.
COMMITMENT PERCENTAGE. With respect to each Lender, the percentage
set forth on SCHEDULE 1 hereto as such Lender's percentage of the aggregate
Commitments of all of the Lenders.
COMMITMENT REALLOCATION DATE. The date on which any reallocation
of the Sub-Commitments among the Borrowers is made or is to be made by CML in
accordance with [Section]2.3.1.
COMMITMENT REALLOCATION REQUEST. See [Section]2.3.1.
COMPLIANCE CERTIFICATE. See [Section]9.4(d).
CONCENTRATION ACCOUNT. With respect to any Borrower or any Guarantor,
such Borrower's or such Guarantor's, as the case may be, depository account with
FNBB under the control of the Administrative Agent for the benefit of the
Lenders and the Agents.
<PAGE> 13
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CONSOLIDATED OR CONSOLIDATED. With reference to any term defined
herein, shall mean that term as applied to the accounts of a Person and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
CONSOLIDATED ADJUSTED NET INCOME. With respect to any Person and its
Subsidiaries, for any period, an amount equal to consolidated net income for
such period, after deduction of all expenses, taxes and other proper charges,
determined in accordance with generally accepted accounting principles and after
eliminating therefrom all extraordinary nonrecurring items of income including,
without limitation (a) income from unusual transactions, (b) income from the
sale of Capital Assets and (c) income from the write-up in the book value of any
assets of such Person or its Subsidiaries.
CONSOLIDATED EBITDA. With respect to any Person and its Subsidiaries,
for any period, Consolidated Adjusted Net Income plus, to the extent deducted in
determining Consolidated Adjusted Net Income, the sum of interest, taxes,
depreciation and amortization of such Person and its Subsidiaries for such
period on a consolidated basis, all determined in accordance with generally
accepted accounting principles.
CONSOLIDATED INVENTORY VALUE. At the relevant time of reference
thereto, the aggregate net book value (determined on a first-in first-out basis
at lower of cost or market) of all finished goods, work-in-progress and raw
materials inventory of CML and its Subsidiaries, determined on a consolidated
basis in accordance with generally accepted accounting principles, but including
in any event all such inventory of any Subsidiary or business unit of CML or any
of its Subsidiaries which is accounted for as a discontinued operation or an
asset held for sale or on any other basis which would result in such inventory
not being included as part of the inventory of CML and its Subsidiaries,
determined on a consolidated basis.
CONSOLIDATED TANGIBLE NET WORTH. With respect to any Person, the
excess of Consolidated Total Assets over Consolidated Total Liabilities,
and less the sum of:
(a) the total book value of all assets of such Person and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names,
copyrights, patents and licenses, and rights with respect to the
foregoing; plus
(b) all amounts representing any write-up in the book value of
any assets of such Person or its Subsidiaries resulting from a
revaluation thereof subsequent to the Balance Sheet Date; PLUS
<PAGE> 14
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(c) to the extent otherwise includable in the computation of
Consolidated Tangible Net Worth, any subscriptions receivable relating
to capital stock.
CONSOLIDATED TOTAL ASSETS. All assets of a Person and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles.
CONSOLIDATED TOTAL INTEREST EXPENSE. With respect to any Person for any
period, the aggregate amount of interest required to be paid or accrued by such
Person and its Subsidiaries during such period on all Indebtedness of such
Person and its Subsidiaries outstanding during all or any part of such period,
whether such interest was or is required to be reflected as an item of expense
or capitalized, including payments consisting of interest in respect of
Capitalized Leases and including commitment fees, agency fees, facility fees,
balance deficiency fees and similar fees or expenses in connection with the
borrowing of money, PROVIDED that Consolidated Total Interest Expense shall not
include amortization of fees and expenses paid in connection with the
transactions contemplated by the Credit Agreement.
CONSOLIDATED TOTAL LIABILITIES. All liabilities of a Person and its
Subsidiaries determined on a consolidated basis that in accordance with
generally accepted accounting principles should be classified upon the obligor's
balance sheet as liabilities.
CONSULTANT. See [Section]9.9.7.
CONTROLLED DISBURSEMENT ACCOUNT. With respect to any Borrower or CML,
such Borrower's or CML's, as the case may be, controlled disbursement account
with FNBB, listed on SCHEDULE 8.20 hereto.
CONVERSION REQUEST. A notice given by any of the Borrowers to the
Administrative Agent of such Borrower's election to convert or continue a
Loan in accordance with [Section]2.7.
COPYRIGHT MORTGAGE. The Memorandum of Copyrights, dated or to be dated
on or prior to the Closing Date, made by the Borrowers and the Guarantors in
favor of the Administrative Agent and in form and substance satisfactory to the
Lenders and the Agents.
CREDIT AGREEMENT. This Revolving Credit Agreement, including the
Schedules and Exhibits hereto.
DEFAULT. See [Section]14.1.
DELINQUENT LENDER. See [Section]16.5.3.
<PAGE> 15
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DETERMINED VALUE. At the relevant time of reference thereto, (a) with
respect to Eligible Real Estate, the appraised fair market value thereof
determined by reference to the appraisal thereof pursuant to [Section]12.7 and
(b) with respect to Eligible Machinery and Equipment, the appraised value of
such machinery and equipment on an orderly liquidation basis determined by
reference to the appraisal conducted pursuant to [Section]9.15, in each case
after deduction of any claims entitled to priority under applicable law over the
security interest or mortgage of the Administrative Agent.
DISTRIBUTION. The declaration or payment of any dividend on or in
respect of any shares of any class of capital stock of a Person, other than
dividends payable solely in shares of common stock or similar non-preferred
equity interests of such Person; the purchase, redemption, or other retirement
of any shares of any class of capital stock or other equity interests of a
Person, directly or indirectly through a Subsidiary of such Person or otherwise;
the return of capital by a Person to its shareholders or equity holders as such;
or any other distribution on or in respect of any shares of any class of capital
stock or other equity interest of such Person.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
DOMESTIC LENDING OFFICE. Initially, the office of each Lender
designated as such in SCHEDULE 1 hereto; thereafter, such other office of such
Lender, if any, located within the United States that will be making or
maintaining Base Rate Loans.
DRAWDOWN DATE. The date on which any Loan is made or is to be made,
and the date on which any Loan is converted or continued in accordance with
[Section]2.7.
ELIGIBLE ACCOUNTS RECEIVABLE. With respect to NordicTrack and S&H, the
aggregate of the unpaid portions of Accounts Receivable (net of any credits,
rebates, offsets, holdbacks or other adjustments or commissions payable to third
parties that are adjustments to such Accounts Receivable) (i) that such Borrower
reasonably and in good faith determines to be collectible; (ii) that are with
account debtors that (A) are not Affiliates of CML or any of its Subsidiaries,
(B) purchased the goods or services giving rise to the relevant Account
Receivable in an arm's length transaction, (C) are not insolvent or the subject
of any case or proceeding, whether voluntary or involuntary, under any
bankruptcy, reorganization, arrangement, insolvency, adjustment of debt,
dissolution, liquidation or similar law of any jurisdiction and (D) are, in the
Co-Agents' reasonable judgment, creditworthy; (iii) that are in payment of
obligations that have been fully performed and are not subject to dispute or any
other similar claims that would reduce the cash amount payable therefor; (iv)
that are not subject to any pledge, restriction, security interest or other lien
or encumbrance other than those created by the Loan Documents; (v) in which the
Administrative Agent has a valid and perfected first priority security interest;
(vi) that are not outstanding for more than (A) sixty (60) days past the date
<PAGE> 16
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payment thereof is due or (B) ninety (90) days past the earlier to occur of (x)
the date of the respective invoices therefor and (y) the date of shipment
therefor in the case of goods or the end of the calendar month following the
provision thereof in the case of services; (vii) that are not due from an
account debtor located in Indiana, Minnesota or New Jersey unless such Borrower
(A) has received a certificate of authority to do business and is in good
standing in such state or (B) has filed a notice of business activities report
with the appropriate office or agency of such state for the current year; (viii)
that are not due from any single account debtor if more than twenty-five percent
(25%) of the aggregate amount of all Accounts Receivable owing from such account
debtor would otherwise not be Eligible Accounts Receivable (after applying co-op
advertising credits, if any, to the balances more than sixty (60) days past the
date payment thereof is due); (ix) that are payable in Dollars; (x) that are not
payable from an office outside of the United States or Canada; (xi) that are not
secured by a letter of credit unless the Administrative Agent has a prior,
perfected security interest in such letter of credit; (xii) that are not
"bill-and-hold", guaranteed sale, sale-or-return, sale on approval or
consignment basis receivables; (xiii) that are not credit card receivables
(other than, in the case of NordicTrack, Eligible FitFinance Receivables); (xiv)
that are not due from any single account debtor (other than American Express
Company, Sears Roebuck and Company and Target Stores, a division of Dayton
Hudson Corporation if and to the extent that, after inclusion of such Account
Receivable in Eligible Accounts Receivable, the aggregate amount of Eligible
Accounts Receivable owing from such account debtor would exceed twenty percent
(20%) of the aggregate amount of all Eligible Accounts Receivable; (xv) in the
case of NordicTrack, that are not due from NorWest Bank Minnesota, N.A.; and
(xvi) in the case of S&H, that do not arise from the sale of mailing lists or
are due from Felissimo Corporation.
ELIGIBLE ASSIGNEE. Any of (i) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, PROVIDED that such
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution or
other Person approved by the Administrative Agent, such approval not to be
unreasonably withheld.
<PAGE> 17
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ELIGIBLE FITFINANCE RECEIVABLE. With respect to NordicTrack, the
aggregate of the unpaid portions of Eligible Accounts Receivable arising from
NordicTrack's discontinued "FitFinance" consumer installment sales program
excluding all Accounts Receivable from each FitFinance customer that has more
than one past due payment on such customer's Accounts Receivable.
ELIGIBLE INVENTORY. With respect to Hear Music, S&H and TNC, finished
goods owned by such Borrower; PROVIDED that Eligible Inventory shall not include
any inventory (i) held on consignment, or not otherwise owned by such Borrower,
or of a type no longer sold by such Borrower; (ii) which has been returned by a
customer or is damaged or subject to any legal encumbrance other than Permitted
Liens; (iii) which is not in the possession of such Borrower unless (A) such
inventory is subject to a documentary letter of credit issued by a lender
approved by the Administrative Agent and the Administrative Agent has possession
of and a first priority, perfected security interest in the documents of title
relating to such inventory, (B) such inventory is in transit from one Permitted
Inventory Location of such Borrower within the United States of America to
another Permitted Inventory Location of such Borrower within the United States
of America or (C) the aggregate gross book value of such inventory, with respect
to S&H, does not exceed $1,750,000 and, with respect to Hear Music and TNC, does
not exceed $0 and the Administrative Agent has received (x) a waiver in form and
substance satisfactory to the Administrative Agent from the possessor of such
inventory, (y) financing statements in form and substance satisfactory to the
Administrative Agent executed and delivered by S&H as secured party/bailor and
the possessor of such inventory as debtor/bailee, for filing in the appropriate
jurisdictions and (z) an assignment in form and substance satisfactory to the
Administrative Agent by the secured party/bailor to the Administrative Agent of
the aforementioned financing statements; (iv) in which the Administrative Agent
does not have a valid and perfected first priority security interest; (v) which
has been shipped to a customer of such Borrower regardless of whether such
shipment is on a consignment basis; (vi) which is not located at a Permitted
Inventory Location of such Borrower within the United States of America, unless
(A) such inventory is subject to a documentary letter of credit issued by a
lender approved by the Administrative Agent and the Administrative Agent has
possession of and a first priority, perfected security interest in the documents
of title relating to such inventory or (B) such inventory is in transit from one
Permitted Inventory Location of such Borrower within the United States of
America to another Permitted Inventory Location of such Borrower within the
United States of America; (vii) which the Majority Lenders reasonably deem to be
obsolete or not marketable; (viii) which is located in California unless the
Administrative Agent has received a legal opinion in form and substance
satisfactory to the Administrative Agent that the Loan Documents comply with the
provisions of [Section]9102(5)(b) of the Uniform Commercial Code as in effect in
California, or (ix) in the case of S&H, which consists of live plantings.
ELIGIBLE MACHINERY AND EQUIPMENT. Those items of machinery and
equipment owned by NordicTrack at the relevant time of reference thereto with
<PAGE> 18
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respect to which NordicTrack has full and unencumbered title (except for liens
granted to the Administrative Agent pursuant to the Security Documents) and with
respect to which the Administrative Agent has a valid and perfected first
priority security interest.
ELIGIBLE NORDICTRACK INVENTORY. With respect to NordicTrack, (a)
finished goods owned by NordicTrack and (b) work-in-progress and raw materials
owned by NordicTrack and having an aggregate gross book value of not more than
$20,000,000 determined in accordance with generally accepted accounting
principles; PROVIDED that Eligible NordicTrack Inventory shall not include any
inventory (i) held on consignment, or not otherwise owned by NordicTrack, or of
a type no longer sold by NordicTrack; (ii) which has been returned by a customer
or is damaged or subject to any legal encumbrance other than Permitted Liens;
(iii) which is not in the possession of NordicTrack unless (A) such inventory is
subject to a documentary letter of credit issued by a lender approved by the
Administrative Agent and the Administrative Agent has possession of and a first
priority, perfected security interest in the documents of title relating to such
inventory, (B) such inventory is in transit from one Permitted Inventory
Location of NordicTrack within the United States of America to another Permitted
Inventory Location of NT or NA, as applicable, within the United States of
America or (C) the aggregate gross book value of such inventory does not exceed
$4,250,000 and the Administrative Agent has received (x) a waiver in form and
substance satisfactory to the Administrative Agent from the possessor of such
inventory, (y) financing statements in form and substance satisfactory to the
Administrative Agent executed and delivered by NT or NA, as applicable, as
secured party/bailor and the possessor of such inventory as debtor/bailee, for
filing in the appropriate jurisdictions and (z) an assignment in form and
substance satisfactory to the Administrative Agent by the secured party/bailor
to the Administrative Agent of the aforementioned financing statements; (iv) in
which the Administrative Agent does not have a valid and perfected first
priority security interest; (v) which has been shipped to a customer of
NordicTrack regardless of whether such shipment is on a consignment basis; (vi)
which is not located at a Permitted Inventory Location of NT or NA, as
applicable, within the United States of America, unless (A) such inventory is
subject to a documentary letter of credit issued by a lender approved by the
Administrative Agent and the Administrative Agent has possession of and a first
priority, perfected security interest in the documents of title relating to such
inventory or (B) such inventory is in transit from one Permitted Inventory
Location of NT or NA, as applicable, within the United States of America to
another Permitted Inventory Location of NT or NA, as applicable, within the
United States of America; (vii) which the Majority Lenders reasonably deem to be
obsolete or not marketable or (viii) which is located in California unless the
Administrative Agent has received a legal opinion in form and substance
satisfactory to the Administrative Agent that the Loan Documents comply with the
provisions of [Section]9102(5)(b) of the Uniform Commercial Code as in effect in
California.
<PAGE> 19
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ELIGIBLE REAL ESTATE. With respect to NordicTrack, all real property
with respect to which NordicTrack has full and unencumbered title (except for
the liens granted to the Administrative Agent pursuant to the Security
Documents) and with respect to which the Administrative Agent has a valid and
perfected first priority lien.
EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of
[Section]3(3) of ERISA maintained or contributed to by CML, any of the
Borrowers, or any ERISA Affiliate, other than a Multiemployer Plan.
ENGAGEMENT LETTER. See [Section]9.9.7.
ENVIRONMENTAL LAWS. See [Section]8.18(a).
ERISA. The Employee Retirement Income Security Act of 1974.
ERISA AFFILIATE. Any Person which is treated as a single employer with
CML or any of the Borrowers under [Section]414 of the Code.
ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of [Section]4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Administrative Agent
in its sole discretion acting in good faith.
EURODOLLAR LENDING OFFICE. Initially, the office of each Lender
designated as such in Schedule 1 hereto; thereafter, such other office of such
Lender, if any, that shall be making or maintaining Eurodollar Rate Loans.
EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate of interest equal to (i) the rate per annum (rounded upwards
to the nearest 1/16 of one percent) at which the Reference Bank's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
<PAGE> 20
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the Eurodollar and foreign currency and exchange operations of such Eurodollar
Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of the Reference Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.
EURODOLLAR RATE LOANS. Loans bearing interest calculated by reference
to the Eurodollar Rate.
EVENT OF DEFAULT. See [Section]14.1.
FEE LETTER. The letter agreement dated as of March 8, 1996 and
amended and restated as of the Closing Date among CML, the Borrowers and
the Co-Agents.
FISCAL AGENCY AGREEMENT. The Fiscal Agency Agreement dated as of
January 20, 1993 between CML and Chemical Bank, as fiscal agent, in the form
delivered to the Administrative Agent on or prior to the Closing Date.
FNBB. The First National Bank of Boston, a national banking
association, in its individual capacity.
FOREIGN GUARANTIES. The several foreign subsidiary guaranties made by
each of the Foreign Guarantors in favor of the Administrative Agent pursuant to
which each Foreign Guarantor guaranties to the Administrative Agent for the
benefit of the Lenders and the Agents the payment and performance of the
Obligations.
FOREIGN GUARANTORS. CML International (FSC), Ltd., The Nature
Company Limited, NordicTrack (U.K.) Ltd., NordicTrack GmbH and Nordic
Advantage of Ontario, Inc.
FOREIGN PLEDGE AGREEMENT. Collectively, (a) the share pledge agreement
dated on or about the Closing Date among NT and the Lenders pledging the shares
of NordicTrack GmbH, (b) the charge over securities dated on or about the
Closing Date between TNC and the Administrative Agent pledging the securities of
The Nature Company Limited and (c) the charge over securities dated on or about
the Closing Date between NT and the Administrative Agent, pledging the
securities of NordicTrack (U.K.) Ltd., in each case in form and substance
satisfactory to the Lenders and the Agents.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (i) When used in [Section]11,
whether directly or indirectly through reference to a capitalized term used
therein, means (A) principles that are consistent with the principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and
(B) to the extent consistent with such principles, the accounting practice of
CML and the
<PAGE> 21
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Borrowers reflected in their financial statements for the year ended on the
Balance Sheet Date, and (ii) when used in general, other than as provided
above, means principles that are (A) consistent with the principles promulgated
or adopted by the Financial Accounting Standards Board and its predecessors, as
in effect from time to time, and (B) consistently applied with past financial
statements of CML and the Borrowers adopting the same principles, provided that
in each case referred to in this definition of "generally accepted accounting
principles" a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified
opinion (other than a qualification regarding changes in generally accepted
accounting principles) as to financial statements in which such principles have
been properly applied.
GORDON BROTHERS REPORT. The Gordon Brothers Partners, Inc. Inventory
Valuation and Review Report dated as of March, 1996 relating to the Borrowers'
inventory, in the form delivered to the Co-Agents on or prior to the Closing
Date, or any subsequent appraisal thereof prepared in a manner consistent with
such report and in form and substance satisfactory to the Co-Agents.
GUARANTEED PENSION PLAN. Any employee pension benefit plan within the
meaning of [Section]3(2) of ERISA maintained or contributed to by CML or any of
the Borrowers or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA, other
than a Multiemployer Plan.
GUARANTORS. CML, each Borrower and the direct and indirect Subsidiaries
of CML listed on the signature pages hereto as Guarantors.
GUARANTY. The Guaranty made by each of the Guarantors in favor of the
Lenders and the Agents pursuant to [Section]7 hereof, pursuant to which each
Guarantor guaranties to the Lenders and the Agents the payment and performance
of the Obligations.
HAZARDOUS SUBSTANCES. See [Section]8.18(b).
HEAR MUSIC. As defined in the preamble hereto.
HEAR MUSIC BORROWING BASE. At the relevant time of reference thereto,
an amount determined by the Administrative Agent by reference to the most recent
Borrowing Base Report, which is equal to the sum of:
(a) 55.00% of the net book value (determined on a first-in first-out
basis at lower of cost or market) of Hear Music's Eligible Inventory; MINUS
(b) the amount of any Landlord Lien Reserve with respect to Hear
Music;
PROVIDED, HOWEVER, the Administrative Agent reserves its rights, upon prior
written notice to the Borrowers, to add reserves and decrease the advance rate
<PAGE> 22
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set forth herein, if, in the Administrative Agent's reasonable discretion, the
results of commercial finance examinations, inventory appraisals or other credit
or collateral considerations indicate a deterioration in Hear Music's Eligible
Inventory from January 27, 1996 such that additional reserves or a lower advance
rate for Hear Music's Eligible Inventory is warranted.
HEAR MUSIC LOANS. Revolving credit loans made or to be made by the
Lenders to Hear Music pursuant to [Section]2.1.4.
HEAR MUSIC NOTE RECORD. A Record with respect to a Hear Music Note.
HEAR MUSIC NOTES. See [Section]2.4.4.
INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct or
indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (iii) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
INTERCOMPANY SUBORDINATION AGREEMENT. The Intercompany Subordination
Agreement, dated or to be dated on or prior to the Closing Date, among CML, the
Borrowers, and their Subsidiaries and in form and substance satisfactory to the
Lenders and the Agents.
INTEREST PAYMENT DATE. (i) As to any Base Rate Loan, the first day
after the last day of the Interest Period with respect thereto; and (ii) as to
any Eurodollar Rate Loan, the last day of each Interest Period with respect
thereto.
INTEREST PERIOD. With respect to each Loan, (i) initially, the period
commencing on the Drawdown Date of such Loan and ending on the last day of one
of the periods set forth below, as selected by the applicable Borrower in a Loan
Request (A) for any Base Rate Loan, the last day of the calendar month; and (B)
for any Eurodollar Rate Loan, 1, 2 or 3 months; and (ii) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Loan and ending on the last day of one of the periods set forth above, as
selected by the applicable Borrower in a Conversion Request; PROVIDED
<PAGE> 23
-15-
that all of the foregoing provisions relating to Interest Periods are subject to
the following:
(a) if any Interest Period with respect to a Eurodollar Rate
Loan would otherwise end on a day that is not a Eurodollar Business
Day, that Interest Period shall be extended to the next succeeding
Eurodollar Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(b) if any Interest Period with respect to a Base Rate Loan
would end on a day that is not a Business Day, that Interest Period
shall end on the next succeeding Business Day;
(c) if the applicable Borrower shall fail to give notice as
provided in [Section]2.7, such Borrower shall be deemed to have
requested a conversion of the affected Eurodollar Rate Loan to a Base
Rate Loan and the continuance of all Base Rate Loans as Base Rate
Loans on the last day of the then current Interest Period with respect
thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan
that begins on the last Eurodollar Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Eurodollar Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date.
INVESTMENTS. All expenditures made and all liabilities incurred
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
<PAGE> 24
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ISSUING BANK. With respect to any Letter of Credit, FNBB and any
successor Issuing Bank.
KIOSK. Any temporary seasonal lease (not in excess of twelve months in
any event) by any Borrower of space provided that not more than $50,000 of
Capital Expenditures may be expended by CML and its Subsidiaries in respect of
any one kiosk.
LANDLORD LIEN RESERVE. With respect to any Eligible Inventory or
Eligible NordicTrack Inventory which is located at premises subject to a
Specified Lease at any time prior to the date which is sixty (60) days after the
Closing Date, the Landlord Lien Reserve shall be zero, and at any time
thereafter, the Landlord Lien Reserve shall be the lesser of (a) the sum of (i)
all rent past due for more than thirty (30) days under such Specified Lease at
such time and (ii) all rent which may become due under such Specified Lease
during the twelve month period commencing at such time, in each case, unless
otherwise requested by the Administrative Agent, calculated on the date which is
sixty (60) days after the Closing Date and at the end of each fiscal quarter
thereafter by reference to the average monthly rent on such Specified Lease
during the immediately preceding calendar year and (b) the net book value
(determined on a first-in first-out basis at lower of cost or market) of such
Eligible Inventory or Eligible NordicTrack Inventory.
LANDLORD WAIVER. A waiver from the lessor or sublessor of property
leased by any of the Borrowers as lessee in substantially the form of Exhibit F
hereto or otherwise approved by the Administrative Agent in its sole discretion.
LENDERS. FNBB, BankAmerica and any other Person who becomes a Lender
pursuant to [Section]20.
LETTER OF CREDIT. See [Section]4.1.1.
LETTER OF CREDIT APPLICATION. See [Section]4.1.1.
LETTER OF CREDIT EXPOSURE. At any time, and with respect to any
Borrower or CML, the sum of (a) the Maximum Drawing Amount with respect to all
Letters of Credit issued at the request of such Borrower or, in the case of CML,
any Borrower and (b) all Unpaid Reimbursement Obligations of such Borrower or,
as the case may be, CML.
LETTER OF CREDIT PARTICIPATION. See [Section]4.1.4.
LITIGATION RESERVE. $3,410,000.
LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of
Credit Applications, the Letters of Credit, the Fee Letter, the Intercompany
Subordination Agreement, the Post-Closing Letter and the Security Documents.
<PAGE> 25
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LOAN REQUEST. See [Section]2.6.1.
LOANS. The NordicTrack Loans, the Hear Music Loans, the TNC Loans
and the S&H Loans.
MAJORITY LENDERS. As of any date, the Lenders (excluding any Delinquent
Lenders) holding at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding principal amount of the Notes on such date; and if no such principal
is outstanding, the Lenders (excluding any Delinquent Lenders) whose aggregate
Commitments constitutes at least sixty-six and two-thirds percent (66 2/3%) of
the Total Commitment.
MATURITY DATE. April 15, 1999.
MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
MAXIMUM OVERADVANCE AMOUNT. See [Section]2.1.5.
MONOGRAM CREDIT CARD PROGRAM. The credit card program made available to
customers of NordicTrack pursuant to the Monogram Credit Card Program Agreement.
MONOGRAM CREDIT CARD PROGRAM AGREEMENT. The Consumer Credit Card
Program Agreement dated as of November 29, 1995 among Monogram Credit Card Bank
of Georgia and NordicTrack in the form delivered to the Administrative Agent on
or prior to the Closing Date.
MORTGAGED PROPERTY. Any Real Estate which is subject to any Mortgage.
MORTGAGES. Collectively the Mortgage Deeds, Assignments of Leases and
Security Agreements dated or to be dated on or prior to the Closing Date, from
NordicTrack to FNBB as agent under the Collateral Note and assigned to the
Administrative Agent in accordance with the terms and provisions of (i) that
certain Pledge Agreement dated on or about the Closing Date by and among NT,
FNBB as agent and the Administrative Agent and (ii) that certain Assignment of
Mortgage dated on or about the Closing Date by and between FNBB as agent and the
Administrative Agent, with respect to the fee interest of NordicTrack in its
owned real properties, in each case in form and substance satisfactory to the
Agents and such other mortgages and deeds of trust from any of the Borrowers or
Guarantors to the Administrative Agent pursuant to [Section]9.13.
MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of
[Section]3(37) of ERISA maintained or contributed to by CML, any of the
Borrowers or any ERISA Affiliate.
<PAGE> 26
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NA. As defined in the preamble hereto.
NT. As defined in the preamble hereto.
NET CASH PROCEEDS. With respect to any sale of any assets of any of
CML, any of the Borrowers or any of their Subsidiaries, the gross consideration
received by CML, such Borrower, or such Subsidiary (in cash) from such sale, net
of commissions, direct sales costs, normal closing adjustments, income taxes
attributable to such sale and professional fees and expenses incurred directly
in connection therewith, to the extent the foregoing are actually paid in
connection with such sale.
NORDICTRACK. As defined in the preamble hereto.
NORDICTRACK BORROWING BASE. At the time of reference thereto, an amount
determined by the Administrative Agent by reference to the most recent Borrowing
Base Report, which is equal to the sum of:
(a) 80.00% of NordicTrack's Eligible Accounts Receivable for which
invoices have been issued and are payable; PLUS
(b) for the period commencing on the Closing Date through July 31,
1996, 75.00% of Eligible FitFinance Receivable for which invoices have been
issued and are payable; PLUS
(c) 55.00% of the net book value (determined on a first-in first-out
basis at lower of cost or market) of Eligible NordicTrack Inventory; MINUS
(d) the amount of any Landlord Lien Reserve with respect to
NordicTrack;
PROVIDED, HOWEVER, the Administrative Agent reserves its rights, upon prior
written notice to the Borrowers, to add reserves and decrease the advance rates
set forth herein, if, in the Administrative Agent's reasonable discretion, the
results of commercial finance examinations, inventory appraisals or other credit
or collateral considerations indicate a deterioration in NordicTrack's Eligible
Accounts Receivable, Eligible FitFinance Receivables or Eligible NordicTrack
Inventory from January 27, 1996, such that additional reserves or a lower
advance rate for NordicTrack's Eligible Accounts Receivable, Eligible FitFinance
Receivables and/or Eligible NordicTrack Inventory is warranted.
NORDICTRACK LOANS. Revolving credit loans made or to be made by the
Lenders to NordicTrack pursuant to [Section].1.1.
NORDICTRACK NOTE RECORD. A record with respect to a NordicTrack Note.
NORDICTRACK NOTES. See [Section]2.4.1.
<PAGE> 27
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NOTE RECORDS. Collectively, the NordicTrack Note Records, the Hear
Music Note Records, the TNC Note Records and the S&H Note Records.
NOTES. Collectively, the Collateral Notes, the NordicTrack Notes, the
Hear Music Notes, the TNC Notes and the S&H Notes.
OBLIGATIONS. All indebtedness, obligations and liabilities of any of
CML, the Borrowers and their Subsidiaries to any of the Lenders and any of the
Agents, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Applications, Letter of Credits or other instruments
at any time evidencing any thereof.
OPERATING ACCOUNT. With respect to any Borrower or CML, such
Borrower's or CML's as the case may be, demand deposit account(s) with FNBB,
listed on SCHEDULE 8.20 hereto.
OUTSTANDING. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
OVERADVANCE. As of any date of determination, with respect to any
Borrower, Loans, the unpaid principal thereof which exceeds an amount equal to
such Borrower's Borrowing Base MINUS such Borrower's Letter of Credit Exposure.
OVERADVANCE BORROWING BASE. At the relevant time of reference thereto,
an amount determined by the Administrative Agent by reference to the most recent
Borrowing Base Report, which is equal to the sum of:
(a) 60.00% of the Determined Value of Eligible Real Estate LESS the
Litigation Reserve; PLUS
(b) 80.00% of the Determined Value of Eligible Machinery and
Equipment; PLUS
(c) 10.00% of the sum of (i) the net book value (determined on a
first-in first-out basis at lower of cost or market) of TNC's, S&H's and Hear
Music's aggregate Eligible Inventory and (ii) the net book value (determined on
a first-in first-out basis at a lower of cost or market) of Eligible NordicTrack
Inventory.
OVERADVANCE REALLOCATION Date. The date on which any reallocation
of the Sub-Overadvance Amounts among the Borrowers is made or is to be made by
CML in accordance with [Section]2.1.5(b).
<PAGE> 28
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OVERADVANCE REALLOCATION REQUEST. See [Section]2.1.5(b).
PATENT ASSIGNMENT. The Patent Collateral Assignment and Security
Agreement, dated or to be dated on or prior to the Closing Date, made by the
Borrowers and the Guarantors in favor of the Administrative Agent and in form
and substance satisfactory to the Lenders and the Agents.
PBGC. The Pension Benefit Guaranty Corporation created by
[Section]4002 of ERISA and any successor entity or entities having similar
responsibilities.
PERFECTION CERTIFICATES. The Perfection Certificates as defined in the
Security Agreement.
PERMITTED DISPOSITION. Any disposition of assets of any Person
described in and permitted by [Section]10.5.2.
PERMITTED INVENTORY LOCATIONS. The retail stores, distribution centers
and manufacturing facilities of the Borrowers located in the United States of
America and listed on SCHEDULE 2 hereto, as such SCHEDULE 2 may be supplemented
from time to time in accordance with the provisions of [Section]9.4(j).
PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by [Section]10.2.
PERMITTED OVERADVANCE AMOUNT. See [Section]2.1.5(a).
PERSON. Any individual, corporation, partnership, limited liability
company, limited liability partnership, trust, unincorporated association,
business, or other legal entity, and any government or any governmental agency
or political subdivision thereof.
POST-CLOSING LETTER. The letter agreement relating to post closing
matters dated as of the Closing Date among CML, the Borrowers, the Lenders and
the Agents, in form and substance satisfactory to Lenders and the Agents.
PRIVATE LABEL CREDIT CARD PROGRAMS. The Monogram Credit Card Program
and all other credit card programs provided to customers of NordicTrack by
Persons other than CML, NordicTrack or their Subsidiaries or Affiliates,
together with all associated documentation.
REAL ESTATE. All real property now, or in the future, owned or
leased (as lessee or sublessee) by CML, any of the Borrowers or any of their
Subsidiaries.
RECORD. The grid attached to a Note, or the continuation of such grid,
or any other similar record, including computer records, maintained by any
Lender with respect to any Loan referred to in such Note.
REFERENCE BANK. FNBB.
<PAGE> 29
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REIMBURSEMENT OBLIGATION. Each of CML's and each Borrower's obligation
to reimburse the Issuing Bank and the Lenders on account of any drawing under
any Letter of Credit issued on behalf of (a) in the case of CML, any Borrower,
and (b) in the case of any Borrower, such Borrower, all as provided in
[Section]4.2.
RELATIVE. In relation to any Person, any spouse, parent, grandparent,
child, grandchild, brother or sister of such Person, or the spouse of any of
the foregoing.
RESTRICTED PAYMENTS. In relation to CML, the Borrowers and their
Subsidiaries, (a) any Distribution or (b) any payment or prepayment by any
Borrower or its Subsidiaries to CML or to any other Affiliate of any of the
Borrowers or CML other than payments to Affiliates (other than CML) for goods
and services in the ordinary course of business on terms equivalent to those
obtainable in arms length transactions.
S&H. As defined in the preamble hereto.
S&H BORROWING BASE. At the relevant time of reference thereto, an
amount determined by the Administrative Agent by reference to the most recent
Borrowing Base Report, which is equal to the sum of:
(a) 80.00% of S&H's Eligible Accounts Receivable for which
invoices have been issued and are payable; PLUS
(b) 55.00% of the net book value (determined on a first-in
first-out basis at lower of cost or market) of S&H's Eligible
Inventory; MINUS
(c) the amount of any Landlord Lien Reserve with respect to S&H;
PROVIDED, HOWEVER, the Administrative Agent reserves its rights, upon prior
written notice to the Borrowers, to add reserves and decrease the advance rates
set forth herein, if, in the Administrative Agent's reasonable discretion, the
results of commercial finance examinations, inventory appraisals or other credit
or collateral considerations indicate a deterioration in S&H's Eligible Accounts
Receivable or Eligible Inventory from February 29, 1996, such that additional
reserves or a lower advance rate for S&H's Eligible Accounts Receivable and/or
Eligible Inventory is warranted.
S&H LOANS. Revolving credit loans made or to be made by the Lenders to
S&H pursuant to [Section]2.1.3.
S&H NOTE RECORD. A Record with respect to an S&H Note.
S&H NOTES. See [Section]2.4.3.
SECURITY AGREEMENT. The Security Agreement, dated or to be dated on or
prior to the Closing Date, among the Borrowers, the Guarantors and the
<PAGE> 30
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Administrative Agent and in form and substance satisfactory to the Lenders and
the Agents.
SECURITY DOCUMENTS. The Guaranty, the Foreign Guaranties, the
Security Agreement, the Mortgages, the Patent Assignment, the Trademark
Assignment, the Copyright Mortgage, the Agency Account Agreements, the Stock
Pledge Agreement and the Foreign Pledge Agreements.
SETTLEMENT. The making among the Lenders of, or receiving of payments
among the Lenders, in immediately available funds, to the extent necessary to
cause each Lender's actual share of the outstanding amount of Loans (after
giving effect to any Loan Request) to be equal to each Lender's Commitment
Percentage of the outstanding amount of such Loans (after giving effect to any
Loan Request), in any case where, prior to such event or action, the actual
share is not so equal.
SETTLEMENT AMOUNT. See [Section]2.8.
SETTLEMENT DATE. (a) The Drawdown Date relating to any Loan Request,
(b) Friday of each week, or if Friday is not a Business Day, the Business Day
immediately following such Friday, (c) the Business Day immediately following
the Administrative Agent becoming aware of the existence of an Event of Default,
(d) any Business Day on which the amount of Loans outstanding from FNBB PLUS
FNBB's Commitment Percentage of the aggregate Letter of Credit Exposures of the
Borrowers is equal to or greater than FNBB's Commitment Percentage of the Total
Commitment, (e) the Business Day immediately following any Business Day on which
the amount of Loans outstanding increases or decreases by more than $5,000,000
as compared to the previous Settlement Date, (f) any day on which any conversion
of a Base Rate Loan to a Eurodollar Rate Loan occurs or (g) any Business Day on
which (i) the amount of outstanding Loans decreases and (ii) the amount of the
Administrative Agent's Loans outstanding equals zero Dollars ($0).
SETTLING LENDER. See [Section]2.8.
SPECIFIED LEASE. A lease by any of the Borrowers as lessee of Real
Estate at which Eligible Inventory or, in the case of NordicTrack, Eligible
NordicTrack Inventory, is held and as to which at any time the Administrative
Agent has not received evidence, in form and substance satisfactory to the
Administrative Agent, that based upon then existing law (as determined by the
Administrative Agent in the exercise of its reasonable discretion and on the
advice of counsel), the landlord of such property would not have a lien on
inventory superior to the security interest granted under the Security
Documents, securing rent obligations more than thirty (30) days past due or
securing future rent obligations accruing after the Closing Date; PROVIDED,
HOWEVER, that no lease for which the applicable Borrower and the Administrative
Agent have received a Landlord Waiver shall be a Specified Lease.
<PAGE> 31
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STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated or to be
dated on or prior to the Closing Date, among CML, certain of the Borrowers and
the Administrative Agent, in form and substance satisfactory to the Lenders and
the Agents.
SUB-COMMITMENT. See [Section]2.3.1.
SUB-OVERADVANCE AMOUNT. See [Section]2.1.6(b).
SUBORDINATED DEBENTURES. The 5 1/2% Convertible Debentures due 2003
issued by CML pursuant to the Fiscal Agency Agreement.
SUBSIDIARY. Any corporation, association, trust, or other business
entity of which the designated parent shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
TNC. As defined in the preamble hereto.
TNC BORROWING BASE. At the relevant time of reference thereto, an
amount determined by the Administrative Agent by reference to the most recent
Borrowing Base Report, which is equal to the sum of:
(a) 55.00% of the net book value (determined on a first-in first-out
basis at lower of cost or market) of TNC's Eligible Inventory; MINUS
(b) the amount of any Landlord Lien Reserve with respect to TNC;
PROVIDED, HOWEVER, the Administrative Agent reserves its rights, upon prior
written notice to the Borrowers, to add reserves and decrease the advance rate
set forth herein, if, in the Administrative Agent's reasonable discretion, the
results of commercial finance examinations, inventory appraisals or other credit
or collateral consideration indicate a deterioration in TNC's Eligible Inventory
from February 17, 1996, such that additional reserves or a lower advance rate
for TNC's Eligible Inventory is warranted.
TNC LOANS. The revolving credit loans made or to be made by the Lenders
to TNC pursuant to [Section]2.1.2.
TNC NOTES. See [Section]2.4.2.
TNC NOTE RECORD. A Record with respect to a TNC Note.
TITLE INSURANCE COMPANY. Chicago Title Insurance Company.
TITLE POLICY. In relation to each Mortgaged Property, an ALTA standard
form title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Administrative Agent may require, any such
reinsurance to be with direct access endorsements) in such amount as may be
<PAGE> 32
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determined by the Administrative Agent insuring the priority of the Mortgage of
such Mortgaged Property and that one of the Borrowers or one of the Guarantors
holds marketable fee simple title to such Mortgaged Property, subject only to
the encumbrances permitted by such Mortgage and which shall not contain
exceptions for mechanics liens or persons in occupancy (except as may be
permitted by such Mortgage), shall not insure over any matter except to the
extent that any such affirmative insurance is acceptable to the Administrative
Agent in its sole discretion, and shall contain such endorsements and
affirmative insurance as the Administrative Agent in its discretion may require,
including but not limited to (i) comprehensive endorsement, (ii) variable rate
of interest endorsement, (iii) usury endorsement, (iv) revolving credit
endorsement, (v) tie-in endorsement, (vi) doing business endorsement and (vii)
ALTA form 3.1 zoning endorsement.
TOTAL COMMITMENT. The sum of the Commitments of the Lenders, as in
effect from time to time.
TRADEMARK ASSIGNMENT. The Trademark Collateral Security and Pledge
Agreement, dated or to be dated on or prior to the Closing Date, among the
Borrowers, the Guarantors and the Administrative Agent, in form and substance
satisfactory to the Lenders and the Agents and the Assignments of Trademarks and
Service Marks executed in connection therewith.
TYPE. As to any Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.
UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500 or any successor version thereto adopted
by the Issuing Bank in the ordinary course of its business as a letter of credit
issuer and in effect at the time of issuance of such Letter of Credit.
UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the applicable Borrower does not reimburse the Issuing Bank and the Lenders on
the date specified in, and in accordance with, [Section]4.2.
VOTING STOCK. Stock or similar interests, of any class or classes
(however designated), the holders of which are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the corporation, association, trust or other
business entity involved, whether or not the right so to vote exists by reason
of the happening of a contingency.
1.2. RULES OF INTERPRETATION.
-----------------------
(a) A reference to any document or agreement shall include
such document or agreement as amended, modified or supplemented from
time
<PAGE> 33
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to time in accordance with its terms and the terms of this Credit
Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors
and permitted assigns.
(e) Accounting terms not otherwise defined herein have the
meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they
refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts,
have the meanings assigned to them therein, with the term "instrument"
being that defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "Section" refers to that section of
this Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
2. THE REVOLVING CREDIT FACILITIES.
-------------------------------
2.1. COMMITMENT TO LEND.
------------------
2.1.1. COMMITMENT TO LEND NORDICTRACK LOANS. Subject to the
terms and conditions set forth in this Credit Agreement, each of the
Lenders severally agrees to lend to NordicTrack and NordicTrack may
borrow, repay, and reborrow from time to time between the Closing Date
and the Maturity Date upon notice by NordicTrack to the Administrative
Agent given in accordance with [Section]2.6, such sums as are
requested by NordicTrack, PROVIDED that the sum of the outstanding
amount of the NordicTrack Loans (after giving effect to all amounts
requested) PLUS NordicTrack's Letter of Credit Exposure shall not at
any time exceed the lesser of (a) NordicTrack's Sub-Commitment and (b)
the NordicTrack Borrowing Base PLUS the lesser of (i) the Overadvance
Borrowing Base less the aggregate outstanding amount of the
Overadvances of the other
<PAGE> 34
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Borrowers (after giving effect to all amounts requested) and (ii)
NordicTrack's Sub-Overadvance Amount in effect at such time. The
NordicTrack Loans shall be made PRO RATA in accordance with each
Lender's Commitment Percentage. Each request for a NordicTrack Loan
hereunder shall constitute a representation and warranty by
NordicTrack that the conditions set forth in [Section]12 and
[Section]13, in the case of the initial NordicTrack Loans to be made
on the Closing Date, and [Section]13, in the case of all other
NordicTrack Loans, have been satisfied on the date of such request.
2.1.2 COMMITMENT TO LEND TNC LOANS. Subject to the terms and
conditions set forth in this Credit Agreement, each of the Lenders
severally agrees to lend to TNC and TNC may borrow, repay, and
reborrow from time to time between the Closing Date and the Maturity
Date upon notice by TNC to the Administrative Agent given in
accordance with [Section]2.6, such sums as are requested by TNC,
PROVIDED that the sum of the outstanding amount of the TNC Loans
(after giving effect to all amounts requested) PLUS TNC's Letter of
Credit Exposure shall not at any time exceed the lesser of (a) TNC's
Sub-Commitment and (b) the TNC Borrowing Base PLUS the lesser of (i)
the Overadvance Borrowing Base less the aggregate outstanding amount
of the Overadvances of the other Borrowers (after giving effect to all
amounts requested) and (ii) TNC's Sub-Overadvance Amount in effect at
such time. The TNC Loans shall be made PRO RATA in accordance with
each Lender's Commitment Percentage. Each request for a TNC Loan
hereunder shall constitute a representation and warranty by TNC that
the conditions set forth in [Section]12 and [Section]13, in the case
of the initial TNC Loans to be made on the Closing Date, and
[Section]13, in the case of all other TNC Loans, have been satisfied
on the date of such request.
2.1.3. COMMITMENT TO LEND S&H LOANS. Subject to the terms
and conditions set forth in this Credit Agreement, each of the Lenders
severally agrees to lend to S&H and S&H may borrow, repay, and
reborrow from time to time between the Closing Date and the Maturity
Date upon notice by S&H to the Administrative Agent given in
accordance with [Section]2.6, such sums as are requested by S&H,
PROVIDED that the sum of the outstanding amount of the S&H Loans
(after giving effect to all amounts requested) PLUS S&H's Letter of
Credit Exposure shall not at any time exceed the lesser of (a) S&H's
Sub-Commitment and (b) the S&H Borrowing Base PLUS the lesser of (i)
the Overadvance Borrowing Base less the aggregate outstanding amount
of the Overadvances of the other Borrowers (after giving effect to all
amounts requested) and (ii) S&H's Sub-Overadvance Amount in effect at
such time. The S&H Loans shall be made PRO RATA in accordance with
each Lender's Commitment Percentage. Each request for a S&H Loan
hereunder shall constitute a representation and warranty by S&H that
the conditions set forth in [Section]12 and [Section]13, in the case
of the initial S&H Loans to be made on the Closing
<PAGE> 35
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Date, and [Section]13, in the case of all other S&H Loans, have been
satisfied on the date of such request.
2.1.4. COMMITMENT TO LEND HEAR MUSIC LOANS. Subject to the
terms and conditions set forth in this Credit Agreement, each of the
Lenders severally agrees to lend to Hear Music and Hear Music may
borrow, repay, and reborrow from time to time between the Closing Date
and the Maturity Date upon notice by Hear Music to the Administrative
Agent given in accordance with [Section]2.6, such sums as are requested
by Hear Music, PROVIDED that the sum of the outstanding amount of the
Hear Music Loans (after giving effect to all amounts requested) PLUS
Hear Music's Letter of Credit Exposure shall not at any time exceed
the lesser of (a) Hear Music's Sub-Commitment and (b) the Hear Music
Borrowing Base PLUS the lesser of (i) the Overadvance Borrowing Base
less the aggregate outstanding amount of the Overadvances of the other
Borrowers (after giving effect to all amounts requested) and (ii)
Hear Music's Sub-Overadvance Amount in effect at such time. The Hear
Music Loans shall be made PRO RATA in accordance with each Lender's
Commitment Percentage. Each request for a Hear Music Loan hereunder
shall constitute a representation and warranty by Hear Music that the
conditions set forth in [Section]12 and [Section]13, in the case of
the initial Hear Music Loans to be made on the Closing Date, and
[Section]13, in the case of all other Hear Music Loans, have been
satisfied on the date of such request.
2.1.5. OVERADVANCE FACILITY.
--------------------
<TABLE>
2.1.5(A). PERMITTED OVERADVANCE AMOUNT. As of any date of
determination, the sum of the Overadvances shall not exceed the
lesser of (i) the Overadvance Borrowing Base and (ii) the Maximum
Overadvance Amount in effect at that time (the "Permitted
Overadvance Amount"). For each period specified in the table set
forth below, the Maximum Overadvance Amount shall be the amount
set forth opposite such period, as such amounts may be reduced
permanently from time to time in accordance with this
[Section]2.1.5 (the "Maximum Overadvance Amount"):
<CAPTION>
Maximum
Period Overadvance Amount
------ ------------------
<S> <C> <C>
August 1, 1996 - December 5, 1996 $15,000,000
December 6, 1996 - December 12, 1996 $11,500,000
December 13, 1996 - December 19, 1996 $ 8,000,000
December 20, 1996 - December 26, 1996 $ 4,500,000
December 27, 1996 - December 30, 1996 $ 1,000,000
December 31, 1996 $ 0
</TABLE>
The Maximum Overadvance Amount shall automatically and
irrevocably be reduced in accordance with the table above, or,
<PAGE> 36
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if the date specified for such reduction is not a Business Day,
on the immediately following Business Day. Each Overadvance
outstanding from time to time shall bear interest calculated by
reference to the Base Rate pursuant to [Section]2.5.
2.1.5(B). ALLOCATION OF MAXIMUM OVERADVANCE AMOUNT. On or
prior to July 31, 1996, CML shall by written notice to the
Administrative Agent allocate the Maximum Overadvance Amount
among the Borrowers (such amount allocated to each Borrower, a
"Sub-Overadvance Amount"), PROVIDED that (a) the sum of the
Borrowers' Sub-Overadvance Amounts shall not exceed the Maximum
Overadvance Amount, (b) NordicTrack shall not have a
Sub-Overadvance Amount at any time in excess of the lesser of (i)
$15,000,000 and (ii) the Maximum Overadvance Amount in effect at
that time, and (c) no other individual Borrower shall have a
Sub-Overadvance Amount at any time in excess of the lesser of (i)
$5,000,000 and (ii) the Maximum Overadvance Amount in effect at
that time. CML shall have the right, no more frequently than once
in any calendar week (unless otherwise permitted by the
Administrative Agent) to request that the Administrative Agent
reallocate the unborrowed and unused portion of the Maximum
Overadvance Amount. Concurrently with its delivery of the
Borrowing Base Report for the previous week pursuant to
[Section]9.4(f), CML shall give the Administrative Agent written
notice in the form of Exhibit H-1 hereto of each reallocation of
the Sub-Overadvance Amounts requested under this
[Section]2.1.5(b) (an "Overadvance Reallocation Request"). Each
such notice shall specify (i) each Borrower's Sub-Overadvance
Amount as of the date of such notice, (ii) each Borrower's
Sub-Overadvance Amount after giving effect to such notice, and
(iii) the effective date of such reallocation, which date shall
be no less than two (2) Business Days after the date of such
notice. Promptly upon receipt of any such notice, the
Administrative Agent shall notify each of the Lenders thereof.
Upon giving effect to an Overadvance Reallocation Request, the
sum of the Borrowers' Sub-Overadvance Amounts shall not exceed
the Maximum Overadvance Amount in effect at that time. On the
Overadvance Reallocation Date, the Sub-Overadvance Amount of each
of the Borrowers shall be reallocated in accordance with the
Overadvance Reallocation Request. The Administrative Agent shall
keep a record of each Overadvance Reallocation Request and the
Sub-Overadvance Amount of each Borrower as in effect on each date
and such record shall be conclusive, in the absence of manifest
error.
2.1.5(C). REDUCTION OF MAXIMUM OVERADVANCE AMOUNT. In
addition to reductions of the Maximum Overadvance Amount
contemplated by [Section]2.1.5(a), in the event CML receives any
tax refunds on or after March 1, 1996 (excluding all federal or
<PAGE> 37
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state tax refunds in respect of overpayments of estimated tax
payments for the fiscal year ending July 31, 1995, such excluded
amount not to exceed $4,300,000 in aggregate amount), the Maximum
Overadvance Amount shall be reduced automatically and irrevocably
by an amount equal to the aggregate amount of all such tax
refunds and the amount of each subsequent reduction of the
Maximum Overadvance Amount contemplated by [Section]2.1.5(a)
shall be further increased by the amount of all such tax refunds.
2.2 COMMITMENT FEE. Each Borrower agrees to pay to the Administrative
Agent for the accounts of the Lenders in accordance with their respective
Commitment Percentages a commitment fee calculated at the rate of one-half
percent (0.50%) per annum on the average daily amount during each calendar
quarter or portion thereof from the date hereof to the Maturity Date by which
such Borrower's Sub-Commitment MINUS such Borrower's Letter of Credit Exposure
exceeds the outstanding amount of such Borrower's Loans during such calendar
quarter. The commitment fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter
commencing on the first such date following the date hereof, with a final
payment on the Maturity Date or any earlier date on which the Commitments shall
terminate.
2.3. REALLOCATION AND REDUCTION OF TOTAL COMMITMENT.
2.3.1. REALLOCATION OF TOTAL COMMITMENT. On the Closing Date, CML
shall by written notice to the Administrative Agent allocate the Total
Commitment among the Borrowers (such amount allocated to any Borrower and
set forth on SCHEDULE 1, a "Sub-Commitment"), PROVIDED that the sum of the
Borrowers' Sub-Commitments shall not exceed the Total Commitment. CML shall
have the right, no more frequently than once in any calendar month (unless
otherwise permitted by the Administrative Agent) to request that the
Lenders reallocate the unborrowed and unused portion of the Total
Commitment. Concurrently with its delivery of the Borrowing Base Report for
the previous month pursuant to [Section]9.4(f), CML shall give to the
Administrative Agent written notice in the form of EXHIBIT H-2 hereto of
each reallocation requested under this [Section]2.3.1 (a "Commitment
Reallocation Request"). Each such notice shall specify (i) each Borrower's
Sub-Commitment as of the date of such notice, (ii) each Borrower's
Sub-Commitment after giving effect to such notice, and (iii) the effective
date of such reallocation, which date shall be no less than two (2)
Business Days after the date of such notice (the "Commitment Reallocation
Date"). Upon giving effect to a Commitment Reallocation Request, the sum of
the Borrowers' Sub-Commitments shall not exceed the Total Commitment in
effect at that time. On the Commitment Reallocation Date, the
Sub-Commitment of each of the Borrowers shall be reallocated in accordance
with the Commitment Reallocation Request and SCHEDULE 1 shall be deemed
revised to reflect the reallocation. The Administrative Agent shall keep a
<PAGE> 38
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record of each Commitment Reallocation Request and the Sub-Commitment of
each Borrower as in effect on each date and such record shall be
conclusive, in the absence of manifest error. A reallocation of the Total
Commitment under this [Section]2.3.1 shall not be deemed to be a reduction
of the Total Commitment.
2.3.2. REDUCTION OF SUB-COMMITMENT. Each of the Borrowers and CML
shall have the right at any time and from time to time upon five (5)
Business Days prior written notice to the Administrative Agent to reduce by
$500,000 or an integral multiple thereof or terminate entirely its
Sub-Commitment or, in the case of CML, any Borrower's Sub-Commitment,
whereupon the Total Commitment shall be reduced by the amount specified in
such notice or, as the case may be, terminated and the Commitments of the
Lenders shall be reduced PRO RATA in accordance with their respective
Commitment Percentages of the amount specified in such notice or, as the
case may be, terminated. Promptly after receiving any notice of any
Borrower or CML delivered pursuant to this [Section]2.3.2, the
Administrative Agent will notify the Lenders of the substance thereof.
Upon the effective date of any such reduction or termination, the
applicable Borrower shall pay to the Administrative Agent for the
respective accounts of the Lenders the full amount of any commitment fee
then accrued on the amount of the reduction. No reduction or termination
of the Commitments may be reinstated.
2.3.3. MANDATORY REDUCTION OF TOTAL COMMITMENT. Without limiting the
obligations of CML, the Borrowers and their Subsidiaries to comply with the
provisions of [Section]10.5.2 of the Credit Agreement, in the event of any
disposition of assets by CML or any of its Subsidiaries (other than a
Permitted Disposition), the Total Commitment shall be reduced on the date
of receipt by CML or any of its Subsidiaries of any Net Cash Proceeds from
such disposition by an amount equal to such Net Cash Proceeds. On or prior
to the date of any such disposition, CML shall (a) allocate the reduction
of the Total Commitment among the Sub-Commitments of the Borrowers as CML
deems appropriate and (b) give to the Administrative Agent written notice
setting forth the Total Commitment allocation after giving effect to any
reduction pursuant to this [Section]2.3.3. In the event CML fails, by the
date of the receipt by CML or any of its Subsidiaries of any Net Cash
Proceeds from such disposition, to reallocate the Sub-Commitments of the
Borrowers to give effect to such reductions, the Administrative Agent shall
reallocate the Sub-Commitments of the Borrowers in its sole discretion.
2.4. THE NOTES.
---------
2.4.1. THE NORDICTRACK NOTES. The NordicTrack Loans shall be evidenced
by promissory notes of NordicTrack in substantially the form of EXHIBIT A-1
hereto (each a "NordicTrack Note"), dated as of the Closing Date (or other
such date on which a Lender may become a party hereto in
<PAGE> 39
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accordance with [Section]20 hereof) and completed with appropriate
insertions. One NordicTrack Note shall be payable to the order of each
Lender in a principal amount equal to such Lender's Commitment or, if less,
the outstanding amount of all NordicTrack Loans made by such Lender, plus
interest accrued thereon, as set forth below. NordicTrack irrevocably
authorizes each Lender to make or cause to be made, at or about the time of
the Drawdown Date of any NordicTrack Loan or at the time of receipt of any
payment of principal on such Lender's NordicTrack Note, an appropriate
notation on such Lender's NordicTrack Note Record reflecting the making of
such NordicTrack Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the NordicTrack Loans set forth on such Lender's
NordicTrack Note Record shall be PRIMA FACIE evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record,
or any error in so recording, any such amount on such Lender's NordicTrack
Note Record shall not limit or otherwise affect the obligations of
NordicTrack hereunder or under any NordicTrack Note to make payments of
principal of or interest on any NordicTrack Note when due.
2.4.2. THE TNC NOTES. The TNC Loans shall be evidenced by promissory
notes of TNC in substantially the form of Exhibit A-2 hereto (each a "TNC
Note"), dated as of the Closing Date (or other such date on which a Lender
may become a party hereto in accordance with [Section]20 hereof) and
completed with appropriate insertions. One TNC Note shall be payable to the
order of each Lender in a principal amount equal to such Lender's
Commitment or, if less, the outstanding amount of all TNC Loans made by
such Lender, plus interest accrued thereon, as set forth below. TNC
irrevocably authorizes each Lender to make or cause to be made, at or about
the time of the Drawdown Date of any TNC Loan or at the time of receipt of
any payment of principal on such Lender's TNC Note, an appropriate notation
on such Lender's TNC Note Record reflecting the making of such TNC Loan or
(as the case may be) the receipt of such payment. The outstanding amount of
the TNC Loans set forth on such Lender's TNC Note Record shall be PRIMA
FACIE evidence of the principal amount thereof owing and unpaid to such
Lender, but the failure to record, or any error in so recording, any such
amount on such Lender's TNC Note Record shall not limit or otherwise affect
the obligations of TNC hereunder or under any TNC Note to make payments of
principal of or interest on any TNC Note when due.
2.4.3. THE S&H NOTES. The S&H Loans shall be evidenced by promissory
notes of S&H in substantially the form of Exhibit A-3 hereto (each a "S&H
Note"), dated as of the Closing Date (or other such date on which a Lender
may become a party hereto in accordance with [Section]20 hereof) and
completed with appropriate insertions. One S&H Note shall be payable to the
order of each Lender in a principal amount equal to such Lender's
Commitment or, if less, the outstanding amount of all S&H Loans made by
such Lender, plus interest accrued thereon, as set forth
<PAGE> 40
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below. S&H irrevocably authorizes each Lender to make or cause to be made,
at or about the time of the Drawdown Date of any S&H Loan or at the time
of receipt of any payment of principal on such Lender's S&H Note, an
appropriate notation on such Lender's S&H Note Record reflecting the
making of such S&H Loan or (as the case may be) the receipt of such
payment. The outstanding amount of the S&H Loans set forth on such
Lender's S&H Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record,
or any error in so recording, any such amount on such Lender's Hear Music
Note Record shall not limit or otherwise affect the obligations of S&H
hereunder or under any S&H Note to make payments of principal of or
interest on any S&H Note when due.
2.4.4. THE HEAR MUSIC NOTES. The Hear Music Loans shall be evidenced
by promissory notes of Hear Music in substantially the form of EXHIBIT A-4
hereto (each of "Hear Music Note"), dated as of the Closing Date (or other
such date on which a Lender may become a party hereto in accordance with
[Section]20 hereof) and completed with appropriate insertions. One Hear
Music Note shall be payable to the order of each Lender in a principal
amount equal to such Lender's Commitment or, if less, the outstanding
amount of all Hear Music Loans made by such Lender, plus interest accrued
thereon, as set forth below, Hear Music irrevocably authorizes each Lender
to make or cause to be made, at or about the time of the Drawdown Date of
any Hear Music Loan or at the time of receipt of any payment of principal
on such Lender's Hear Music Note, an appropriate notation on such Lender's
Hear Music Note Record reflecting the making of such Hear Music Loan or (as
the case may be) the receipt of such payment. The outstanding amount of the
Hear Music Loans set forth on such Lender's Hear Music Note Record shall be
PRIMA FACIE evidence of the principal amount thereof owing and unpaid to
such Lender, but the failure to record, or any error in so recording, any
such amount on such Lender's Hear Music Note Record shall not limit or
otherwise affect the obligations of Hear Music hereunder or under any Hear
Music Note to make payments of principal of or interest on any Hear Music
Note when due.
2.5 INTEREST ON LOANS. Except as otherwise provided in [Section]5.11.
(a) Each Base Rate Loan which does not constitute an Overadvance shall
bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at the
rate of three-quarters of one percent (0.75%) per annum above the Base
Rate.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate of two and three-
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quarters percent (2.75%) per annum above the Eurodollar Rate determined for
such Interest Period.
(c) Each Base Rate Loan which constitutes an Overadvance shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at the
rate of two percent (2.00%) per annum above the Base Rate.
(d) Each of the Borrowers promises to pay interest on each of its
Loans in arrears on each Interest Payment Date with respect thereto.
2.6. REQUESTS FOR LOANS.
------------------
2.6.1. LOAN REQUESTS.Each of the Borrowers shall give to the
Administrative Agent written notice in the form of EXHIBIT B hereto (or
telephonic notice confirmed in a writing in the form of EXHIBIT B hereto)
of each Loan requested by such Borrower hereunder (a "Loan Request") not
later than (i) 1:00 p.m. (Boston time) on the proposed Drawdown Date of any
Base Rate Loan and (ii) three (3) Eurodollar Business Days prior to the
proposed Drawdown Date of any Eurodollar Rate Loan, PROVIDED, HOWEVER that
none of the Borrowers shall request any Eurodollar Rate Loan with an
Interest Period of more than one month until the date which is ninety (90)
days following the Closing Date and all Interest Periods for Eurodollar
Rate Loans during such ninety (90) day period shall end on the same date.
Each such notice shall specify (A) the principal amount of the Loan
requested, (B) the proposed Drawdown Date of such Loan, (C) the Interest
Period for such Loan, (D) the Type of such Loan and (E) the Borrower
requesting such Loan. Promptly upon receipt of any such notice, the
Administrative Agent shall notify each of the Lenders thereof. Each Loan
Request shall be irrevocable and binding on the requesting Borrower and
shall obligate the requesting Borrower to accept the Loan requested from
the Lenders on the proposed Drawdown Date. Each Loan Request shall be in a
minimum aggregate amount of $100,000 or a larger integral multiple thereof.
2.6.2. DAILY BORROWINGS. Notwithstanding the notice and minimum amount
requirements set forth in [Section]2.6.1 but otherwise in accordance with
the terms and conditions of this Credit Agreement, the Administrative Agent
may, in its sole discretion and without conferring with the Lenders, make
Loans to each Borrower (i) by entry of credits to such Borrower's
Controlled Disbursement Account to cover checks or other charges which such
Borrower has drawn or made against such account or (ii) in an amount as
otherwise requested by such Borrower. Each Borrower hereby requests and
authorizes the Administrative Agent to make from time to time such Loans by
means of appropriate entries of such credits sufficient to cover checks and
other charges then presented. Each Borrower acknowledges and agrees that
the making of such Loans shall, in each case, be subject in all respects to
the provisions of this
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Credit Agreement as if they were Loans covered by a Loan Request including,
without limitation, the limitations set forth in [Section]2.1 and the
requirements that the applicable provisions of [Section]12 and 13 (in the
case of Loans made on the Closing Date) and [Section]13 (in all other
cases) be satisfied. All actions taken by the Administrative Agent pursuant
to the provisions of this [Section]2.6.2 shall be conclusive and binding on
the applicable Borrower absent the Administrative Agent's gross negligence
or willful misconduct. Loans made pursuant to this [Section]2.6.2 shall be
Base Rate Loans until converted in accordance with the provisions of the
Credit Agreement and, prior to a Settlement, such interest shall be solely
for the account of the Administrative Agent.
2.6.3. CITIBANK ADVANCES. Any payments made by the Administrative
Agent to Citibank in accordance with the Citibank Payoff Letter shall, for
all purposes of this Credit Agreement, be a Loan to (a) in the case of
payments in respect of a Borrower's Citibank Controlled Disbursement
Account, such Borrower, (b) in the case of payments in respect of the
Citibank Controlled Disbursement Account of CML or any direct non-Borrower
Subsidiary of CML, any of the Borrowers, as the Administrative Agent may
determine in its sole discretion, and (c) in the case of payments in
respect of the Citibank Controlled Disbursement Account of any Subsidiary
of any Borrower, such Subsidiary's direct or indirect Borrower parent.
Loans made pursuant to this [Section]2.6.3 shall be immediately payable to
the Administrative Agent for the account of, (i) prior to a Settlement, the
Administrative Agent, and (ii) thereafter, the Lenders, and shall bear
interest at the rate of four percent (4.00%) per annum above the Base Rate.
Prior to a Settlement, such interest shall be solely for the account of the
Administrative Agent.
2.7. CONVERSION OPTIONS.
------------------
2.7.1 CONVERSION TO DIFFERENT TYPE OF LOAN. Each Borrower may elect
from time to time to convert any of its outstanding Loans (excluding the
Loans outstanding from time to time which constitute Overadvances) to a
Loan of another Type, PROVIDED that (i) with respect to any such conversion
of a Loan to a Base Rate Loan, the applicable Borrower shall give the
Administrative Agent at least three (3) Business Days prior written notice
of such election; (ii) with respect to any such conversion of a Base Rate
Loan to a Eurodollar Rate Loan, the applicable Borrower shall give the
Administrative Agent at least three (3) Eurodollar Business Days prior
written notice of such election; (iii) with respect to any such conversion
of a Eurodollar Rate Loan into a Base Rate Loan, such conversion shall only
be made on the last day of the Interest Period with respect thereto; (iv)
no Loan may be converted into a Eurodollar Rate Loan when any Default or
Event of Default has occurred and is continuing; (v) no Base Rate Loan may
be converted into a Eurodollar Rate Loan with an Interest Period of longer
than one (1) month until the date which is ninety (90) days after the
Closing Date and
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all Interest Periods for Eurodollar Rate Loans during such ninety (90) day
period shall end on the same date; and (vi) no Borrower may have more than
two (2) Eurodollar Rate Loans outstanding at any time. On the date on which
such conversion is being made each Lender shall take such action as is
necessary to transfer its Commitment Percentage of such Loans to its
Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of outstanding Loans of any Type may be converted into
a Loan of another Type as provided herein, PROVIDED that any partial
conversion shall be in an aggregate principal amount of $3,000,000 or a
whole multiple of $1,000,000 in excess thereof. Each Conversion Request
relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrowers.
2.7.2 CONTINUATION OF TYPE OF LOAN. Any Loan of any Type may be
continued as a Loan of the same Type upon the expiration of an Interest
Period with respect thereto by compliance by the applicable Borrower with
the notice provisions contained in [Section]2.7.1; PROVIDED that no
Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto ending during the continuance of any Default or Event of
Default of which officers of the Administrative Agent active upon the
Borrowers' account have actual knowledge. In the event that the applicable
Borrower fails to provide any such notice with respect to the continuation
of any Eurodollar Rate Loan as such, then such Eurodollar Rate Loan shall
be automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto. The Administrative Agent shall notify the
Lenders promptly when any such automatic conversion contemplated by this
[Section]2.7 is scheduled to occur.
2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $3,000,000 or a whole multiple of $1,000,000 in excess thereof.
2.8. SETTLEMENT; FAILURE TO MAKE FUNDS AVAILABLE.
-------------------------------------------
2.8.1. SETTLEMENT AND FUNDING PROCEDURES. On each Settlement Date, the
Administrative Agent shall, not later than 1:00 p.m. (Boston time), give
telephonic or facsimile notice (i) to the Lenders and the Borrowers of (A)
the respective outstanding amount of Base Rate Loans made by the Agent on
behalf of the Lenders from the immediately preceding Settlement Date
through the close of business on the prior day and (B) the amount of any
Eurodollar Rate Loans to be made (following the giving of notice pursuant
to 2.6.1(ii)) on such date pursuant to a Loan Request and (ii) to the
Lenders of the amount (a "Settlement Amount")
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that each Lender (the "Settling Lender") shall pay to effect a Settlement
of any Loan. A statement of the Administrative Agent submitted to the
Lenders and the applicable Borrower or to the Lenders with respect to any
amounts owing under this [Section]2.8.1 shall be PRIMA FACIE evidence of
the amount due and owing. The Settling Lender shall, not later than 3:00
p.m. (Boston time) on such Settlement Date, effect a wire transfer of
immediately available funds to the Administrative Agent in the amount of
the Settlement Amount. All funds advanced by any Lender as a Settling
Lender pursuant to this [Section]2.8.1 shall for all purposes be treated as
a Loan made by such Settling Lender to the applicable Borrower and all
funds received by any Lender pursuant to this [Section]2.8.1 shall for all
purposes be treated as repayment of amounts owed with respect to Loans made
by such Lender. In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which any of
the Borrowers is a debtor prevent a Settling Lender from making any Loan to
effect a Settlement as contemplated hereby, such Settling Lender will make
such disposition and arrangements with the other Lenders with respect to
such Loans, either by way of purchase of participations, distribution, PRO
TANTO assignment of claims, subrogation or otherwise as shall result in
each Lender's share of the outstanding Loans being equal, as nearly as may
be, to such Lender's Commitment Percentage of the outstanding amount of the
Loans.
2.8.2. ADVANCES BY ADMINISTRATIVE AGENT. The Administrative Agent may,
unless notified to the contrary by any Lender prior to a Settlement Date,
assume that such Lender has made or will make available to the
Administrative Agent on such Settlement Date the amount of such Lender's
Settlement Amount, and the Administrative Agent may (but it shall not be
required to), in reliance upon such assumption, make available to the
applicable Borrower a corresponding amount. If any Lender makes available
to the Administrative Agent such amount on a date after such Settlement
Date, such Lender shall pay to the Administrative Agent on demand an amount
equal to the product of (i) the average computed for the period referred to
in clause (iii) below, of the weighted average interest rate paid by the
Administrative Agent for federal funds acquired by the Administrative Agent
during each day included in such period, TIMES (ii) the amount of such
Settlement Amount, TIMES (iii) a fraction, the numerator of which is the
number of days that elapse from and including such Settlement Date to the
date on which the amount of such Settlement Amount shall become immediately
available to the Administrative Agent, and the denominator of which is 360.
A statement of the Administrative Agent submitted to such Lender with
respect to any amounts owing under this paragraph shall be PRIMA FACIE
evidence of the amount due and owing to the Administrative Agent by such
Lender. If such Lender's Settlement Amount is not made available to the
Administrative Agent by such Lender within three (3) Business Days
following such Settlement Date, the Administrative Agent
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shall be entitled to recover such amount from the applicable Borrower on
demand, with interest thereon at the rate per annum applicable to the Loans
as of such Settlement Date.
2.8.3. FAILURE TO MAKE FUNDS AVAILABLE. The failure or refusal of any
Lender to make available to the Administrative Agent at the aforesaid time
and place on any Settlement Date the amount of its Settlement Amount (i)
shall not relieve any other Lender from its several obligations hereunder
to make available to the Administrative Agent the amount of such other
Lender's Settlement Amount and (ii) shall not impose upon such other Lender
any liability with respect to such failure or refusal or otherwise increase
the Commitment of such other Lender.
2.9. CHANGE IN BORROWING BASES.Each Borrowing Base shall be determined
weekly (or at such other interval as may be specified pursuant to
[Section]9.4(f)) by the Administrative Agent by reference to the Borrowing Base
Report. The Administrative Agent shall give to the Lenders and the applicable
Borrower(s) written notice of any change in such Borrower's Borrowing Base
determined by the Administrative Agent resulting from the Administrative Agent's
determination to add reserves or decrease the advance rates with respect to such
Borrowing Base based on commercial finance examinations, inventory appraisals or
other credit or collateral considerations, which notice shall be effective upon
receipt by the applicable Borrower(s). Prior to such time as the applicable
Borrower receives such notice, such Borrower's Borrowing Base shall be the
amount in effect in the absence of such notice. For purposes of this Credit
Agreement and the other Loan Documents, the Administrative Agent may assume,
subject to adjustment based upon the provisions of this Credit Agreement, that
each Borrower's Borrowing Base and the Overadvance Borrowing Base in effect on
any given date is such Borrower's Borrowing Base or the Overadvance Borrowing
Base, as the case may be, as indicated on the most recent Borrowing Base Report
delivered on a timely basis to the Lenders and the Administrative Agent in
accordance with the provisions of [Section]9.4(f) hereof.
3. REPAYMENT OF THE LOANS.
----------------------
3.1. MATURITY. Each Borrower promises to pay on the Maturity Date, and
there shall become absolutely due and payable on the Maturity Date, all of its
Loans outstanding on such date, together with any and all accrued and unpaid
interest thereon.
3.2. MANDATORY REPAYMENTS OF LOANS.
3.2.1. NORDICTRACK LOANS. If at any time the sum of the outstanding
amount of the NordicTrack Loans and NordicTrack's Letter of Credit Exposure
exceeds the lesser of (i) NordicTrack's Sub-Commitment in effect at such
time and (ii) the NordicTrack Borrowing Base PLUS the lesser of (x) the
Overadvance Borrowing Base less the aggregate outstanding amount of the
Overadvances of the other
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Borrowers and (y) NordicTrack's Sub-Overadvance Amount in effect at such
time, then NordicTrack shall immediately pay the amount of such excess to
the Administrative Agent for the respective accounts of the Lenders for
application: FIRST, to any Unpaid Reimbursement Obligations in respect of
Letters of Credit issued at the request of NordicTrack; SECOND, to the
NordicTrack Loans; and THIRD, to provide to the Administrative Agent cash
collateral for Reimbursement Obligations in respect of Letters of Credit
issued at the request of NordicTrack as contemplated by [Section]4.2(b)
and (c). Each payment of any Unpaid Reimbursement Obligations or
prepayment of NordicTrack Loans shall be allocated among the Lenders, in
proportion, as nearly as practicable, to each Unpaid Reimbursement
Obligation or (as the case may be) the respective unpaid principal amount
of each Lender's NordicTrack Note, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion.
3.2.2. TNC LOANS. If at any time the sum of the outstanding amount of
the TNC Loans and TNC's Letter of Credit Exposure exceeds the lesser of (i)
TNC's Sub-Commitment in effect at such time and (ii) the TNC Borrowing Base
PLUS the lesser of (x) the Overadvance Borrowing Base less the aggregate
outstanding amount of the Overadvances of the other Borrowers and (y) TNC's
Sub-Overadvance Amount in effect at such time, then TNC shall immediately
pay the amount of such excess to the Administrative Agent for the
respective accounts of the Lenders for application: FIRST, to any Unpaid
Reimbursement Obligations in respect of Letters of Credit issued at the
request of TNC; SECOND, to the TNC Loans; and THIRD, to provide to the
Administrative Agent cash collateral for Reimbursement Obligations in
respect of Letters of Credit issued at the request of TNC as contemplated
by [Section]4.2(b) and (c). Each payment of any Unpaid Reimbursement
Obligations or prepayment of TNC Loans shall be allocated among the
Lenders, in proportion, as nearly as practicable, to each Unpaid
Reimbursement Obligation or (as the case may be) the respective unpaid
principal amount of each Lender's TNC Note, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion.
3.2.3. S&H LOANS. If at any time the sum of the outstanding amount of
the S&H Loans and S&H's Letter of Credit Exposure exceeds the lesser of (i)
S&H's Sub-Commitment in effect at such time and (ii) the S&H Borrowing Base
PLUS the lesser of (x) the Overadvance Borrowing Base less the aggregate
outstanding amount of the Overadvances of the other Borrowers and (y) S&H's
Sub-Overadvance Amount in effect at such time, then S&H shall immediately
pay the amount of such excess to the Administrative Agent for the
respective accounts of the Lenders for application: FIRST, to any Unpaid
Reimbursement Obligations in respect of Letters of Credit issued at the
request of S&H; SECOND, to the S&H Loans; and THIRD, to provide to the
Administrative Agent cash collateral for Reimbursement Obligations in
respect of Letters of Credit issued at
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the request of S&H as contemplated by [Section]4.2(b) and (c). Each payment
of any Unpaid Reimbursement Obligations or prepayment of S&H Loans shall be
allocated among the Lenders, in proportion, as nearly as practicable, to
each Unpaid Reimbursement Obligation or (as the case may be) the respective
unpaid principal amount of each Lender's S&H Note, with adjustments to the
extent practicable to equalize any prior payments or repayments not exactly
in proportion.
3.2.4. HEAR MUSIC LOANS. If at any time the sum of the outstanding
amount of the Hear Music Loans, and Hear Music's Letter of Credit Exposure
exceeds the lesser of (i) Hear Music's Commitment and (ii) the Hear Music
Borrowing Base PLUS the lesser of (x) the Overadvance Borrowing Base less
the aggregate outstanding amount of the Overadvances of the other Borrowers
and (y) Hear Music's Sub-Overadvance Amount in effect at such time, then
Hear Music shall immediately pay the amount of such excess to the
Administrative Agent for the respective accounts of the Lenders for
application: FIRST, to any Unpaid Reimbursement Obligations in respect of
Letters of Credit issued at the request of Hear Music; SECOND, to the Hear
Music Loans; and THIRD, to provide to the Administrative Agent cash
collateral for Reimbursement Obligations in respect of Letters of Credit
issued at the request of Hear Music as contemplated by [Section]4.2(b) and
(c). Each payment of any Unpaid Reimbursement Obligations or prepayment of
Hear Music Loans shall be allocated among the Lenders, in proportion, as
nearly as practicable, to each Unpaid Reimbursement Obligation or (as the
case may be) the respective unpaid principal amount of each Lender's Hear
Music Note, with adjustments to the extent practicable to equalize any
prior payments or repayments not exactly in proportion.
3.2.5. ANNUAL CLEAN-DOWN. During each fiscal year of the Borrowers,
for a period of forty-five (45) consecutive days commencing not earlier
than December 15 and ending not later than the next following March 31, the
aggregate amount of all Loans outstanding shall not exceed $15,000,000. At
the beginning of each such forty-five (45) day period, the Borrowers shall
repay any Loans outstanding in excess of $15,000,000, and within fourteen
(14) days following the commencement of such forty-five (45) day period,
CML and the Borrowers shall deliver to the Agents and the Lenders a
certificate signed by the chief financial officer of CML notifying the
Agents and the Lenders of the commencement of such forty-five (45) day
period.
3.3. DEPOSITORY ARRANGEMENTS.
3.3.1. THE BORROWER'S DEPOSITORY ARRANGEMENTS. Each of the Borrowers
will (i) on or prior to the Closing Date, maintain a depository
concentration account (such Borrower's "Concentration Account") with and
under the control of the Administrative Agent, as contemplated by the terms
of the Credit Agreement, (ii) direct each Agency Account
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Institution pursuant to the Agency Account Agreements (whereby such Agency
Account Institution shall, among other things, waive any right of set off,
other than for service charges and returns incurred in connection
therewith), to cause all funds held by such Agency Account Institution in
the Agency Accounts to be transferred daily (or such other period as the
Administrative Agent requests) to, and only to, the Administrative Agent
for deposit in such Borrower's Concentration Account and (iii) direct its
account debtors and obligors on instruments or other obligors of such
Borrower with respect to any of the Collateral to make all payments on or
with respect to any of the Collateral due or to become due to such Borrower
directly to such Borrower's Concentration Account or the Agency Accounts.
If, notwithstanding the requirements of the foregoing sentence, any of the
Borrowers receives any cash proceeds of any of the Collateral, whether in
the form of money, checks or otherwise, such Borrower will hold such cash
proceeds in trust for the benefit of the Agents and the Lenders and turn
such cash proceeds promptly over to the Administrative Agent in the
identical form received by deposit to any Agency Account or Concentration
Account. The Administrative Agent shall, (i) with respect to all funds and
cash proceeds in the form of money, checks and like items received in any
Borrower's Concentration Account, on the same Business Day on which the
Administrative Agent determines that good collected funds have been
received, and prior to the final collection of good collected funds, on a
provisional basis until such final collection, (ii) with respect to all
funds and cash proceeds in the form of a wire transfer received in any
Borrower's Concentration Account, on the same Business Day as the
Administrative Agent's receipt of such amounts (or such later date as the
Administrative Agent determines that good collected funds have been
received) and (iii) with respect to all funds and cash proceeds in the form
of an automated clearing house transfer received in any Borrower's
Concentration Account, on the next Business Day following the
Administrative Agent's receipt of such amounts (or such later date as the
Administrative Agent determines that good collected funds have been
received), in each case, apply to the principal of the applicable
Borrower's Base Rate Loans and then (after payment in full of all such
Borrower's Base Rate Loans) to the principal of the applicable Borrower's
Eurodollar Rate Loans all such funds and cash proceeds which were deposited
to such Borrower's Concentration Account and, so long as no Default or
Event of Default has occurred and is continuing, the Administrative Agent
shall cause any excess to be credited to the applicable Borrower's
Operating Account. From and after the occurrence and during the continuance
of a Default or an Event of Default, the Administrative Agent may, from
time to time in the Administrative Agent's discretion, retain any or all of
such excess to pay any Obligations then due and payable in accordance with
[Section]14.4 and to provide cash collateral for any Obligations not then
due and payable, including an amount equal to 105% of the Maximum Drawing
Amount to secure Reimbursement Obligations with respect to Letters of
Credit
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issued at the request of the applicable Borrower, with the Administrative
Agent causing any surplus, subject to the rights of any other persons
entitled thereto, to be credited to the applicable Borrower's Operating
Account. For purposes of the foregoing provisions of this [Section]3.3.1,
the Administrative Agent shall not be deemed to have received any such cash
proceeds on any day unless received by the Administrative Agent before 4:00
p.m. (Boston time) on such day. Each of the Borrowers further acknowledges
and agrees that any such provisional credit by the Administrative Agent
shall be subject to reversal if final collection in good collected funds of
the related item is not received by the Administrative Agent in accordance
with the Administrative Agent's customary procedures and practices for
collecting provisional items.
3.2.2. CML'S DEPOSITORY ARRANGEMENTS. CML will (i) on or prior to the
Closing Date, maintain a depository concentration account (CML's
"Concentration Account") with and under the control of the Administrative
Agent, as contemplated by the terms of the Credit Agreement, (ii) direct
each Agency Account Institution pursuant to the Agency Account Agreements
(whereby such Agency Account Institution shall, among other things, waive
any right of set off, other than for service charges and returns incurred
in connection therewith), to cause all funds held by such Agency Account
Institution in the Agency Accounts to be transferred daily (or such other
period as the Administrative Agent requests) to, and only to, the
Administrative Agent for deposit in such Borrower's Concentration Account
and (iii) direct its account debtors and obligors on instruments or other
obligors of CML with respect to any of the Collateral to make all payments
on or with respect to any of the Collateral due or to become due to CML
directly to CML's Concentration Account or the Agency Accounts. If,
notwithstanding the requirements of the foregoing sentence, CML receives
any cash proceeds of any of the Collateral, whether in the form of money,
checks or otherwise, CML will hold such cash proceeds in trust for the
benefit of the Agents and the Lenders and turn such cash proceeds promptly
over to the Administrative Agent in the identical form received by deposit
to any Agency Account or Concentration Account. The Administrative Agent
shall, (i) with respect to all funds and cash proceeds in the form of
money, checks and like items received in CML's Concentration Account, on
the same Business Day on which the Administrative Agent determines that
good collected funds have been received, and prior to the final collection
of good collected funds, on a provisional basis until such final
collection, (ii) with respect to all funds and cash proceeds in the form of
a wire transfer received in CML's Concentration Account, on the same
Business Day as the Administrative Agent's receipt of such amounts (or such
later date as the Administrative Agent determines that good collected funds
have been received), and (iii) with respect to all funds and cash proceeds
in the form of an automated clearing house transfer received in CML's
Concentration Account, on the next Business Day following the
Administrative Agent's
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receipt of such amounts (or such later date as the Administrative Agent
determines that good collected funds have been received), in each case,
apply first, to the principal of the Borrowers' Base Rate Loans and then
(after payment in full of the Borrowers' Base Rate Loans) to the principal
of the Borrowers' Eurodollar Rate Loans, in each case in such proportions
as the Administrative Agent shall determine in its sole discretion all such
funds and cash proceeds which were deposited to CML's Concentration Account
and, so long as no Default or Event of Default has occurred and is
continuing, the Administrative Agent shall cause any excess to be credited
to CML's Operating Account. From and after the occurrence and during the
continuance of a Default or an Event of Default, the Administrative Agent
may, from time to time in the Administrative Agent's discretion, retain any
or all of such excess to pay any Obligations then due and payable in
accordance with [Section]14.4 and to provide cash collateral for any
Obligations not then due and payable, including an amount equal to 105% of
the Maximum Drawing Amount to secure Reimbursement Obligations of the
Borrowers and CML, with the Administrative Agent causing any surplus,
subject to the rights of any other persons entitled thereto, to be credited
to CML's Operating Account. For purposes of the foregoing provisions of
this [Section]3.3.2, the Administrative Agent shall not be deemed to have
received any such cash proceeds on any day unless received by the
Administrative Agent before 4:00 p.m. (Boston time) on such day. CML
further acknowledges and agrees that any such provisional credit by the
Administrative Agent shall be subject to reversal if final collection in
good collected funds of the related item is not received by the
Administrative Agent in accordance with the Administrative Agent's
customary procedures and practices for collecting provisional items.
3.3.3. THE OTHER GUARANTORS' DEPOSITORY ARRANGEMENTS. Each of the
Guarantors not subject to [Section]3.3.1 or 3.3.2 will (i) direct each
Agency Account Institution pursuant to the Agency Account Agreements
(whereby such Agency Account Institution shall, among other things, waive
any right of set off, other than for service charges and returns incurred
in connection therewith), to cause all funds held by such Agency Account
Institution in the Agency Accounts to be transferred daily (or such other
period as the Administrative Agent requests) to, and only to, the
Administrative Agent for deposit in the Concentration Account of the
Borrower which is such Guarantor's direct or indirect parent, in accordance
with this [Section]3.3.3 and (ii) direct its account debtors and obligors
on instruments or other obligors of such Guarantor with respect to any of
the Collateral to make all payments on or with respect to any of the
Collateral due or to become due to such Guarantor directly to the
Concentration Account of such Guarantor's direct or indirect parent or the
Agency Accounts of such Guarantor or such Guarantor's direct or indirect
parent. If, notwithstanding the requirements of the foregoing sentence, any
of the Guarantors receives
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any cash proceeds of any of the Collateral, whether in the form of money,
checks or otherwise, such Guarantor will hold such cash proceeds in trust
for the benefit of the Administrative Agent and the Lenders and turn such
cash proceeds promptly over to the Administrative Agent in the identical
form received by deposit to any Agency Account or Concentration Account.
The Administrative Agent shall, (i) with respect to all funds and cash
proceeds in the form of money checks and like items received in any
Borrower's or CML's Concentration Account, on the same Business Day on
which the Administrative Agent determines that good collected funds have
been received, and prior to the final collection of good collected funds,
on a provisional basis until such final collection, (ii) with respect to
all funds and cash proceeds in the form of a wire transfer received in any
Borrower's or CML's Concentration Account, on the same Business Day as the
Administrative Agent's receipt of such amounts (or such later date as the
Administrative Agent determines that good collected funds have been
received), and (iii) with respect to all funds and cash proceeds in the
form of an automated clearing house transfer received in any Borrower's or
CML's Concentration Account, on the next Business Day following the
Administrative Agent's receipt of such amounts (or such later date as the
Administrative Agent determines that good collected funds have been
received), in each case, apply, in accordance with the provisions of
[Section]3.3.1 or [Section]3.3.2, as the case may be, all such funds and
cash proceeds so long as no Default or Event of Default has occurred and is
continuing, the Administrative Agent shall cause any excess to be credited
in accordance with the provisions of [Section]3.3.1 or [Section]3.3.2, as
the case may be. From and after the occurrence and during the continuance
of a Default or an Event of Default, the Administrative Agent may, from
time to time in the Administrative Agent's discretion, retain any or all of
such excess to pay any Obligations then due and payable in accordance with
[Section]14.4 and to provide cash collateral for any Obligations not then
due and payable, including an amount equal to 105% of the Maximum Drawing
Amount to secure Reimbursement Obligations of the Borrowers, with the
Administrative Agent causing any surplus, subject to the rights of any
other persons entitled thereto, to be credited in accordance with the
provisions of [Section]3.3.1 or [Section]3.3.2, as the case may be. For
purposes of the foregoing provisions of this [Section]3.3.3, the
Administrative Agent shall not be deemed to have received any such cash
proceeds on any day unless received by the Administrative Agent before 4:00
p.m. (Boston time) on such day. Each of the Guarantors subject to this
[Section]3.3.3 further acknowledges and agrees that any such provisional
credit by the Administrative Agent shall be subject to reversal if final
collection in good collected funds of the related item is not received by
the Administrative Agent in accordance with the Administrative Agent's
customary procedures and practices for collecting provisional items.
3.3.4. FEES AND EXPENSES: APPLICATION OF PAYMENT. Each of the
Borrowers and the Guarantors agrees to pay to the Administrative
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Agent any and all reasonable fees, costs and expenses which the
Administrative Agent incurs in connection with the opening and maintaining
of the Concentration Accounts, the Controlled Disbursement Accounts and the
depositing for collection by the Administrative Agent of any check or other
item of payment. Absent gross negligence or willful misconduct by the
Administrative Agent, each of the Borrowers and each of the Guarantors
agrees to indemnify the Administrative Agent and to hold the Administrative
Agent harmless from and against any loss, cost or expense sustained or
incurred by the Administrative Agent on account of any claims of third
parties arising in connection with the Administrative Agent's operation of
the Concentration Account. Each partial prepayment of Loans under this
[Section]3.3 shall be allocated among the Lenders in proportion, as nearly
as practicable, to the respective unpaid principal amount of each Lender's
applicable Note, with adjustments to the extent practicable to equalize any
prior repayments not exactly in proportion.
3.4. OPTIONAL REPAYMENTS OF LOANS. Each Borrower shall have the right, at
its election, to repay the outstanding amount of its Loans, as a whole or in
part, at any time without penalty or premium, PROVIDED that any full or partial
prepayment of the outstanding amount of any Eurodollar Rate Loans pursuant to
this [Section]3.4 may be made only on the last day of the Interest Period
relating thereto. The applicable Borrower shall give the Administrative Agent,
no later than 1:00 p.m., Boston time, at least one (1) Business Day prior
written notice of any proposed prepayment pursuant to this [Section]3.4 of Base
Rate Loans, and three (3) Eurodollar Business Days notice of any proposed
prepayment pursuant to this [Section]3.4 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of its Loans and the principal amount
to be prepaid. Each such partial prepayment of the Loans shall be in an integral
multiple of $500,000 and shall be applied, in the absence of instruction by the
applicable Borrower, first to the principal of the applicable Borrower's Base
Rate Loans and then to the principal of the applicable Borrower's Eurodollar
Rate Loans. Each partial prepayment shall be allocated among the Lenders, in
proportion, as nearly as practicable, to the respective unpaid principal amount
of each Lender's applicable Note, with adjustments to the extent practicable to
equalize any prior repayments not exactly in proportion. Any prepayment of the
Loans made pursuant to [Section]3.3 shall not be subject to the provisions of
this [Section]3.4.
4. LETTERS OF CREDIT.
-----------------
4.1. LETTER OF CREDIT COMMITMENTS.
----------------------------
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and
conditions hereof and the execution and delivery by any of the Borrowers
and CML of a letter of credit application on the Issuing Bank's customary
form (a "Letter of Credit Application"), the Issuing Bank on behalf of the
Lenders and in reliance upon the agreement of the Lenders set forth in
[Section]4.1.4 and upon the representations and warranties of the
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the applicable Borrower and CML contained herein, agrees, in its individual
capacity, to issue, extend and renew for the account of such Borrower and
CML one or more standby or documentary letters of credit (individually, a
"Letter of Credit"), in such form as may be requested from time to time by
the applicable Borrower and agreed to by the Issuing Bank; PROVIDED,
HOWEVER, that, after giving effect to such request, (a) the sum of the
aggregate Letter of Credit Exposure of the Borrowers shall not exceed
$40,000,000 at any one time and (b) the sum of (i) each Borrower's Letter
of Credit Exposure and (ii) the amount of all Loans of such Borrower
outstanding shall not exceed the lesser of (A) such Borrower's
Sub-Commitment and (B) such Borrower's Borrowing Base PLUS the lesser of
(x) the Overadvance Borrowing Base and (y) such Borrower's Sub-Overadvance
Amount less the aggregate Sub-Overadvance Amounts allocated to other
Borrowers.
4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the satisfaction of the Issuing Bank. In
the event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (i) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, (ii) subject to clause (iii) hereof, with respect to
documentary Letters of Credit, have a term of not more than one hundred
eighty (180) days from the date of issuance, extension or renewal thereof
(unless the Issuing Bank, in its sole discretion, shall have agreed to a
longer term of up to but not exceeding two hundred seventy (270) days) and
with respect to Standby Letters of Credit, have a term of not more than one
(1) year from the date of issuance, extension or renewal thereof, and (iii)
have an expiry date no later than the date which is fourteen (14) days (or,
if the Letter of Credit is confirmed by a confirmer or otherwise provides
for one or more nominated persons, forty-five (45) days) prior to the
Maturity Date. Each Letter of Credit so issued, extended or renewed shall
be subject to the Uniform Customs.
4.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally
agrees that it shall be absolutely liable, without regard to the occurrence
of any Default or Event of Default or any other condition precedent
whatsoever, to the extent of such Lender's Commitment Percentage, to
reimburse the Issuing Bank on demand for the amount of each draft paid by
the Issuing Bank under each Letter of Credit to the extent that such amount
is not reimbursed by the Borrowers or CML pursuant to [Section]4.2 (such
agreement for a Lender being called herein the "Letter of Credit
Participation" of such Lender).
<PAGE> 54
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4.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a Lender
shall be treated as the purchase by such Lender of a participating interest
in CML's and the Borrowers' Reimbursement Obligations under [Section]4.2 in
an amount equal to such payment. Each Lender shall share in accordance with
its participating interest in any interest which accrues pursuant to
[Section]4.2.
4.2. REIMBURSEMENT OBLIGATION OF CML AND THE BORROWERS. In order to induce
the Issuing Bank to issue, extend and renew each Letter of Credit and the
Lenders to participate therein, each Borrower and CML hereby agrees to reimburse
or pay to the Issuing Bank, for the account of the Issuing Bank or (as the case
may be) the Lenders, with respect to each Letter of Credit issued, extended or
renewed by the Issuing Bank hereunder at the request of such Borrower and CML,
(a) except as otherwise expressly provided in [Section]4.2(b) and (c),
on each date that any draft presented under such Letter of Credit is
honored by the Issuing Bank, or the Issuing Bank otherwise makes a payment
with respect thereto, (i) the amount paid by the Issuing Bank under or with
respect to such Letter of Credit, and (ii) the amount of any taxes, fees,
charges or other costs and expenses whatsoever incurred by the Issuing Bank
or any Lender in connection with any payment made by the Issuing Bank or
any Lender under, or with respect to, such Letter of Credit,
(b) upon the reduction (but not termination) of such Borrower's
Sub-Commitment to an amount less than the Maximum Drawing Amount with
respect to Letters of Credit issued at the request of such Borrower, an
amount equal to such difference, which amount shall be held by the Issuing
Bank for the benefit of the Lenders, the Issuing Bank and the Agents as
cash collateral for all Reimbursement Obligations with respect to Letters
of Credit issued at the request of such Borrower, and
(c) upon the termination of the such Borrower's Sub-Commitment, or the
acceleration of the Reimbursement Obligations with respect to Letters of
Credit issued at the request of such Borrower in accordance with
[Section]14, an amount equal to the then Maximum Drawing Amount with
respect to Letters of Credit issued at the request of such Borrower, which
amount shall be held by the Issuing Bank for the benefit of the Lenders,
the Issuing Bank and the Agents as cash collateral for all Reimbursement
Obligations with respect to Letters of Credit issued at the request of such
Borrower.
Each such payment shall be made to the Issuing Bank at the Issuing Bank's head
office located at 100 Federal Street, Boston, Massachusetts in immediately
available funds. Interest on any and all amounts remaining unpaid by the
Borrowers under this [Section]4.2 at any time from the date such amounts become
due and payable (whether as stated in this [Section]4.2, by acceleration or
otherwise) until
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payment in full (whether before or after judgment) shall be payable to the
Issuing Bank on demand at the rate specified in [Section]5.11 for overdue
principal on the Loans.
4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Issuing Bank
shall notify the applicable Borrower of the date and amount of the draft
presented or demand for payment and of the date and time when it expects to pay
such draft or honor such demand for payment. If the applicable Borrower or CML
fails to reimburse the Issuing Bank as provided in [Section]4.2 on or before the
date that such draft is paid or other payment is made by the Issuing Bank, the
Issuing Bank may at any time thereafter notify the Lenders of the amount of any
such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on
the Business Day next following the receipt of such notice, each Lender shall
make available to the Issuing Bank, at its head office located at 100 Federal
Street, Boston, Massachusetts, in immediately available funds, such Lender's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Issuing Bank for federal funds acquired by the Issuing Bank during each day
included in such period, TIMES (ii) the amount equal to such Lender's Commitment
Percentage of such Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the
numerator of which is the number of days that elapse from and including the date
the Issuing Bank paid the draft presented for honor or otherwise made payment to
the date on which such Lender's Commitment Percentage of such Unpaid
Reimbursement obligation shall become immediately available to the Issuing Bank,
and the denominator of which is 360. The responsibility of the Issuing Bank to
CML, the Borrowers and the Lenders shall be only to determine that the documents
(including each draft) delivered under each Letter of Credit in connection with
such presentment shall be in conformity in all material respects with such
Letter of Credit.
4.4. OBLIGATION ABSOLUTE. Each Borrower's and CML's obligations under this
[Section]4 shall be absolute and unconditional under any and all circumstances
and irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which any Borrower or CML may have or have had against the Issuing Bank, any
Lender, any Agent or any beneficiary of a Letter of Credit. Each Borrower and
CML further agrees with the Issuing Bank and the Lenders that the Issuing Bank
and the Lenders shall not be responsible for, and each Borrower's and CML's
Reimbursement Obligations under [Section]4.2 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, or any dispute between or among any
Borrower, CML, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of any Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Issuing Bank
<PAGE> 56
and the Lenders shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. Each Borrower and CML
agrees that any action taken or omitted by the Issuing Bank or any Lender under
or in connection with each Letter of Credit and the related drafts and
documents, if done in good faith, shall be binding upon such Borrower and CML
and shall not result in any liability on the part of the Issuing Bank or any
Lender to such Borrower.
4.5. RELIANCE BY ISSUER. To the extent not inconsistent with [Section]4.4,
the Issuing Bank shall be entitled to rely, and shall be fully protected in
relying upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Issuing Bank. The Issuing Bank shall be fully
justified in failing or refusing to take any action under this Credit Agreement
unless it shall first have received such advice or concurrence of the Majority
Lenders as it reasonably deems appropriate or it shall first be indemnified to
its reasonable satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Issuing Bank shall in all cases be fully protected in
acting, or in refraining from acting, under this Credit Agreement in accordance
with a request of the Majority Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon the Lenders and all future
holders of the Notes or of a Letter of Credit Participation.
4.6. LETTER OF CREDIT FEE. Each Borrower shall, quarterly in arrears on the
first day of each calendar quarter for the immediately preceding calendar
quarter, pay a fee (in each case, a "Letter of Credit Fee") to the Issuing Bank
(i) in respect of each standby Letter of Credit issued at the request of such
Borrower equal to two and one-half percent (2.50%) per annum of the face amount
of such standby Letter of Credit, and (ii) in respect of each documentary Letter
of Credit issued at the request of such Borrower equal to one and three-eighths
percent (1.375%) of the face amount of such documentary Letter of Credit. The
Issuing Bank shall, in turn, remit to each Lender its PRO RATA portion of such
Letter of Credit Fee. In addition, the applicable Borrower shall pay to the
Issuing Bank, for its own account, on the date of issuance, or any extension or
renewal of any Letter of Credit and at such other time or times as such charges
are customarily made by the Issuing Bank, a fronting fee equal to one-eighth
percent (0.125%) of the face amount of such Letter of Credit and the Issuing
Bank's standard issuance, processing, negotiation, amendment and administrative
fees, determined in accordance with customary fees and charges for similar
facilities.
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5. CERTAIN GENERAL PROVISIONS.
--------------------------
5.1. CLOSING FEE. The Borrowers jointly and severally agree to pay to the
Administrative Agent on the Closing Date a closing fee in the amount set forth
in the Fee Letter.
5.2. ADMINISTRATIVE AGENT'S FEE.The Borrowers jointly and severally shall
pay to the Administrative Agent an Administrative Agent's fee as provided in the
Fee Letter.
5.3. FUNDS FOR PAYMENTS.
5.3.1. PAYMENTS TO ADMINISTRATIVE AGENT. All payments of principal,
interest, Reimbursement Obligations, commitment fees, Letter of Credit Fees
and any other amounts due hereunder or under any of the other Loan
Documents shall be made to the Administrative Agent, for the respective
accounts of the Lenders and the Administrative Agent, at the Administrative
Agent's Head Office or at such other location in the Boston, Massachusetts
area that the Administrative Agent may from time to time designate, in each
case in immediately available funds.
5.3.2. NO OFFSET, ETC. All payments by the Borrowers hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless any Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon any Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, such Borrower will pay
to the Administrative Agent, for the account of the Lenders or (as the case
may be) the Administrative Agent, on the date on which such amount is due
and payable hereunder or under such other Loan Document, such additional
amount in Dollars as shall be necessary to enable the Lenders or the
Administrative Agent to receive the same net amount which the Lenders or
the Administrative Agent would have received on such due date had no such
obligation been imposed upon such Borrower. Such Borrower will deliver
promptly to the Administrative Agent certificates or other valid vouchers
for all taxes or other charges deducted from or paid with respect to
payments made by such Borrower hereunder or under such other Loan Document.
5.4. COMPUTATION. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on a 360-day year and paid for the actual
number of days elapsed. Except as otherwise provided in the definition of the
term "Interest Period" with respect to Eurodollar Rate Loans, whenever a
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payment hereunder or under any of the other Loan Documents becomes due on a day
that is not a Business Day, the due date for such payment shall be extended to
the next succeeding Business Day, and interest shall accrue during such
extension. The outstanding amount of the Loans as reflected on the Note Records
from time to time shall be considered correct and binding on the applicable
Borrower unless within five (5) Business Days after receipt of any notice by the
Administrative Agent or any of the Lenders of such outstanding amount, the
Administrative Agent or such Lender shall notify such Borrower to the contrary.
5.5 INABILITY TO DETERMINE EURODOLLAR RATE. In the event, prior to the
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Administrative Agent shall determine or be notified by the Majority Lenders that
adequate and reasonable methods do not exist for ascertaining the Eurodollar
Rate that would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest Period, the Administrative Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrowers and the Lenders) to the Borrowers and the Lenders. In
such event (i) any Loan Request or Conversion Request with respect to Eurodollar
Rate Loans shall be automatically withdrawn and shall be deemed a request for
Base Rate Loans, (ii) each Eurodollar Rate Loan will automatically, on the last
day of the then current Interest Period relating thereto, become a Base Rate
Loan, and (iii) the obligations of the Lenders to make Eurodollar Rate Loans
shall be suspended until the Administrative Agent determine that the
circumstances giving rise to such suspension no longer exist, whereupon the
Administrative Agent shall so notify the Borrowers and the Lenders.
5.6. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Rate Loans, such Lender shall forthwith give notice of such
circumstances to the Borrowers and the other Lenders and thereupon (i) the
commitment of such Lender to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Lender's Loans then outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period as
may be required by law. Each Borrower hereby agrees promptly to pay the
Administrative Agent for the account of such Lender, upon demand by such Lender,
any additional amounts necessary to compensate such Lender for any costs
incurred by such Lender in making any conversion in accordance with this
[Section]5.6, including any interest or fees payable by such Lender to
lenders of funds obtained by it in order to make or maintain its Eurodollar
Rate Loans hereunder.
5.7. ADDITIONAL COSTS, ETC. If any present or future applicable law, which
expression, as used herein, includes statutes, rules and regulations
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thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise issued to any Lender or the Administrative Agent by any central bank
or other fiscal, monetary or other authority (whether or not having the force of
law), shall:
(a) subject any Lender or the Administrative Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with
respect to this Credit Agreement, the other Loan Documents, any Letters of
Credit, such Lender's Commitment or the Loans (other than taxes based upon
or measured by the income or profits of such Lender or the Administrative
Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Lender of the principal of
or the interest on any Loans or any other amounts payable to any Lender or
the Administrative Agent under this Credit Agreement or any of the other
Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Lender, or
(d) impose on any Lender or the Administrative Agent any other
conditions or requirements with respect to this Credit Agreement, the other
Loan Documents, any Letters of Credit, the Loans, such Lender's Commitment,
or any class of loans, letters of credit or commitments of which any of the
Loans or such Lender's Commitment forms a part, and the result of any of
the foregoing is
(i) to increase the cost to any Lender of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Lender's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Lender or the
Administrative Agent hereunder on account of such Lender's Commitment,
any Letter of Credit or any of the Loans, or
(iii) to require such Lender or the Administrative Agent to make
any payment or to forgo any interest or Reimbursement Obligation or
other sum payable hereunder, the amount of which payment or forgone
interest or Reimbursement Obligation or other
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sum is calculated by reference to the gross amount of any sum
receivable or deemed received by such Lender or the Administrative
Agent from the Borrowers hereunder,
then, and in each such case, the Borrowers will, upon demand made by such Lender
or (as the case may be) the Administrative Agent at any time and from time to
time and as often as the occasion therefor may arise, pay to such Lender or the
Administrative Agent such additional amounts as will be sufficient to compensate
such Lender or the Administrative Agent for such additional cost, reduction,
payment or forgone interest or Reimbursement Obligation or other sum.
5.8. CAPITAL ADEQUACY. If after the date hereof any Lender or the
Administrative Agent determines that (i) the adoption of or change in any law,
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law) regarding capital requirements for banks or bank
holding companies or any change in the interpretation or application thereof by
a court or governmental authority with appropriate jurisdiction, or (ii)
compliance by such Lender or the Administrative Agent or any corporation
controlling such Lender or the Administrative Agent with any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) of any such entity regarding capital adequacy, has the effect of
reducing the return on such Lender's or the Administrative Agent's capital as a
result of such Lender's obligations hereunder to a level below that which such
Lender or the Administrative Agent could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or the
Administrative Agent's then existing policies with respect to capital adequacy
and assuming full utilization of such entity's capital) by any amount deemed by
such Lender or (as the case may be) the Administrative Agent to be material,
then such Lender or the Administrative Agent may notify the Borrowers of such
fact. To the extent that the amount of such reduction in the return on capital
is not reflected in the Base Rate, the Borrowers agree to pay such Lender or (as
the case may be) the Administrative Agent for the amount of such reduction in
the return on capital as and when such reduction is determined upon presentation
by such Lender or (as the case may be) the Administrative Agent of a certificate
in accordance with [Section]5.9 hereof. Each Lender shall allocate such cost
increases among its customers in good faith and on an equitable basis.
5.9. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to [Sections]5.7 or 5.8 and a brief explanation of such amounts
which are due, submitted by any Lender or the Administrative Agent to the
Borrowers, shall be conclusive, absent manifest error, that such amounts are due
and owing.
5.10. INDEMNITY. Each of the Borrowers agrees to indemnify each Lender and
to hold each Lender harmless from and against any loss, cost or expense
(including loss of anticipated profits) that such Lender may sustain or incur as
a consequence of (i) default by such Borrower in payment of
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the principal amount of or any interest on any Eurodollar Rate Loans as and when
due and payable, including any such loss or expense arising from interest or
fees payable by such Lender to lenders of funds obtained by it in order to
maintain its Eurodollar Rate Loans, (ii) default by such Borrower in making a
borrowing or conversion after such Borrower has given (or is deemed to have
given) a Loan Request or a Conversion Request relating thereto in accordance
with [Section]2.6 or [Section]2.7 or (iii) the making of any payment of a
Eurodollar Rate Loan or the making of any conversion of any such Loan to a Base
Rate Loan on a day that is not the last day of the applicable Interest Period
with respect thereto, including interest or fees payable by such Lender to
lenders of funds obtained by it in order to maintain any such Loans.
5.11. INTEREST AFTER DEFAULT.
----------------------
5.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per annum
equal to two percent (2%) above the rate of interest otherwise applicable
thereto until such amount shall be paid in full (after as well as before
judgment).
5.11.2. AMOUNTS NOT OVERDUE. During the continuance of an Event of
Default the principal of the Loans not overdue shall, until such Event of
Default has been cured or remedied or such Event of Default has been waived
by the Majority Lenders pursuant to [Section]27, bear interest at a rate
per annum equal to the rate of interest applicable to overdue principal
pursuant to [Section]5.11.1.
6. COLLATERAL SECURITY AND GUARANTIES.
----------------------------------
6.1. SECURITY OF BORROWERS. The Obligations shall be secured by a perfected
first priority security interest (subject only to Permitted Liens entitled to
priority under applicable law) in all of the assets of the Borrowers, (with such
exceptions as are acceptable to the Majority Lenders), including, without
limitation, the stock of all Borrowers, Guarantors (other than CML) and Foreign
Guarantors, and all intercompany obligations owing to the Borrowers, in each
case wherever located and whether now owned or hereafter acquired, pursuant to
the terms of the Security Documents to which any of such Borrower is a party.
6.2. GUARANTY FOREIGN GUARANTIES AND SECURITY OF GUARANTORS. The
Obligations shall also be guaranteed pursuant to the terms of the Guaranty and
the Foreign Guaranties. The obligations of the Guarantors under the Guaranty
shall be in turn secured by a perfected first priority security interest
(subject only to Permitted Liens entitled to priority under applicable law) in
all of the assets of each such Guarantor (with such exceptions as are acceptable
to the Majority Lenders) and all intercompany obligations owing to
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the Guarantors, in each case wherever located and whether now owned or hereafter
acquired, pursuant to the terms of the Security Documents to which such
Guarantor is a party.
7. GUARANTY.
--------
7.1. GUARANTY OF PAYMENT AND PERFORMANCE. Each of the Guarantors hereby
jointly and severally guarantees to the Lenders, the Issuing Bank and the
Administrative Agents the full and punctual payment when due (whether at stated
maturity, by required pre-payment, by acceleration or otherwise), as well as the
performance, of all of the Obligations including all such which would become due
but for the operation of the automatic stay pursuant to [Section]362(a) of the
Federal Bankruptcy Code and the operation of [Sections]502(b) and 506(b) of the
Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectability only and is in no way
conditioned upon any requirement that any Agent, the Issuing Bank or any Lender
first attempt to collect any of the Obligations from the applicable Borrower or
resort to any collateral security or other means of obtaining payment. Should
any of the Borrowers default in the payment or performance of any of the
Obligations, the obligations of the Guarantors hereunder with respect to such
Obligations in default shall, upon demand by the Administrative Agent, become
immediately due and payable to the Administrative Agent, for the benefit of the
Lenders, the Issuing Bank and the Agents, without demand or notice of any
nature, all of which are expressly waived by each of the Guarantors. Payments by
the Guarantors hereunder may be required by the Administrative Agent on any
number of occasions. All payments by any of the Guarantors hereunder shall be
made to the Administrative Agent, in the manner and at the place of payment
specified therefor in [Section]5 hereof, for the account of the Lenders, the
Issuing Bank and the Agents.
7.2. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. Each of the
Guarantors further jointly and severally agrees, as the principal obligor and
not as a guarantor only, to pay to the Administrative Agent, on demand, all
reasonable costs and expenses (including court costs and legal expenses,
including the allocated cost of staff counsel) incurred or expended by any
Agent, the Issuing Bank or any Lender in connection with the Obligations, this
Guaranty and the enforcement thereof, together with interest on amounts
recoverable under this [Section]7 from the time when such amounts become due
until payment, whether before or after judgment, at the rate of interest for
overdue principal set forth in [Section]5.11 hereof, PROVIDED that if such
interest exceeds the maximum amount permitted to be paid under applicable law,
then such interest shall be reduced to such maximum permitted amount.
7.3. WAIVERS BY THE GUARANTORS; LENDERS' FREEDOM TO ACT. Each of the
Guarantors agrees that the Obligations will be paid and performed strictly in
accordance with their respective terms, regardless of any law, regulation or
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order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Agent, the Issuing Bank or any Lender with respect thereto.
Each of the Guarantors waives promptness, diligence, presentment, demand,
protest, notice of acceptance, notice of any Obligations incurred and all other
notices of any kind, all defenses which may be available by virtue of any
valuation, stay, moratorium law or other similar law now or hereafter in effect,
any right to require the marshalling of assets of the applicable Borrower or any
other entity or other Person primarily or secondarily liable with respect to any
of the Obligations, and all suretyship defenses generally. Without limiting the
generality of the foregoing, each of the Guarantors agrees to the provisions of
any instrument evidencing, securing or otherwise executed in connection with any
Obligation and agrees that the obligations of such Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of any Agent, the Issuing Bank or any Lender to assert any claim or
demand or to enforce any right or remedy against the applicable Borrower or any
other entity or other person primarily or secondarily liable with respect to any
of the Obligations; (ii) any extensions, compromise, refinancing, consolidation
or renewals of any Obligation; (iii) any change in the time, place or manner of
payment of any of the Obligations or any rescissions, waivers, compromise,
refinancing, consolidation or other amendments or modifications of any of the
terms or provisions of this Credit Agreement, the other Loan Documents or any
other agreement evidencing, securing or otherwise executed in connection with
any of the Obligation, (iv) the addition, substitution or release of any entity
or other person primarily or secondarily liable for any Obligation; (v) the
adequacy of any rights which any Agent, the Issuing Bank or any Lender may have
against any collateral security or other means of obtaining repayment of any of
the Obligations; (vi) the impairment of any collateral securing any of the
Obligations, including without limitation the failure to perfect or preserve any
rights which any Agent, the Issuing Bank or any Lender might have in such
collateral security or the substitution, exchange, surrender, release, loss or
destruction of any such collateral security; or (vii) any other act or omission
which might in any manner or to any extent vary the risk of such Guarantor or
otherwise operate as a release or discharge of such Guarantor, all of which may
be done without notice to such Guarantor. To the fullest extent permitted by
law, each of the Guarantors hereby expressly waives any and all rights or
defenses arising by reason of (A) any "one action" or "anti-deficiency" law
which would otherwise prevent any Agent, the Issuing Bank or any Lender from
bringing any action, including any claim for a deficiency, or exercising any
other right or remedy (including any right of set-off), against such Guarantor
before or after such Agent's, the Issuing Bank's or such Lender's commencement
or completion of any foreclosure action, whether judicially, by exercise of
power of sale or otherwise, or (B) any other law which in any other way would
otherwise require any election of remedies by any Agent, the Issuing Bank or any
Lender.
7.4. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWERS. If for any reason
any of the Borrowers has no legal existence or is under no legal
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obligation to discharge any of the Obligations, or if any of the Obligations
have become irrecoverable from such Borrower by reason of such Borrower's
insolvency, bankruptcy or reorganization or by other operation of law or for any
other reason, this Guaranty shall nevertheless be binding on each of the
Guarantors to the same extent as if each such Guarantor at all times had been
the principal obligor on all such Obligations. In the event that acceleration of
the time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of such Borrower, or for any other reason, all such
amounts otherwise subject to acceleration under the terms of this Credit
Agreement, the other Loan Documents or any other agreement evidencing, securing
or otherwise executed in connection with any Obligation shall be immediately due
and payable by each of the Guarantors.
7.5. SUBROGATION; SUBORDINATION.
7.5.1. POSTPONEMENT OF RIGHTS AGAINST BORROWERS. Until the final
payment and performance in full in cash of all of the Obligations: none of
the Guarantors shall exercise any rights against any Borrower arising as a
result of payment by each such Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not prove
any claim in competition with any Agent, the Issuing Bank or any Lender in
respect of any payment hereunder in any bankruptcy, insolvency or
reorganization case or proceedings of any nature; none of the Guarantors
will claim any setoff, recoupment or counterclaim against any Borrower in
respect of any liability of any such Guarantor to such Borrower; and each
of the Guarantors waives any benefit of and any right to participate in any
collateral security which may be held by any Agent, the Issuing Bank or any
Lender.
7.5.2. SUBORDINATION. The payment of any amounts due with respect to
any indebtedness of the Borrowers for money borrowed or credit received now
or hereafter owed to any of the Guarantors is hereby subordinated to the
prior payment in full in cash of all of the Obligations. Each of the
Guarantors agrees that, after the occurrence of any default in the payment
or performance of any of the Obligations, such Guarantor will not demand,
sue for or otherwise attempt to collect any such indebtedness of any
Borrower to such Guarantor until all of the Obligations shall have been
paid in full. If, notwithstanding the foregoing sentence, any of the
Guarantors shall collect, enforce or receive any amounts in respect of such
indebtedness while any Obligations are still outstanding, such amounts
shall be collected, enforced and received by such Guarantor as trustee for
the Lenders, the Issuing Bank and the Agents and be paid over to the
Administrative Agent, for the benefit of the Lenders, the Issuing Bank and
the Agents, on account of the Obligations without affecting in any manner
the liability of the Guarantors under the other provisions of this
Guaranty.
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7.5.3. PROVISIONS SUPPLEMENTAL. The provisions of this [Section]7.5
shall be supplemental to and not in derogation of any rights and remedies
of the Lenders, the Issuing Bank and the Agents under any separate
subordination agreement which the Agents may at any time and from time to
time enter into with any of the Guarantors for the benefit of the Lenders,
the Issuing Bank and the Agents.
7.6. SECURITY; SETOFF. Each of the Guarantors grants to each of the Agents,
the Issuing Bank and the Lenders, as security for the full and punctual payment
and performance of all of the Guarantors' obligations hereunder, a continuing
lien on and security interest in all securities or other property belonging to
each such Guarantor now or hereafter held by such Agent, the Issuing Bank or
such Lender and in all deposits (general or special, time or demand, provisional
or final) and other sums credited by or due from such Agent, the Issuing Bank or
such Lender to such Guarantor or subject to withdrawal by such Guarantor.
Regardless of the adequacy of any collateral security or other means of
obtaining payment of any of the Obligations, each of the Agents, the Issuing
Bank and the Lenders is hereby authorized at any time and from time to time,
without notice to any of the Guarantors (any such notice being expressly waived
by each of the Guarantors) and to the fullest extent permitted by law, to set
off and apply such deposits and other sums against the obligations of such
Guarantor under this Guaranty, whether or not such Agent, the Issuing Bank or
such Lender shall have made any demand under this Guaranty and although such
obligations may be contingent or unmatured.
7.7. FURTHER ASSURANCE. Each of the Guarantors agrees that it will from
time to time, at the request of the Administrative Agent, do all such things and
execute all such documents as the Administrative Agent may consider necessary or
desirable to give full effect to this Guaranty and to perfect and preserve the
rights and powers of the Lenders, the Issuing Bank and the Agents hereunder.
Each of the Guarantors acknowledges and confirms that such Guarantor itself has
established its own adequate means of obtaining from the Borrowers on a
continuing basis all information desired by such Guarantor concerning the
financial condition of the Borrowers and that such Guarantor will look to the
Borrowers and not to any Agent, the Issuing Bank or any Lender in order for such
Guarantor to keep adequately informed of changes in any of the Borrowers'
financial condition.
7.8. TERMINATION. Notwithstanding any termination of this Guaranty, this
Guaranty shall continue to be effective or be reinstated, if at any time any
payment made or value received with respect to any Obligation is rescinded or
must otherwise be returned by any Agent, the Issuing Bank or any Lender upon the
insolvency, bankruptcy or reorganization of any Borrower, or otherwise, all as
though such payment had not been made or value received.
7.9. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon each of
the Guarantors, its successors and assigns, and shall inure to the benefit of
the Agents, the Issuing Bank and the Lenders and their respective successors,
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transferees and assigns. Without limiting the generality of the foregoing
sentence, each Lender may, in accordance with the provisions of [Section]20,
assign or otherwise transfer this Credit Agreement, the other Loan Documents or
any other agreement or note held by it evidencing, securing or otherwise
executed in connection with the Obligations, or sell participations in any
interest therein, to any other entity or other person, and such other entity or
other person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer or participation, with all the
rights in respect thereof granted to such Lender herein. None of the Guarantors
may assign any of its obligations hereunder.
8. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each of the Borrowers and, to the extent the representation relates to CML,
CML represents and warrants to the Lenders and the Agents as follows:
8.1. CORPORATE AUTHORITY.
-------------------
8.1.1. INCORPORATION; GOOD STANDING. Each of CML, the Borrowers and
each of their Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation,
(ii) has all requisite corporate power to own its property and conduct its
business as now conducted and as presently contemplated, and (iii) is in
good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where such qualification is necessary except
where a failure to be so qualified would not have a materially adverse
effect on the business, assets or financial condition of CML, such Borrower
or such Subsidiary.
8.1.2. AUTHORIZATION. The execution, delivery and performance of this
Credit Agreement and the other Loan Documents to which CML, any of the
Borrowers or any of their Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of such Person, (ii) have been duly authorized by all necessary
corporate proceedings, (iii) do not conflict with or result in any breach
or contravention of any provision of law, statute, rule or regulation to
which CML, any of the Borrowers or any of their Subsidiaries is subject or
any judgment, order, writ, injunction, license or permit applicable to CML,
any of Borrower or any of their Subsidiaries and (iv) do not conflict with
any provision of the corporate charter or bylaws of, or any agreement or
other instrument binding upon, CML, any of the Borrowers or any of their
Subsidiaries.
8.1.3. ENFORCEABILITY. The execution and delivery of this Credit
Agreement and the other Loan Documents to which CML, any of the Borrowers
or any of their Subsidiaries is or is to become a party will result in
valid and legally binding obligations of such Person enforceable against it
in accordance with the respective terms and provisions hereof
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and thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
8.2. GOVERNMENTAL APPROVALS. The execution, delivery and performance by
CML, any of the Borrowers and any of their Subsidiaries of this Credit Agreement
and the other Loan Documents to which CML, any of the Borrowers or any of their
Subsidiaries is or is to become a party and the transactions contemplated hereby
and thereby do not require the approval or consent of, or filing with, any
governmental agency or authority other than those already obtained.
8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3
hereto, CML, the Borrowers and their Subsidiaries own all of the assets
reflected in the consolidated balance sheet of CML, the Borrowers and their
Subsidiaries as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except Permitted Liens.
8.4. FINANCIAL STATEMENTS AND PROJECTIONS.
------------------------------------
8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the
Lenders (a) the consolidated balance sheet of CML, the Borrowers and their
Subsidiaries as at the Balance Sheet Date, and the consolidated statements
of income and cash flows of CML, the Borrowers and their Subsidiaries for
the fiscal year then ended, certified by Deloitte and Touche LLP and (b)
the consolidated balance sheet of CML, the Borrowers and their Subsidiaries
as at October 28, 1995 and January 27, 1996 and the consolidated statements
of income and cash flows of CML, the Borrowers and their Subsidiaries for
the fiscal quarters then ended. All such balance sheets, statements of
income and statements of cash flows have been prepared in accordance with
generally accepted accounting principles and fairly present the
consolidated financial condition of CML, the Borrowers and their
Subsidiaries as at the close of business on the dates thereof and the
results of operations for the fiscal year or quarter, as the case may be,
then ended. There are no contingent liabilities of CML, any of the
Borrowers or any of their Subsidiaries as of January 27, 1996 involving
material amounts, known to the officers of CML or any the Borrowers, which
were not disclosed in the balance sheet as of January 27, 1996 or the notes
related thereto.
8.4.2. PROJECTIONS. The projections of the annual operating budgets of
CML, the Borrowers and their Subsidiaries on a consolidated
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basis, balance sheets and cash flow statements for the 1996 to 1998 fiscal
years, copies of which have been delivered to each Lender, disclose all
assumptions made with respect to general economic, financial and market
conditions used in formulating such projections. To the knowledge of CML,
any of Borrowers or any of their Subsidiaries, no facts exist that
(individually or in the aggregate) would result in any material change in
any of such projections. The projections are based upon reasonable
estimates and assumptions, have been prepared on the basis of the
assumptions stated therein and reflect the reasonable estimates of CML, the
Borrowers and its Subsidiaries of the results of operations and other
information projected therein.
8.5. NO MATERIAL CHANGES, ETC.; SOLVENCY.
-----------------------------------
8.5.1. CHANGES. Since January 27, 1996 there has occurred no
materially adverse change in the financial condition, business or
operations of CML, the Borrowers and their Subsidiaries. Since the Balance
Sheet Date and except as set forth on SCHEDULE 8.5, CML has not made any
Distribution.
8.5.2. SOLVENCY. CML, each of the Borrowers and each of their
Subsidiaries, taken as a whole (after giving effect to the transactions
contemplated by this Credit Agreement and the other Loan Documents), is
Solvent. As used herein, "Solvent" shall mean such Person, (i) has assets
having a fair value in excess of its liabilities, (ii) has assets having a
fair value in excess of the amount required to pay its liabilities on
existing debts as such debts become absolute and matured, and (iii) has,
and expects to continue to have, access to adequate capital for the conduct
of its business and the ability to pay its debts from time to time incurred
in connection with the operation of its business as such debts mature.
8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of CML, the Borrowers and
their Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others.
8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are no
actions, suits, proceedings or investigations of any kind pending or threatened
against CML, any of the Borrowers or any of their Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of CML, the Borrowers and
their Subsidiaries or materially impair the right of CML, the Borrowers and
their Subsidiaries, considered as a whole, to carry on business substantially as
now conducted by them, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
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consolidated balance sheet of CML, the Borrowers and their Subsidiaries, or
which question the validity of this Credit Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of CML, any of the
Borrowers nor any of their Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of CML, any of the Borrowers or any of
their Subsidiaries. None of CML, any of the Borrowers nor any of their
Subsidiaries is a party to any contract or agreement that has or is expected, in
the judgment of CML's officers, to have any materially adverse effect on the
business of CML, any of the Borrowers or any of their Subsidiaries.
8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAW, ETC. None of CML, any of the
Borrowers nor any of their Subsidiaries is in violation of any provision of its
charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of CML, any of the Borrowers or any of their Subsidiaries.
8.10. TAX STATUS. Each of CML, the Borrowers and their Subsidiaries (i)
have made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which any of them is
subject, (ii) have paid all taxes and other governmental assessments and charges
shown or determined to be due on such returns, reports and declarations, except
those being contested in good faith and by appropriate proceedings and (iii)
have set aside on their books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except as set forth on SCHEDULE 8.10, there are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and none of the officers of CML or any of the Borrowers knows of
any basis for any such claim.
8.11. NO ENENT OF DEFAULT. No Default or Event of Default has occurred and
is continuing.
8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of CML, any of the
Borrowers nor any of their Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
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8.13. ABSENCE OF FINANCING STATEMENTS, ETC. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of CML, any of the Borrowers or any of their
Subsidiaries or any rights relating thereto.
8.14. PERFECTION OF SECRUITY INTEREST. All filings, assignments, pledges
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Administrative Agent's security interest in the
Collateral (with such exceptions as are acceptable to the Majority Lenders). The
Collateral and the Administrative Agent's rights with respect to the Collateral
are not subject to any setoff, claims, withholdings or other defenses. CML, one
of the Borrowers or one of their Subsidiaries, as specified in the Security
Documents, is the owner of the Collateral free from any lien, security interest,
encumbrance and any other claim or demand, except for Permitted Liens.
8.15. CERTAIN AFFILIATE TRANSACTIONS. None of CML, any of the Borrowers nor
any of their Subsidiaries is a party to any transaction in violation of
[Section]10.11. None of CML, any of Borrowers nor any of their Subsidiaries is a
party to any tax sharing agreement.
8.16. EMPLOYEE BENEFIT PLANS.
----------------------
8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of
ERISA and, to the extent applicable, the Code, including but not limited to
the provisions thereunder respecting prohibited transactions. The Borrowers
have heretofore delivered to the Co-Agents the most recently completed
annual report, Form 5500, with all required attachments, and actuarial
statement required to be submitted under [Section]103(d) of ERISA, with
respect to each Guaranteed Pension Plan.
8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of
[Section]3(1) or [Section]3(2)(B) of ERISA, no benefits are due unless the
event giving rise to the benefit entitlement occurs prior to plan
termination (except as required by Title I, Subtitle B, Part 6 of ERISA).
Any of CML, the Borrowers or an ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of
CML, such Borrower or such ERISA Affiliate without liability to any Person
other than for benefits accrued prior to such termination.
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8.16.3. GUARANTEED PENSION PLANS. None of CML, any of the Borrowers
nor any ERISA Affiliate maintains or operates a Guaranteed Pension Plan.
8.16.4. MULTIEMPLOYER PLANS. None of CML, any of the Borrowers nor any
ERISA Affiliate maintains or operates a Multiemployer Plan.
8.17. REGULATIONS U, X AND G. The proceeds of the Loans shall be used
solely to refinance amounts outstanding under the Citibank Facility and for
working capital and general corporate purposes of the Borrowers. Each of the
Borrowers will obtain Letters of Credit solely for working capital purposes. No
portion of any Loan is to be used, and no portion of any Letter of Credit is to
be obtained, for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U, X and G of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
8.18. ENVIRONMENTAL COMPLIANCE. The Borrowers have taken all necessary
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and have determined that:
(a) none of CML, any Borrower, any of their Subsidiaries nor any of
their operations is in violation, or alleged violation, of any judgment,
decree, order, law, license, rule or regulation pertaining to environmental
matters, including without limitation, those arising under the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal
Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
Laws"), which violation could have a material adverse effect on the
environment or the business, assets or financial condition of CML, any of
the Borrowers or any of their Subsidiaries;
(b) except as set forth on SCHEDULE 8.18 attached hereto, none of CML,
any of the Borrowers nor any of their Subsidiaries has received notice from
any third party including, without limitation, any federal, state or local
governmental authority, (i) that any one of them has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B; (ii) that any
hazardous waste, as defined by 42 U.S.C. [Section]6903(5), any hazardous
substances as defined by 42 U.S.C. [Section]9601(14), any pollutant or
contaminant as defined by 42 U.S.C. [Section]9601(33) and any toxic
substances, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws ("Hazardous Substances") which any one
of
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them has generated, transported or disposed of has been found at any site
at which a federal, state or local agency or other third party has
conducted or has ordered that CML, any Borrower or any of their
Subsidiaries conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law; or (iii) that it is or shall be a
named party to any claim, action, cause of action, complaint, or legal or
administrative proceeding (in each case, contingent or otherwise) arising
out of any third party's incurrence of costs, expenses, losses or damages
of any kind whatsoever in connection with the release of Hazardous
Substances;
(c) except as set forth on SCHEDULE 8.18 attached hereto: (i) no
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of
the Real Estate; (ii) in the course of any activities conducted by CML, the
Borrowers, their Subsidiaries or operators of their properties, no
Hazardous Substances have been generated or are being used on the Real
Estate except in accordance with applicable Environmental Laws; (iii) there
have been no releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the properties of CML, the Borrowers or
their Subsidiaries, which releases would have a material adverse effect on
the value of any of the Real Estate or adjacent properties or the
environment; (iv) to the best of CML's and the Borrowers' knowledge, there
have been no releases on, upon, from or into any real property in the
vicinity of any of the Real Estate which, through soil or groundwater
contamination, may have come to be located on, and which would have a
material adverse effect on the value of, the Real Estate; and (v) in
addition, to the best of CML's and the Borrowers' knowledge, any Hazardous
Substances that have been generated on any of the Real Estate have been
transported offsite only by carriers having an identification number issued
by the EPA, treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental Laws,
which transporters and facilities have been and are, to the best of CML's
and each Borrowers' knowledge, operating in compliance with such permits
and applicable Environmental Laws; and
(d) except as set forth on SCHEDULE 8.18 attached hereto, none of CML,
the Borrowers and their Subsidiaries, any Mortgaged Property or any of the
other Real Estate is subject to any applicable environmental law requiring
the performance of Hazardous Substances site assessments, or the removal or
remediation of Hazardous Substances, or the giving of notice to any
governmental agency or the recording or delivery to other Persons of an
environmental disclosure document or
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statement by virtue of the transactions set forth herein and contemplated
hereby, or as a condition to the recording of any Mortgage or to the
effectiveness of any other transactions contemplated hereby.
8.19. SUBSIDIARIES, ETC. Set forth on SCHEDULE 8.19 hereto is a complete
and accurate list of all Subsidiaries of CML, each Borrower and each of their
Subsidiaries, showing as of the Closing Date (as to each such Subsidiary) the
jurisdiction of its incorporation, the number of shares of each class of capital
stock authorized and the number outstanding on the Closing Date and the
percentage of the outstanding shares of each such class owned (directly or
indirectly) by CML, such Borrower or such Subsidiary at the Closing Date and the
number of shares covered by all outstanding options, warrants, rights of
conversion or purchase and similar rights at the date hereof. All of the
outstanding capital stock of all such Subsidiaries has been validly issued, is
fully paid and non-assessable and is owned by CML or one or more of its
Subsidiaries free and clear of all liens except those created by the Security
Documents. Except as set forth on SCHEDULE 8.19 hereto, none of CML, any of the
Borrowers nor any of their Subsidiaries is engaged in any joint venture or
partnership with any other Person. None of the Guarantors (other than the
Borrowers and CML) or the Foreign Guarantors has assets having an aggregate net
book value in excess of $1,000,000.
8.20. BANK ACCOUNTS. SCHEDULE 8.20 sets forth the account numbers, location
and a description of all bank accounts of CML, each of the Borrowers and each of
their Subsidiaries.
8.21. CHIEF EXECUTIVE OFFICES. Set forth on SCHEDULE 8.21 hereto is a
complete and accurate list of the chief executive office of each of CML, each
Borrower and each of their Subsidiaries, at which location such Person keeps its
books and records.
8.22. FISCAL YEAR. Each of CML, each Borrower and each of their
Subsidiaries has a fiscal year which is the twelve (12) months ending on July 31
of each year.
8.23. DISCLOSURE. No representation or warranty made by CML or any of the
Borrowers in this Credit Agreement or in any agreement, instrument, document,
certificate, statement or letter furnished to any Agent or any Lender by or on
behalf of CML and the Borrowers in connection with any of the transactions
contemplated by any of the Loan Documents contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which they are made.
8.24. INSURANCE. CML, the Borrowers and each of their Subsidiaries
maintains with financially sound and reputable insurers insurance with respect
to its properties and businesses against such casualties and contingencies as
are
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in accordance with sound business practices, with the details of such
coverage being more fully described on SCHEDULE 8.24 hereto.
9. AFFIRMATIVE COVENANTS OF CML AND THE BORROWERS.
----------------------------------------------
Each of CML and each of the Borrowers covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any obligation to make any Loans or the Issuing
Bank has any obligation to issue, extend or renew any Letters of Credit:
9.1. PUNCTUAL PAYMENT. Each Borrower will duly and punctually pay or cause
to be paid the principal and interest on its Loans, all Reimbursement
Obligations in respect of letters of credit issued at the request of such
Borrower, the Letter of Credit Fees relating to such Letters of Credit, its
commitment fees, the Administrative Agent's fee and all other amounts provided
for in this Credit Agreement and the other Loan Documents to which CML, any of
the Borrowers or any of their Subsidiaries is a party, all in accordance with
the terms of this Credit Agreement and such other Loan Documents.
9.2. MAINTENANCE OF OFFICE. Each of CML and each of the Borrowers will
maintain its chief executive office at the location set forth on SCHEDULE 8.21
hereto, or at such other place in the United States of America as CML or such
Borrower shall designate upon prior written notice to the Administrative Agent,
where notices, presentations and demands to or upon such Person in respect of
the Loan Documents to which such Person is a party may be given or made.
9.3. RECORDS AND ACCOUNTS. Each of CML and each of the Borrowers will (i)
keep, and cause each of its Subsidiaries to keep, true and accurate records and
books of account in which full, true and correct entries will be made in
accordance with generally accepted accounting principles and (ii) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of its Subsidiaries, contingencies, and other reserves.
9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. CML and the
Borrowers will deliver to each of the Lenders:
(a) as soon as practicable, but in any event not later than ninety
(90) days after the end of each fiscal year of CML, the consolidated
balance sheet of CML and its Subsidiaries and the consolidating balance
sheets of CML and its Subsidiaries, each as at the end of such year, and
the related consolidated statement of income and consolidated statement of
cash flow and consolidating statements of income and consolidating
statements of cash flow for such year, each setting forth in comparative
form the figures for the previous fiscal year and all such consolidated and
consolidating statements to be in reasonable detail, prepared in accordance
with generally accepted accounting principles, and all such consolidated
statements to be certified without qualification by Deloitte
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and Touche LLP or by other independent certified public accountants
satisfactory to the Administrative Agent, together with a written statement
from such accountants to the effect that they have read a copy of this
Credit Agreement, and that, in making the examination necessary to said
certification, they have obtained no knowledge of any Default or Event of
Default, or, if such accountants shall have obtained knowledge of any then
existing Default or Event of Default they shall disclose in such statement
any such Default or Event of Default; PROVIDED that such accountants shall
not be liable to the Lenders for failure to obtain knowledge of any Default
or Event of Default;
(b) as soon as practicable, but in any event not later than forty-five
(45) days after the end of each of the first three fiscal quarters in each
fiscal year of CML, copies of the unaudited consolidated balance sheet of
CML and its Subsidiaries and the unaudited consolidating balance sheets of
CML and its Subsidiaries, each as at the end of such quarter, and the
related consolidated statement of income and consolidated statement of cash
flow and consolidating statements of income and consolidating statements of
cash flow for the portion of CML's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of CML that the information contained in
such financial statements fairly presents the financial position of CML and
its Subsidiaries on the date thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event within thirty (30) days
after the end of the first eleven months in each fiscal year of CML, copies
of the unaudited monthly consolidated balance sheet of CML and its
Subsidiaries and the unaudited consolidating balance sheets of CML and its
Subsidiaries, each as at the end of such month and the related consolidated
statement of income, consolidated statement of cash flow, consolidating
statements of income and consolidating statements of cash flow for such
month, each prepared in accordance with generally accepted accounting
principles, together with a certification by the principal financial or
accounting officer of CML that the information contained in such financial
statements fairly presents the financial condition of CML and its
Subsidiaries on the date thereof (subject to quarter and year-end
adjustments);
(d) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement certified by the
principal financial or accounting officer of CML in substantially the form
of EXHIBIT E hereto (a "COMPLIANCE CERTIFICATE") and setting forth in
reasonable detail computations evidencing compliance with the covenants
contained in [SECTION] 11 and (if applicable) reconciliations to reflect
changes in generally accepted accounting principles since the Balance
Sheet Date;
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(e) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the stockholders of CML;
(f)(i) within three (3) Business Days after the end of each calendar
week or at such earlier time as the Administrative Agent may reasonably
request, a Borrowing Base Report setting forth the Borrowing Bases as at
the end of such calendar week or other date so requested by the
Administrative Agent and (ii) within fifteen (15) days after the end of
each calendar month, a Borrowing Base Report setting forth the Borrowing
Bases as at the end of such calendar month, containing such adjustments to
the applicable weekly Borrowing Base Reports as may be appropriate;
(g) within fifteen (15) days after the end of each calendar month, an
Accounts Receivable aging report with respect to NordicTrack and S&H;
(h) from time to time as the Administrative Agent may request detailed
management prepared reports summarizing the Borrowers' inventory, including
information on the aging and obsolence of such inventory;
(i) as soon as practicable, but in any event not later than thirty
(30) days prior to the beginning of each fiscal year, management-prepared
financial forecasts of CML and its Subsidiaries with respect to such fiscal
year;
(j) prior to the opening by any Borrower of any new retail store,
distribution center or manufacturing facility at which Eligible Inventory
or Eligible NordicTrack Inventory, as the case may be, is to be located, a
supplement to SCHEDULE 2 hereto in the form of EXHIBIT I hereto, listing
any additions or deletions to the list of retail stores, distribution
centers and manufacturing facilities of the Borrowers located in the United
States, which supplement, together with SCHEDULE 2 hereto and any prior
supplements, shall be deemed to constitute SCHEDULE 2 for all purposes of
this Credit Agreement; and
(k) from time to time such other financial data and information
(including accountants' management letters) as any Agent or any Lender may
reasonably request.
9.5. NOTICES.
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9.5.1. DEFAULTS. The Borrowers and CML will promptly notify the
Administrative Agent and each of the Lenders in writing of the occurrence
of any Default or Event of Default. If any Person shall give any notice or
take any other action in respect of a claimed default
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(whether or not constituting an Event of Default) under (a) this Credit
Agreement or (b) any other note, evidence of indebtedness, indenture or
other obligation to which or with respect to which CML, any Borrower or any
of their Subsidiaries is a party or obligor, whether as principal,
guarantor, surety or otherwise and the aggregate amount of such obligations
referred to in this clause (b) in default is in excess of $1,000,000, the
Borrowers and CML shall forthwith give written notice thereof to the
Administrative Agent and each of the Lenders, describing the notice or
action and the nature of the claimed default.
9.5.2. ENVIRONMENTAL EVENTS. The Borrowers and CML will promptly give
notice to each of the Agents and each of the Lenders (i) of any violation
of any Environmental Law that CML, any of the Borrowers or any of their
Subsidiaries reports in writing or is reportable by such Person in writing
(or for which any written report supplemental to any oral report is made)
to any federal, state or local environmental agency and (ii) upon becoming
aware thereof, of any inquiry, proceeding, investigation, or other action,
including a notice from any agency of potential environmental liability, of
any federal, state or local environmental agency or board, that has the
potential to materially affect the assets, liabilities, financial
conditions or operations of CML, any of the Borrowers or any of their
Subsidiaries, or the Administrative Agent's mortgages, deeds of trust or
security interests pursuant to the Security Documents.
9.5.3. NOTIFICATION OF CLAIM AGAINST COLLATERAL. The Borrowers and CML
will, immediately upon becoming aware thereof, notify each of the Agents
and each of the Lenders in writing of any setoff, claims (including, with
respect to the Real Estate, environmental claims), withholdings or other
defenses to which any of the Collateral, or the Administrative Agent's
rights with respect to the Collateral, are subject.
9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. CML and each of the
Borrowers will, and will cause each of their Subsidiaries to, give notice
to each of the Agents and each of the Lenders in writing within fifteen
(15) days of becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting CML, any of the
Borrowers or any of their Subsidiaries or to which CML, any of the Borrower
or any of their Subsidiaries is or becomes a party involving an uninsured
claim against CML, any of the Borrowers or any of their Subsidiaries that
could reasonably be expected to have a materially adverse effect on CML,
any of the Borrowers or any of their Subsidiaries and stating the nature
and status of such litigation or proceedings. Each of CML and each of the
Borrowers will, and will cause each of its Subsidiaries to, give notice to
each of the Agents and each of the Lenders, in writing, in form and detail
satisfactory to the Administrative Agent, within ten (10) days of any
judgment not covered
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by insurance, final or otherwise, against CML, any of the Borrowers or any
of their Subsidiaries in an amount in excess of $1,000,000.
9.5.5. NOTICE OF TAX REFUNDS. CML and each of the Borrowers will give
notice promptly to the Administrative Agent of such Person's receipt of any
federal or state tax refund in excess of $1,000,000 and will, within
fifteen (15) days of the end of each fiscal quarter, give notice to the
Administrative Agent of the aggregate amount of federal and state tax
refunds received by such Person during such fiscal quarter.
9.5.6. NOTICE OF SALE OF TNC. CML will give notice to the
Administrative Agent of any agreement or letter of intent between CML and
any other Person with respect to the sale or disposition of the stock of or
substantially all of the assets of TNC promptly after entering into such
agreement or letter of intent and shall deliver to the Administrative Agent
at such time a copy of such agreement. Performance by the Borrowers of
their obligations under this [Section]9.5.6 shall not relieve the Borrowers
of their obligations to comply with [Section]10.5.
9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. CML and the Borrowers
will do or cause to be done all things necessary to preserve and keep in full
force and effect their corporate existence, rights and franchises and those of
their Subsidiaries and will not, and will not cause or permit any of their
Subsidiaries to, convert to a limited liability company or a limited liability
partnership. They (i) will cause all of their properties and those of their
Subsidiaries used or useful in the conduct of their business or the business of
their Subsidiaries to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment, (ii) will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of CML or the Borrowers, may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times, and (iii) will, and will cause each of
their Subsidiaries to, continue to engage primarily in the businesses now
conducted by them and in related businesses; PROVIDED that nothing in this
[Section]9.6 shall prevent CML or the Borrowers from discontinuing the operation
and maintenance of any of their properties or any of those of their Subsidiaries
if such discontinuance is, in the judgment of CML or the Borrowers as the case
may be, desirable in the conduct of its or their business and that do not in the
aggregate materially adversely affect the business of CML, the Borrowers and
their Subsidiaries on a consolidated basis.
9.7. INSURANCE. Each of CML and each Borrower will, and will cause each of
their Subsidiaries to, maintain with financially sound and reputable insurers
having an A.M. Best rating of not less than A- (or an equivalent rating
reasonably satisfactory to the Administrative Agent) (except that NordicTrack's
workers' compensation insurance may be self-insured) insurance with respect to
its properties and business against such casualties and contingencies as shall
be in accordance with the general practices of businesses engaged in similar
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activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as described on SCHEDULE 8.24 hereto and as may
be reasonable and prudent and in accordance with the terms of the Security
Agreement. Each of CML and each Borrower will, and will cause each of their
Subsidiaries to, maintain insurance on the Mortgaged Properties in accordance
with the terms of the Mortgages.
9.8. TAXES. Each of CML and each Borrower will, and will cause each of
their Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; PROVIDED that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if CML, such Borrower or such Subsidiary shall have set aside on its books
adequate reserves with respect thereto; and PROVIDED FURTHER that CML, each
Borrower and each Subsidiary of such Persons will pay all such taxes,
assessments, charges, levies or claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.
9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC.
---------------------------------------
9.9.1. GENERAL. Each of CML and each Borrower shall permit the
Lenders, through the Co-Agents or any of the Lenders' other designated
representatives, to visit and inspect any of the properties of CML, any of
the Borrowers or any of their Subsidiaries, to examine the books of account
of CML, the Borrowers and their Subsidiaries (and to make copies thereof
and extracts therefrom), and to discuss the affairs, finances and accounts
of the Borrowers and their Subsidiaries with, and to be advised as to the
same by, its and their officers, all at such reasonable times and intervals
as the Co-Agents or any Lender may reasonably request.
9.9.2. INVENTORY REPORTS AND APPRAISALS. No more frequently than twice
each calendar year, or more frequently as determined by the Co-Agents if an
Event of Default shall have occurred and be continuing, upon the request of
the Co-Agents, the Borrowers will obtain and deliver to the Co-Agents a
report of an independent collateral auditor or appraiser satisfactory to
the Co-Agents (which may be affiliated with one of the Lenders) with
respect to the inventory components included in the Borrowing Bases, which
report (i) shall indicate whether or not the information set forth in the
Borrowing Base Report most recently delivered is accurate and complete in
all material respects based upon a review by such auditors of the inventory
(including verification as to the value, location and respective types) and
(ii) shall, in any event, be not less extensive in scope than the Gordon
Brothers Report delivered to the
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Co-Agents prior to the Closing Date. All such collateral value reports
shall be conducted and made at the expense of the applicable Borrower.
9.9.3. COMMERCIAL FINANCE EXAMINATIONS. No more frequently than thrice
each calendar year, or more frequently as determined by the Co-Agents if an
Event of Default shall have occurred and be continuing, upon the Co-Agents'
request, CML and the Borrowers shall permit the Co-Agents' commercial
finance examiners to conduct commercial finance examinations of CML's, the
Borrowers' and their Subsidiaries' property, all at such reasonable times
and intervals as the Co-Agents may reasonably request. All such commercial
finance examinations shall be conducted and made at the expense of the
Borrowers.
9.9.4. APPRAISALS. No more frequently than once each calendar year, or
more frequently as determined by the Co-Agents if an Event of Default shall
have occurred and be continuing, upon the request of the Co-Agents, the
Borrowers will obtain and deliver to the Co-Agents appraisal reports in
form and substance and from appraisers satisfactory to the Co-Agents,
stating the then current fair market, orderly liquidation and forced
liquidation values of all or any portion of the equipment or real estate
owned by CML, any of the Borrowers or any of their Subsidiaries. From time
to time if an Event of Default shall have occurred and be continuing, upon
the request of the Co-Agents, the Borrowers will obtain and deliver to the
Co-Agents appraisal reports in form and substance and from appraisers
satisfactory to the Co-Agents stating the then current business value of
each of CML, each Borrower and their Subsidiaries. All such appraisals
referred to in this [Section]9.9.4 shall be conducted and made at the
expense of the Borrowers.
9.9.5. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default
shall have occurred, upon prior notice to CML and the Borrowers, the
Co-Agents may, from time to time, in their discretion for the purpose of
assessing and ensuring the value of any Mortgaged Property, obtain one or
more environmental assessments or audits of such Mortgaged Property
prepared by a hydrogeologist, an independent engineer or other qualified
consultant or expert approved by the Administrative Agent to evaluate or
confirm (i) whether any Hazardous Materials are present in the soil or
water at such Mortgaged Property and (ii) whether the use and operation of
such Mortgaged Property complies with all Environmental Laws. Environmental
assessments may include without limitation detailed visual inspections of
such Mortgaged Property including any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and ground water samples, as well as such other
investigations or analyses as the Co-Agents deem appropriate. All such
environmental assessments shall be conducted and made at the expense of the
Borrowers. Prior to requiring that such inspections be performed, the
Co-Agents shall discuss with CML and the Borrowers the views of CML and the
Borrowers as to
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whether the results of such inspections would be confidential and would be
required to be reported to governmental authorities and the consequences of
potential findings from such inspections.
9.9.6. COMMUNICATIONS WITH ACCOUNTANTS. Each of CML and each Borrower
authorizes the Co-Agents and, if accompanied by either of the Co-Agents,
the Lenders to communicate directly with CML's and the Borrowers'
independent certified public accountants and authorizes such accountants to
disclose to the Co-Agents and the 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 CML, any of the Borrowers or any of their Subsidiaries. At
the request of the Co-Agents, CML and the Borrowers shall deliver a letter
addressed to such accountants instructing them to comply with the
provisions of this [Section]9.9.6.
9.9.7. CONSULTANTS. NordicTrack agrees to retain a business consultant
(the "Consultant") satisfactory to the Majority Lenders by June 30, 1996,
pursuant to an engagement letter (the "Engagement Letter") in form and
substance satisfactory to the Majority Lenders. The Consultant shall review
NordicTrack's historical and projected operations, financial condition,
revenues, expenses, cash flows and other appropriate measures of financial
performance, its business plan and strategies and its management. In the
course of and after completing such review, the Consultants will report
orally and in writing to NordicTrack and to the Lenders the Consultant's
findings, conclusions and recommendations. NordicTrack shall cooperate
fully with the Consultant and shall provide the Consultant with reasonable
access to NordicTrack's personnel, records, facilities and independent
accountants. The Consultants shall be authorized to discuss directly with
the Lenders any matters relating to the Consultant's engagement by
NordicTrack.
9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of CML
and each Borrower will, and will cause each of their Subsidiaries to, comply
with (i) the applicable laws and regulations wherever its business is conducted,
including all Environmental Laws, (ii) the provisions of its charter documents
and by-laws, (iii) all agreements and instruments by which it or any of its
properties may be bound and (iv) all applicable decrees, orders, and judgments.
If any authorization, consent, approval, permit or license from any officer,
agency or instrumentality of any government shall become necessary or required
in order that CML, any of the Borrowers or any of their Subsidiaries may fulfill
any of its obligations hereunder or any of the other Loan Documents to which
CML, such Borrower or such Subsidiary is a party, CML or such Borrower will, or
(as the case may be) will cause such Subsidiary to, immediately take or cause to
be taken all reasonable steps within the power of CML or such Borrower or such
Subsidiary to obtain such authorization, consent, approval, permit or license
and furnish the Co-Agents and the Lenders with evidence thereof.
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9.11. INVENTORY RESTRICTIONS. Each of the Borrowers shall cause all
Eligible Inventory and, in the case of NordicTrack, all Eligible NordicTrack
Inventory, to be located at all times solely at Permitted Inventory Locations,
and to be sold or otherwise disposed of in the ordinary course of such
Borrower's business, consistent with past practices or as required pursuant to
the terms of this Credit Agreement.
9.12. USE OF PROCEEDS. Each Borrower will use the proceeds of its Loans and
will obtain Letters of Credit solely for the purposes set forth in
[Section]8.17.
9.13. ADDITIONAL MORTGAGED PROPERTY. If, after the Closing Date, CML, any
of the Borrowers or any of their Subsidiaries acquires real estate used as a
manufacturing or warehouse facility, CML or such Borrower shall, or shall cause
such Subsidiary to, forthwith deliver to the Administrative Agent a fully
executed mortgage or deed of trust over such real estate, in form and substance
satisfactory to the Administrative Agent, together with title insurance
policies, surveys, evidences of insurances with the Administrative Agent named
as loss payee and additional insured, legal opinions and other documents and
certificates with respect to such real estate as was required for Real Estate of
NordicTrack as of the Closing Date. CML and each Borrower further agrees that,
following the taking of such actions with respect to such real estate, the
Administrative Agent shall have for the benefit of the Lenders and the
Administrative Agent a valid and enforceable first priority mortgage or deed of
trust over such real estate, free and clear of all title defects and
encumbrances except for Permitted Liens.
9.14. AGENCY ACCOUNT AGREEMENTS. Not later than forty-five (45) days after
the Closing Date, the Borrowers will deliver to the Administrative Agent Agency
Account Agreements in form and substance satisfactory to the Administrative
Agent from each of the Agency Account Institutions (other than the Agency
Account Institutions referred to in [Section] 12.10 hereof). Each of CML and the
Borrowers will, and will cause each of their Subsidiaries to, use its best
efforts to obtain Agency Account Agreements from each other depository
institution with which any of the Borrowers or any of the Guarantors has an
account.
9.15. MACHINERY AND EQUIPMENT APPRAISALS. No later than July 31, 1996, the
Borrowers will deliver to the Co-Agents appraisals of the Borrowers' machinery
and equipment performed by a third party mutually agreed upon by the Co-Agents
and the Borrowers and such appraisals shall be in form and substance
satisfactory to the Co-Agents.
9.16. INTELLECTUAL PROPERTY APPRAISALS. As soon as practicable but in any
event not later than thirty (30) days after the Closing Date, the Borrowers will
deliver to the Co-Agents appraisals of NordicTrack's and TNC's trade names and
trademarks performed by a third party mutually agreed upon by the Co-Agents and
the Borrowers and such appraisals shall be in form and substance satisfactory to
the Co-Agents.
<PAGE> 83
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9.17. INVESTMENTS IN BORROWERS. Within five (5) Business Days of receipt by
CML of any tax refund from any governmental authority or any other funds
received by CML from a third party, CML will invest all such refunds and other
funds in the Borrowers as subordinated loans or as contributions to capital.
9.18. OWNERSHIP OF SUBSIDIARIES. CML will maintain legal and beneficial
ownership of one hundred percent (100%) of the equity interests of each of the
Guarantors (other than CML and NA). NT will maintain legal and beneficial
ownership of one hundred percent (100%) of the equity interests of NA.
9.19. PRIVATE LABEL CREDIT CARD PROGRAM. Except as otherwise provided in
this [Section]9.19, NordicTrack will maintain in effect at all times a Private
Label Credit Card Program which (a) is as limited in recourse to CML,
NordicTrack and their Subsidiaries as the Monogram Credit Card Program and (b)
is on terms not less advantageous to NordicTrack than the terms of the Monogram
Credit Card Program. In the event that any Private Label Credit Card Program is
terminated for any reason, NordicTrack shall select and enter into a letter of
intent (or similar expression of understanding) with the new provider of such
program within sixty (60) days after the date of such termination and shall
replace and implement such new program within 150 days from the date of such
termination with another Private Label Credit Card Program which complies with
the provisions of this [Section]9.19.
9.20. COLLATERAL NOTES. In addition to the NordicTrack Notes, the TNC
Notes, the Hear Music Notes and the S&H Notes, the Borrowers agree that with
respect to any or all of the Mortgaged Properties, they will execute and deliver
or cause to be executed and delivered such Collateral Notes as the
Administrative Agent may request, it being understood, however, that (a) the
aggregate of all payments or recoveries on such Collateral Notes shall not
exceed the amount of the Obligations (exclusive of the Collateral Notes), and
(b) any payments or recoveries on such Collateral Notes shall be credited to the
unpaid amount of the Obligations and in such order of application as may be
required by [Section]3.3 and [Section]14.4 hereof. In the event that the
appraised value of any Mortgaged Property, a lien on which secures any of the
Collateral Notes, exceeds the amount of the Obligations secured by the
applicable Collateral Note, the applicable Borrower will execute and deliver
such amended Collateral Notes, amendments to Mortgages and other documents, and
will obtain such endorsements to the Title Policy covering such Mortgaged
Property, so as to reflect such altered appraised value.
9.21 FURTHER ASSURANCES; ADDITIONAL LOCATIONS.
----------------------------------------
9.21.1. FURTHER ASSURANCES. CML and each Borrower will, and will cause
each of their Subsidiaries to, cooperate with the Lenders and the
Administrative Agent and execute such further instruments and documents as
the Lenders or either Co-Agent shall reasonably request to
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carry out to their satisfaction the transactions contemplated by this
Credit Agreement and the other Loan Documents.
9.21.2. ADDITIONAL LOCATIONS. Prior to the opening by any Borrower of
any new retail store, distribution center or manufacturing facility at
which Eligible Inventory or Eligible NordicTrack Inventory, as the case may
be, is to be located, such Borrower shall take all actions necessary or
advisable, under applicable law, to establish and perfect the
Administrative Agent's security interest in the Collateral located or to be
located at such retail store, distribution center or manufacturing facility
(with such exceptions as are acceptable to the Majority Lenders).
10. CERTAIN NEGATIVE COVENANTS OF CML AND THE BORROWERS.
---------------------------------------------------
Each of CML and each of the Borrowers covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any obligation to make any Loans or the Issuing
Bank has any obligations to issue, extend or renew any Letters of Credit:
10.1. RESTRICTIONS ON INDEBTEDNESS. Neither CML nor any of the Borrowers
will, and none will permit any of their Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Lenders and the Agents arising under any of
the Loan Documents;
(b) current liabilities of CML, such Borrower or such Subsidiary
incurred in the ordinary course of business not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an
open account basis customarily extended and in fact extended in connection
with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of [Section]9.8;
(d) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which CML, such
Borrower or such Subsidiary shall at the time in good faith be prosecuting
an appeal or proceedings for review and in respect of which a stay of
execution shall have been obtained pending such appeal or review;
<PAGE> 85
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(e) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;
(f) Subordinated Debt not exceeding $41,593,000 in aggregate principal
amount at any time outstanding;
(g) obligations under Capitalized Leases and purchase money
Indebtedness incurred in connection with the acquisition of any real or
personal property by CML, such Borrower or such Subsidiary, PROVIDED that
the aggregate outstanding principal amount of all such Indebtedness of CML,
the Borrowers and their Subsidiaries permitted under this paragraph (g)
shall not exceed $7,500,000 at any one time;
(h) Indebtedness not otherwise permitted by this [Section]10.1
existing on the date hereof and listed and described on SCHEDULE 10.1
hereto;
(i) Indebtedness of a Guarantor which is a Subsidiary of any Borrower
to such Borrower in respect of loans permitted by [Section]10.3(e);
(j) Indebtedness of any Borrower to CML in respect of Investments by
CML in such Borrower permitted under [Section]10.3(i);
(k) Indebtedness consisting of guaranties by CML of Indebtedness of
NordicTrack under Private Label Credit Card Programs not to exceed
$9,000,000 in the aggregate at any one time; and
(l) Indebtedness consisting of guaranties by CML or any of its
Subsidiaries of obligations of any direct or indirect Subsidiaries of such
Person in respect of operating leases of such Subsidiary; and
(m) Indebtedness of CML to any Borrower in respect of Investments by
such Borrower in CML permitted under [Section]10.3(j).
10.2. RESTRICTIONS ON LIENS. Neither CML nor any of the Borrowers will, and
none will permit any of their Subsidiaries to, (i) create or incur or suffer to
be created or incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (ii) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (iv)
suffer to exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority
<PAGE> 86
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whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles, chattel paper or
instruments, with or without recourse; PROVIDED that CML, any of the Borrowers
and any of their Subsidiaries may create or incur or suffer to be created or
incurred or to exist:
(a) liens in favor of such Borrower on all or part of the assets of
Subsidiaries of such Borrower securing Indebtedness owing by Subsidiaries
of such Borrower to such Borrower;
(b) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties other than
Mortgaged Properties to secure claims for labor, material or supplies in
respect of obligations not overdue;
(c) deposits or pledges made in connection with, or to secure payment
of, workmen's compensation, unemployment insurance, old age pensions or
other social security obligations;
(d) liens on properties other than Mortgaged Properties in respect of
judgments or awards, the Indebtedness with respect to which is permitted by
[Section]10.1(d);
(e) liens of carriers, warehousemen, mechanics and materialmen, and
other like liens on properties other than Mortgaged Properties, in
existence less than 120 days from the date of creation thereof in respect
of obligations not overdue;
(f) encumbrances on Real Estate other than the Mortgaged Property
consisting of easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the title
thereto, landlord's or lessor's liens under leases to which CML, any of the
Borrowers or any of their Subsidiaries is a party, and other minor liens or
encumbrances none of which in the opinion of CML or such Borrower
interferes materially with the use of the property affected in the ordinary
conduct of the business of CML, such Borrower or their Subsidiaries, as the
case may be, which defects do not individually or in the aggregate have a
materially adverse effect on the business of CML or such Borrower, as the
case may be individually or of CML, the Borrowers and their Subsidiaries on
a consolidated basis;
(g) liens existing on the date hereof and listed on SCHEDULE 10.2
hereto;
(h) liens to secure Capitalized Lease obligations of the type and
amount permitted by [Section]10.1(g), so long as such liens cover only the
property subject to such Capitalized Leases, and purchase money security
interests in or purchase money mortgages on real or personal property
<PAGE> 87
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other than Mortgaged Properties acquired after the date hereof to secure
purchase money Indebtedness of the type and amount permitted by
[Section]10.1(g), incurred in connection with the acquisition of such
property, which security interests or mortgages cover only the real or
personal property so acquired;
(i) liens and encumbrances on each Mortgaged Property as and to the
extent permitted by the Mortgage applicable thereto; and
(j) liens in favor of the Administrative Agent for the benefit of the
Lenders and the Agents under the Loan Documents.
10.3. RESTRICTIONS ON INVESTMENTS. Neither CML nor any of the Borrowers
will, and none will permit any of their Subsidiaries to, make or permit to exist
or to remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United States
of America that mature within one (1) year from the date of purchase by CML
or such Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances and
time deposits of United States banks having total assets in excess of
$1,000,000,000 and money market accounts of brokerage firms acceptable to
the Administrative Agent;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by Standard and
Poor's Ratings Group, a division of McGraw-Hill, Inc.;
(d) Investments existing on the date hereof and listed on SCHEDULE
10.3 hereto;
(e) Investments by any Borrower in any Subsidiary of that Borrower
that is a Guarantor in the form of loans made in cash;
(f) Investments consisting of the Guaranty;
(g) Investments consisting of promissory notes received as proceeds of
asset dispositions permitted by [Section]10.5.2;
(h) Investments consisting of loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business not to exceed $2,000,000 in the aggregate at any time
outstanding;
<PAGE> 88
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(i) Investments by CML in any of the Borrowers in the form of
contributions to capital, subordinated loans or a repayment of a loan
previously made to such Borrower so long as such entities remain Borrowers
hereunder;
(j) Investments consisting of guaranties by CML or any of its
Subsidiaries of obligations of any direct or indirect Subsidiaries of such
Person in respect of operating leases of such Subsidiary; and
(k) Investments by any Borrower in CML in the form of distributions,
subordinated loans or a repayment of a loan previously made to CML by such
Borrower, provided such Investment would be permitted under [Section]10.4
hereof.
PROVIDED, HOWEVER, that, with the exception of loans and advances referred to in
[Section]10.3(h), such Investments will be considered Investments permitted by
this [Section]10.3 only if all actions have been taken to the satisfaction of
the Administrative Agent to provide to the Administrative Agent, for the benefit
of the Lenders and the Agents, a first priority perfected security interest in
all of such Investments free of all encumbrances other than Permitted Liens.
10.4. DISTRIBUTIONS AND RESTRICTED PAYMENTS.
-------------------------------------
10.4.1. INTERCOMPANY DISTRIBUTIONS AND RESTRICTED PAYMENTS. The
Borrowers will not make any Restricted Payments, PROVIDED HOWEVER, that:
(a) the Borrowers, may make Restricted Payments to CML in an
aggregate amount per fiscal year not to exceed (i) $10,000,000, PLUS
(ii) amounts required to pay income and other taxes and governmental
levies owed or payable by CML, PLUS (iii) amounts required and
permitted to be paid by CML in respect of interest on its Subordinated
Debentures, PLUS (iv) the maximum amount of dividends permitted to be
paid by CML during such fiscal year pursuant to [Section]10.4.2;
PROVIDED that all such Restricted Payments made by the Borrowers to
CML pursuant to this [Section]10.4.1(a) shall be used by CML for the
purposes described in such clauses (ii), (iii) and (iv) and to pay any
expenses required to be paid by CML in the ordinary course of business
in each case not later than five (5) Business Days after the date on
which the relevant Restricted Payment is made;
(b) the Borrowers may make Restricted Payments to CML in an
aggregate amount per fiscal year not to exceed $12,000,000 PROVIDED
all such Restricted Payments are used by CML to pay expenses incurred
directly by or for the direct benefit of any of the Borrowers or their
Subsidiaries in each case not later than five (5)
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Business Days after the date on which the relevant Restricted Payment
is made;
(c) each Borrower may make Restricted Payments to CML in an
aggregate amount per Borrower not to exceed, on a cumulative basis in
any fiscal year, (i) $12,500,000 with respect to NordicTrack, (ii)
$5,000,000 with respect to TNC, (iii) $2,500,000 with respect to S&H,
and (iv) $1,000,000 with respect to Hear Music, PROVIDED that (A) no
Default or Event of Default shall have occurred and be continuing or
would result from the making of such Restricted Payment and (B) CML,
concurrently with its receipt of such Restricted Payment, invests the
proceeds of such Restricted Payment in another Borrower to satisfy the
working capital requirements of such Borrower.
10.4.2. CML DISTRIBUTIONS. CML will not make any Distributions
other than:
(a) Distributions in the form of dividends paid in cash not to
exceed an aggregate amount of $1,300,000 for any fiscal quarter,
PROVIDED that:
(i) no Default or Event of Default has occurred and is
continuing or would result from the making of such Distribution;
(ii) the Borrowers have aggregate borrowing availability
under this Credit Agreement (after giving effect to such
Distribution) in excess of $5,000,000;
(iii) Consolidated EBITDA of CML and its Subsidiaries for
the most recent fiscal quarter ending during the month set forth
in the table below is not less than the amount set forth opposite
such month:
Minimum
-------
Quarter Ending Consolidated
-------------- ------------
EBITDA
------
April 1996 $(10,728,000)
July 1996 $ (6,021,000)
October 1996 $ (4,588,000)
January 1997 $ 42,218,000
April 1997 $ (879,000)
July 1997 $ 2,530,000
October 1997 $ 1,932,000
January 1998 $ 53,645,000
April 1998 $ 310,000
July 1998 $ 3,818,000
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(iv) at any time after the fiscal quarter ending in July
1998, Consolidated EBITDA of CML and its Subsidiaries for the
most recent period of four consecutive fiscal quarters is not
less than $30,000,000; and
(v) prior to the declaration or making of any proposed
Distribution under this paragraph (a), CML shall have delivered
to the Administrative Agent a certificate of the principal
financial or accounting officer of CML containing calculations,
on a PRO FORMA basis after giving effect to the proposed
Distribution and the proposed borrowing, if applicable,
illustrating compliance by CML with the foregoing clauses (i)
through (iv); and
(b) purchases or redemptions by CML of the stock of CML resulting
solely from any holder of any stock option issued by CML paying (i)
all or a portion of the exercise price of such stock option or (ii)
any taxes due from such holder as a result of the exercise of such
stock option by such holder's relinquishment of rights under such
stock option.
10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.
-----------------------------------------------
10.5.1. MERGERS AND ACQUISITIONS. Neither CML nor any of the
Borrowers will, and none will permit any of their Subsidiaries to,
become a party to any merger or consolidation, or agree to or effect
any asset acquisition or stock acquisition (other than the acquisition
of assets in the ordinary course of business consistent with past
practices) except the merger or consolidation of one or more of the
Subsidiaries of any Borrower with and into such Borrower (with such
Borrower being the surviving entity), or the merger or consolidation
of two or more Subsidiaries of any Borrower, provided, that if any of
such Subsidiaries is also a Guarantor, such Guarantor is the surviving
entity of such merger or consolidation.
10.5.2. DISPOSITION OF ASSETS. Neither CML nor any of the
Borrowers will, and none will permit any of their Subsidiaries to,
become a party to or agree to or effect any disposition of assets,
other than (a) the disposition of assets in the ordinary course of
business, consistent with past practices, (b) the dispositions of
assets permitted under [Section]10.6, and (c) the termination or
assignment of store leases of any Borrower or its Subsidiaries;
PROVIDED that all Net Cash Proceeds from any such termination or
assignment referred to in this clause (c) shall be applied,
concurrently with receipt of such proceeds by CML or any of its
Subsidiaries, to prepay the Loans of the applicable Borrower, or, in
the case of CML, any of the Borrowers.
10.6. SALE AND LEASEBACK. Neither CML nor any of the Borrowers will, and
none will permit any of their Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby CML, any of the Borrowers or any of their
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Subsidiaries shall sell or transfer any property owned by it in order then or
thereafter to lease such property or lease other property that CML, any of the
Borrowers or any of their Subsidiaries intends to use for substantially the same
purpose as the property being sold or transferred except as described in
SCHEDULE 10.6.
10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. Neither CML nor any of the
Borrowers will, and none will permit any of their Subsidiaries to, (i) use any
of the Real Estate or any portion thereof for the handling, processing, storage
or disposal of Hazardous Substances in violation of Environmental Laws, (ii)
cause or permit to be located on any of the Real Estate any underground tank or
other underground storage receptacle for Hazardous Substances in violation of
Environmental Laws, (iii) generate any Hazardous Substances on any of the Real
Estate in violation of Environmental Laws, (iv) conduct any activity at any Real
Estate or use any Real Estate in any manner so as to cause a release (i.e.
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping) or threatened release of
Hazardous Substances on, upon or into the Real Estate or (v) otherwise conduct
any activity at any Real Estate or use any Real Estate in any manner that would
violate any Environmental Law or bring such Real Estate in violation of any
Environmental Law.
10.8. SUBORDINATED DEBT. Neither CML nor any of the Borrowers will, and
none will permit any of their Subsidiaries to, amend, supplement or otherwise
modify the terms of any of the Subordinated Debentures or Fiscal Agency
Agreement or prepay, redeem or repurchase any of the Subordinated Debentures.
10.9. EMPLOYEE BENEFIT PLANS. None of CML, any Borrower nor any ERISA
Affiliate will
(a) engage in any "prohibited transaction" within the meaning of
[Section]406 of ERISA or [Section]4975 of the Code which could result in a
material liability for CML, any of the Borrowers or any of their
Subsidiaries; or
(b) operated or maintain any Guaranteed Pension Plan or Multiemployer
Plan.
10.10. BANK ACCOUNTS. Neither CML nor any of the Borrowers will, and none
will permit any of their Subsidiaries to, (i) establish any bank accounts other
than those listed on SCHEDULE 8.20 (as such may be amended from time to time to
include those depository institutions which have executed and delivered to the
Administrative Agent Agency Account Agreements) unless such new account is
subject to an Agency Account Agreement, (ii) violate directly or indirectly any
Agency Account Agreement in favor of the Administrative Agent for the benefit of
the Lenders and the Agents with respect to such account or (iii) deposit into
any of the payroll accounts listed on
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SCHEDULE 8.20 any amounts in excess of amounts necessary to pay current payroll
obligations from such accounts.
10.11. TRANSACTIONS WITH AFFILIATES. Neither CML nor any of the Borrowers
will, nor will they permit any of their Subsidiaries to, enter into, or cause,
suffer or permit to exist any transaction or agreement with any Affiliate
except:
(a) employment agreements entered into in the ordinary course of business
by CML, any of the Borrowers or any of their Subsidiaries and loans and advances
to employees of CML, any of the Borrowers or any of their Subsidiaries in the
ordinary course of business for travel expenses, drawing accounts or other
similar business related expenses;
(b) any transaction or agreement having terms not less favorable to CML,
the Borrowers and their Subsidiaries than would be the case if such transaction
or agreement had been entered into with a Person that is not an Affiliate,
PROVIDED that the aggregate potential value payable or receivable by CML, the
Borrowers and their Subsidiaries in connection with all such transactions during
any fiscal year of CML (excluding transactions or agreements exclusively among
or between CML, the Borrowers and their Subsidiaries) shall not exceed $500,000;
and
(c) tax sharing agreements in form and substance satisfactory to the
Administrative Agent among CML and any of its Subsidiaries.
10.12. RESTRICTIVE OR INCONSISTENT AGREEMENTS. Neither CML nor any of the
Borrowers will, nor will they permit any of their Subsidiaries to, enter into
any agreement:
(a) other than the Loan Documents, the Fiscal Agency Agreement and the
Subordinated Debentures (as in effect on the Closing Date or as thereafter
amended in compliance with this Credit Agreement) which, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
otherwise imposes any materially adverse or burdensome condition upon, the
declaration or payment of dividends or distributions, the incurrence of
Indebtedness, the granting of liens, the making of loans or advances to any of
CML, any Borrower or any of their Subsidiaries or the amendment or modification
of any of the Loan Documents; or
(b) containing any provision that would be violated or breached by any Loan
or by the performance by CML, any Borrower or any of their Subsidiaries of their
obligations hereunder or under any of the Loan Documents.
10.13. BUSINESS ACTIVITIES. CML will not engage in any business activity
except its ownership of its Subsidiaries, including the Borrowers, activities
reasonably related thereto, its performance from time to time of its obligations
under this Credit Agreement, the other Loan Documents, the
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Subordinated Debentures and the Fiscal Agency Agreement and each other
agreement, instrument or document contemplated hereby, whether or not executed
on or before the Closing Date.
10.14. PRIVATE LABEL CREDIT CARD PROGRAMS. Neither CML nor NordicTrack will
amend, supplement or otherwise modify any terms or provisions of any Private
Label Credit Card Program in a manner adverse to either CML or NordicTrack
without the prior written consent of the Administrative Agent.
11. FINANCIAL COVENANTS OF CML AND THE BORROWERS.
--------------------------------------------
Each of CML and each of the Borrowers covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Lender has any obligation to make any Loans or the Issuing
Bank has any obligation to issue, extend or renew any Letters of Credit:
11.1. MINIMUM QUARTERLY CONSOLIDATED EBITDA. CML and the Borrowers will not
permit, for each fiscal quarter ending during the month set forth in the table
below, Consolidated EBITDA of CML and its Subsidiaries for such fiscal quarter
to be less than the amount set forth opposite such month:
Minimum
-------
Quarter Ending Consolidated
-------------- ------------
EBITDA
------
April 1996 $(17,900,000)
July 1996 $(13,700,000)
October 1996 $ (8,600,000)
January 1997 $ 34,300,000
April 1997 $ (4,300,000)
July 1997 $ (200,000)
October 1997 $ (900,000)
January 1998 $ 43,400,000
April 1998 $ (2,900,000)
July 1998 $ 1,300,000
October 1998 $ (900,000)
January 1999 $ 43,400,000
11.2. MINIMUM CONSOLIDATED EBITDA TO INTEREST RATIO. CML and the Borrowers
will not permit the ratio of Consolidated EBITDA to Consolidated Total Interest
Expense of CML and its Subsidiaries for any period of four consecutive fiscal
quarters ending during the month set forth in the table below to be less than
the amount set forth opposite such month:
Period Ending Ratio
------------- -----
April 1997 2.00:1.00
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July 1997 2.50:1.00
October 1997 3.00:1.00
January 1998 3.50:1.00
April 1998 and thereafter 4.00:1.00
11.3. CAPITAL EXPENDITURES. Neither CML nor any of the Borrowers will make,
nor will they permit any of their Subsidiaries to make, Capital Expenditures
that exceed $23,000,000 in the aggregate for the fiscal year ending July 1996,
$5,000,000 in the aggregate for any fiscal quarter ending after July 1996, and
$10,000,000 in the aggregate for any fiscal year ending after July 1996;
PROVIDED, HOWEVER that if during any fiscal year the amount of Capital
Expenditures permitted for that fiscal year is not so utilized, such unutilized
amount may be utilized in the next succeeding fiscal year (after first utilizing
the amount of capital expenditures permitted in such fiscal year) but not in any
subsequent fiscal year. CML and its Subsidiaries will not make or commit to make
additional Capital Expenditures with respect to new stores during 1996 (other
than kiosks and the four new S&H stores to be located in Baltimore, Maryland,
Bellevue, Washington, McLean, Virginia and San Francisco, California) and will
not make or commit to make Capital Expenditures with respect to new stores
(other than kiosks) in any subsequent year unless the Consolidated EBITDA of CML
and its Subsidiaries calculated on a rolling four quarter basis based upon the
most recent consolidated financial statements of CML and its Subsidiaries
delivered to the Lenders pursuant to [Section]9.4 is equal to or exceeds
$35,000,000 in which event (a) Capital Expenditures of CML and its Subsidiaries
shall not exceed $20,000,000 in the aggregate for such year and (b) Capital
Expenditures of CML and its Subsidiaries with respect to new stores (other than
kiosks) shall not exceed $10,000,000 in the aggregate for such year.
11.4. TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO. CML and the Borrowers
will not permit the ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth of CML and its Subsidiaries to exceed at any time during any
fiscal quarter ending during the month set forth in the table below the amount
set forth opposite such month:
Quarter Ending Ratio
-------------- -----
April 1996 1.80:1.00
July 1996 2.00:1.00
October 1996 3.00:1.00
January 1997 1.70:1.00
April 1997 1.80:1.00
July 1997 1.90:1.00
October 1997 2.70:1.00
January 1998 1.60:1.00
April 1998 1.60:1.00
July 1998 1.60:1.00
October 1998 2.70:1.00
January 1999 1.80:1.00
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11.5. MINIMUM QUARTERLY EBITDA (NORDICTRACK). For any fiscal quarter
ending during the month set forth in the table below, CML and the Borrowers will
not permit, NordicTrack's EBITDA for such fiscal quarter to be less than the
amount set forth opposite such month:
Quarter Ending Minimum EBITDA
-------------- --------------
April 1996 $ (8,000,000)
July 1996 $(12,300,000)
October 1996 $ (4,900,000)
January 1997 $ 21,700,000
April 1997 $ 5,500,000
July 1997 $ (900,000)
October 1997 $ 600,000
January 1998 $ 28,100,000
April 1998 $ 6,400,000
July 1998 $ (1,000,000)
October 1998 $ 900,000
January 1999 $ 28,400,000
11.6. MINIMUM QUARTERLY EBITDA (TNC). CML and the Borrowers will not permit
for each fiscal quarter ending during the month set forth in the table below,
CML and the Borrowers will not permit TNC's EBITDA for such fiscal quarter to be
less than the amount set forth opposite such month:
Quarter Ending Minimum EBITDA
-------------- --------------
April 1996 $(6,000,000)
July 1996 $(3,600,000)
October 1996 $(2,700,000)
January 1997 $ 9,400,000
April 1997 $(4,000,000)
July 1997 $(1,300,000)
October 1997 $(2,000,000)
January 1998 $12,200,000
April 1998 $(3,900,000)
July 1998 $ (700,000)
October 1998 $(2,000,000)
January 1999 $12,200,000
11.7. MAXIMUM INVENTORY VALUE. CML and the Borrowers will not permit
Consolidated Inventory Value to exceed $40,000,000 as of August 24, 1996 (the
end of the fiscal month of CML and its Subsidiaries). CML and the Borrowers will
deliver to the Co-Agents, within ten Business Days after August 24, 1996, a
written report summarizing and describing in reasonable detail the Consolidated
Inventory Value as of August 24, 1996.
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12. CLOSING CONDITIONS.
------------------
The obligations of the Lenders to make the initial Loans and of the
Issuing Bank to issue any initial Letters of Credit shall be subject to the
satisfaction of the following conditions precedent on or prior to the Closing
Date.
12.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the
Lenders. Each Lender shall have received a fully executed copy of each such
document.
12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Lenders shall
have received from CML, each of the Borrowers and each of their Subsidiaries a
copy, certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (i) its charter or other incorporation
documents as in effect on such date of certification, and (ii) its by-laws as in
effect on such date.
12.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by CML, each of the Borrowers and each of
their Subsidiaries of this Credit Agreement and the other Loan Documents to
which it is or is to become a party shall have been duly and effectively taken,
and evidence thereof satisfactory to the Lenders shall have been provided to
each of the Lenders.
12.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received
from CML, each of the Borrowers and each of their Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of CML, such Borrower or such Subsidiary, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (i) to sign, in
the name and on behalf of each of CML, such Borrower or such Subsidiary, each of
the Loan Documents to which CML, such Borrower or such Subsidiary is or is to
become a party; (ii) in the case of such Borrower, to make Loan Requests and
Conversion Requests and to apply for Letters of Credit; and (iii) to give
notices and to take other action on its behalf under the Loan Documents.
12.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Administrative Agent a legal, valid and enforceable first
(except for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral (with such exceptions as are acceptable
to the Majority Lenders). All filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Administrative Agent
to protect and preserve such security interests shall have been duly effected
(with such exceptions as are acceptable to the Majority Lenders). The
Administrative Agent shall have received evidence thereof in form and substance
satisfactory to the Administrative Agent.
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12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Administrative
Agent shall have received from each of CML, each of the Borrowers and their
Subsidiaries a completed and fully executed Perfection Certificate and the
results of UCC, patent, trademark and copyright searches with respect to the
Collateral, indicating no liens other than Permitted Liens and otherwise in form
and substance satisfactory to the Administrative Agent.
12.7. APPRAISALS; TAXES. The Administrative Agent shall have received (i)
appraisals of NordicTrack's Mortgaged Property performed by appraisers mutually
agreed upon by the Co-Agents and the Borrowers and such appraisals shall be in
form and substance satisfactory to the Co-Agents; and (ii) evidence of payment
of real estate taxes and municipal charges on all Real Estate not delinquent on
or before the Closing Date.
12.8. TITLE INSURANCE. The Administrative Agent shall have received a
Title Policy covering each Mortgaged Property (or commitments to issue such
policies, with all conditions to issuance of the Title Policy deleted by an
authorized agent of the Title Insurance Company) together with proof of payment
of all fees and premiums for such policies, from the Title Insurance Company and
in amounts satisfactory to the Administrative Agent, insuring the interest of
each of the Agents and each of the Lenders as mortgagee under the Mortgages.
12.9. CERTIFICATES OF INSURANCE. The Administrative Agent shall have
received (i) a certificate of insurance from an independent insurance broker
dated as of the Closing Date, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the insurance
obtained in accordance with the provisions of the Security Agreement and (ii)
certified copies of all policies evidencing such insurance (or certificates
therefore signed by the insurer or an agent authorized to bind the insurer) and
the Administrative Agent shall be satisfied with the adequacy of all such
insurance.
12.10. AGENCY ACCOUNT AGREEMENTS. The Administrative Agent shall have
received an Agency Account Agreement, from each depository institution at which
CML, any of the Borrowers or any of the Guarantors maintains depository accounts
which the Administrative Agent in its sole discretion has identified as a key
concentration account concerning the Administrative Agent's interest for the
benefit of the Lenders and the Agents in such accounts.
12.11. BORROWING BASE REPORT. The Administrative Agent shall have
received from the Borrowers the initial Borrowing Base Report dated as of the
Closing Date.
12.12. ACCOUNTS RECEIVABLE AGING REPORT. The Administrative Agent shall
have received from NordicTrack and S&H the most recent Accounts Receivable aging
report of NordicTrack and S&H dated as of a date which shall be no more than
fifteen (15) days prior to the Closing Date and, as applicable shall have
notified the Administrative Agent in writing on the Closing Date of
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any material deviation from the Accounts Receivable values reflected in such
Accounts Receivable aging report and shall have provided the Administrative
Agent with such supplementary documentation as the Administrative Agent may
reasonably request.
12.13. HAZARDOUS WASTE ASSESSMENTS. The Administrative Agent shall have
received hazardous waste site assessments from environmental engineers and in
form and substance satisfactory to the Administrative Agent, covering (a) all
currently owned real estate and (b), as requested by the Administrative Agent,
all other real property in respect of which CML, any of the Borrowers or any of
their Subsidiaries may have material liability, whether contingent or otherwise,
for dumping or disposal of Hazardous Substances.
12.14. SOLVENCY CERTIFICATE. Each of the Lenders shall have received an
officer's certificate of CML dated as of the Closing Date as to the solvency of
CML and its Subsidiaries following the consummation of the transactions
contemplated herein and in form and substance satisfactory to the Lenders.
12.15. OPINION OF COUNSEL. Each of the Lenders and the Agents shall have
received a favorable legal opinion addressed to the Lenders and the Agents,
dated as of the Closing Date, in form and substance satisfactory to the Lenders
and the Agents, from:
(a) Hale and Dorr, counsel to CML, the Borrowers and the
Guarantors; and
(b) local counsel to CML, the Borrowers and their Subsidiaries in
the United Kingdom, Germany, Canada, the U.S. Virgin Islands and the
states of California and Minnesota, as applicable.
Each of CML, the Borrowers and their Subsidiaries have instructed each
such counsel to deliver its opinion to the Lenders and the Agents.
12.16. PAYMENT OF FEES. The Borrowers shall have paid to the
Administrative Agent the Closing Fee and Administrative Agent's fee pursuant to
[Sections] 5.1 and 5.2.
12.17. PAYOFF LETTER. The Administrative Agent shall have received a
payoff letter from Citibank and the other lenders under the Citibank Facility,
indicating the amount of the loan obligations of CML to Citibank to be
discharged on the Closing Date and an acknowledgment by Citibank that upon
receipt of such funds it will forthwith execute and deliver to the
Administrative Agent for filing all termination statements and take such other
actions as may be necessary to discharge all mortgages, deeds of trust and
security interests granted by CML, any of the Borrowers or any of their
Subsidiaries in favor of Citibank and the other lenders under the Citibank
Facility.
<PAGE> 99
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12.18. DISBURSEMENT INSTRUCTIONS. The Administrative Agent shall have
received disbursement instructions from the Borrowers, indicating that a portion
of the proceeds of the Loans, in an amount equal to the aggregate loan
obligations of CML under the Citibank Facility, are paid to Citibank.
12.19. UPDATED COLLATERAL EXAMINATIONS. The Co-Agents' shall have
reviewed and been satisfied with the update of the commercial finance
examinations performed by the Co-Agents' field examiners, including satisfactory
review of the Borrowers' books and records in connection with the calculation of
the Borrowing Base and the Co-Agents' satisfaction with the components and the
Borrowers' method of calculating the Borrowing Base.
12.20. LANDLORD LIEN WAIVERS. The Administrative Agent shall have
received landlord waivers with respect to material leased locations of the
Borrowers located in Kentucky, Minnesota, South Dakota and Virginia in form and
substance satisfactory to the Administrative Agent.
12.21. BORROWING AVAILABILITY. The Co-Agents' shall have received
evidence satisfactory to the Co-Agents that after giving effect to all
transactions to occur on the Closing Date and after deducting the amount of
accounts payable of the Borrowers' more than thirty (30) days past due, the
Borrowers shall have aggregate borrowing availability under the Credit Agreement
of not less than $9,000,000.
13. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Lenders to make any Loan, and of the Issuing Bank
to issue, extend or renew any Letter of Credit, in each case whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULE. Each of the
representations and warranties of any of CML, the Borrowers and their
Subsidiaries contained in this Credit Agreement, the other Loan Documents or in
any document or instrument delivered pursuant to or in connection with this
Credit Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default shall have
occurred and be continuing.
13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Lender would make it illegal for such Lender to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or
<PAGE> 100
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in the reasonable opinion of the Issuing Bank would make it illegal for the
Issuing Bank to issue, extend or renew such Letter of Credit.
13.3. GOVERNMENTAL REGULATION. Each Lender shall have received such
statements in substance and form reasonably satisfactory to such Lender as such
Lender shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Lenders and to the Administrative Agent and the Agent's Special
Counsel, and the Lenders, the Administrative Agent and such counsel shall have
received all information and such counterpart originals or certified or other
copies of such documents as the Administrative Agent may reasonably request.
13.5. BORROWING BASE REPORT. The Administrative Agent shall have received
the most recent Borrowing Base Report required to be delivered to the
Administrative Agent in accordance with [Section] 9.4(f).
13.6. BORROWING AVAILABILITY. After giving effect to all amounts
requested, the sum of the outstanding amount of all Loans PLUS the Borrowers'
aggregate Letter of Credit Exposures shall not exceed the lesser of (a) the
Total Commitment and (b) the Aggregate Borrowing Base PLUS the Permitted
Overadvance Amount.
14. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) any of the Borrowers shall fail to pay any principal of the
Loans or any Reimbursement Obligation when the same shall become due and
payable, whether at the stated date of maturity or any accelerated date
of maturity or at any other date fixed for payment;
(b) CML, any of the Borrowers or any of their Subsidiaries shall
fail to pay any interest on the Loans, the commitment fee, any Letter of
Credit Fee, the Administrative Agent's fee, or other sums due hereunder
or under any of the other Loan Documents, when the same shall become due
and payable, whether at the stated date of maturity or any accelerated
date of maturity or at any other date fixed for payment;
<PAGE> 101
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(c) CML or any of the Borrowers shall fail to comply with any of
its covenants contained in [Sections] 9.1, 9.4, 9.5, 9.7, 9.9, 9.12, 9.14
through 9.19, 10 or 11 or any of the covenants contained in any of the
Mortgages;
(d) CML, any of the Borrowers or any of their Subsidiaries shall
fail to perform any term, covenant or agreement contained herein or in
any of the other Loan Documents (other than those specified elsewhere in
this [Section] 14.1) for fifteen (15) days after written notice of such
failure has been given to the Borrowers by the Administrative Agent;
(e) any representation or warranty of CML, any of the Borrowers or
any of their Subsidiaries in this Credit Agreement or any of the other
Loan Documents or in any other document or instrument delivered pursuant
to or in connection with this Credit Agreement shall prove to have been
false in any material respect upon the date when made or deemed to have
been made or repeated;
(f) CML, any of the Borrowers or any of their Subsidiaries shall
fail to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received or in respect of any
Capitalized Leases and the aggregate amount of such obligations and
Capitalized Leases is in excess of $2,000,000, or fail to observe or
perform any term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing borrowed money or credit
received or in respect of any Capitalized Leases and the aggregate amount
of such obligations and Capitalized Leases is in excess of $2,000,000 for
such period of time as would permit (assuming the giving of appropriate
notice if required) the holder or holders thereof or of any obligations
issued thereunder to accelerate the maturity thereof;
(g) CML, any of the Borrowers or any of their Subsidiaries shall
make an assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee
or other custodian, liquidator or receiver of CML, any of the Borrowers
or any of their Subsidiaries or of any substantial part of the assets of
CML, any of the Borrowers or any of their Subsidiaries or shall commence
any case or other proceeding relating to CML, any of the Borrowers or any
of their Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar
law of any jurisdiction, now or hereafter in effect, or shall take any
action to authorize or in furtherance of any of the foregoing, or if any
such petition or application shall be filed or any such case or other
proceeding shall be commenced against CML, any of the Borrowers or any of
their Subsidiaries and CML, any of the Borrowers or any of their
Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within sixty (60) days following the filing thereof;
<PAGE> 102
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(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating CML, any of the
Borrowers or any of their Subsidiaries bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of CML, any of the Borrowers or
any of their Subsidiaries in an involuntary case under federal bankruptcy
laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any
final judgment against CML, any of the Borrowers or any of their
Subsidiaries that, with other outstanding final judgments, undischarged,
against CML, any of the Borrowers or any of their Subsidiaries exceeds in
the aggregate $2,000,000;
(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or
the Subordinated Debt shall be prepaid, redeemed or repurchased in whole
or in part;
(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Administrative Agent's security interests,
mortgages or liens in a substantial portion of the Collateral shall cease
to be perfected, or shall cease to have the priority contemplated by the
Security Documents, in each case otherwise than in accordance with the
terms thereof or with the express prior written agreement, consent or
approval of the Lenders, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of CML, any of the Borrowers or any of
their Subsidiaries party thereto or any of their respective stockholders,
or any court or any other governmental or regulatory authority or agency
of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of
the Loan Documents is illegal, invalid or unenforceable in accordance
with the terms thereof;
(l) CML, any of the Borrowers or any of their Subsidiaries shall be
enjoined, restrained or in any way prevented by the order of any court or
any administrative or regulatory agency from conducting any material part
of its business and such order shall continue in effect for more than
thirty (30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty, which in any such case causes, for more than
fifteen (15) consecutive days, the cessation or substantial curtailment
of revenue producing activities at any facility of CML, any of the
Borrowers
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or any of their Subsidiaries if such event or circumstance is not covered
by business interruption insurance and would have a material adverse
effect on the business or financial condition of CML, such Borrower or
such Subsidiary;
(n) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
CML, any of the Borrowers or any of their Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material adverse
effect on the business or financial condition of CML, such Borrower or
such Subsidiary;
(o) CML, any of the Borrowers or any of their Subsidiaries shall be
indicted for a state or federal crime, or any civil or criminal action
otherwise shall have been brought against CML, any of the Borrowers or any
of their Subsidiaries, a punishment for which in any such case could
include the forfeiture of any assets of such Person included in any of the
Borrowing Bases or any assets of such Person not included in the Borrowing
Bases but having a fair market value in excess of $2,000,000;
(p) (i) CML shall at any time, legally or beneficially own less than
one hundred percent (100%) of the shares of capital stock of the Borrowers
(other than NA), as adjusted pursuant to any stock split, stock dividend
or recapitalization or reclassification of the capital of such Borrower or
(ii) NT shall at any time, legally or beneficially own less than one
hundred percent (100%) of the common stock of NA, as adjusted pursuant to
any stock split, stock dividend or recapitalization or reclassification of
the capital of NA;
(q) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under said Act) of
30% or more of the outstanding shares of common stock of CML; or, during
any period of twelve consecutive calendar months, a majority of the seats
(other than vacant seats) on the board of directors of CML shall at any
time be occupied by Persons other than (i) directors on the Closing Date
or (ii) directors initially nominated or appointed by action of a majority
of CML's directors;
then, and in any such event, so long as the same may be continuing, the
Administrative Agent may, and upon the request of the Majority Lenders shall, by
notice in writing to the Borrowers declare all amounts owing with respect to
this Credit Agreement, the Notes and the other Loan Documents and all
Reimbursement Obligations to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrowers; PROVIDED
that in the event of any Event of Default specified in [Sections] 14.1(g),
14.1(h)
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or 14.1(j), all such amounts shall becOmE immediately due and payable
automatically and without any requirement of notice from the Administrative
Agent or any Lender.
14.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in [Section] 14.1(g), [Section] 14.1(h) or [Section] 14.1(j)
shall occur, any unused portion of the credit hereunder shall forthwith
terminate and each of the Lenders shall be relieved of all further obligations
to make Loans to the Borrowers and the Issuing Bank shall be relieved of all
further obligations to issue, extend or renew Letters of Credit. If any other
Event of Default shall have occurred and be continuing, or if on any Drawdown
Date or other date for issuing, extending or renewing any Letter of Credit the
conditions precedent to the making of the Loans to be made on such Drawdown Date
or (as the case may be) to issuing, extending or renewing such Letter of Credit
on such other date are not satisfied, the Administrative Agent may and, upon the
request of the Majority Lenders, shall, by notice to the Borrowers, terminate
the unused portion of the credit hereunder, and upon such notice being given
such unused portion of the credit hereunder shall terminate immediately and each
of the Lenders shall be relieved of all further obligations to make Loans and
the Issuing Bank shall be relieved of all further obligations to issue, extend
or renew Letters of Credit. No termination of the credit hereunder shall relieve
CML, any of the Borrowers or any of their Subsidiaries of any of the
Obligations.
14.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Lenders shall have
accelerated the maturity of the Loans pursuant to [Section]14.1, each Lender,
if owed any amount with respect to the Loans or the Reimbursement Obligations,
may, with the consent of the Majority Lenders but not otherwise, proceed to
protect and enforce its rights by suit in equity, action at law or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Credit Agreement and the other Loan Documents or
any instrument pursuant to which the Obligations to such Lender are evidenced,
including as permitted by applicable law the obtaining of the EX PARTE
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Lender. No remedy herein conferred upon any
Lender or the Administrative Agent or the holder of any Note or purchaser of
any Letter of Credit Participation is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law.
14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that following
the occurrence or during the continuance of any Default or Event of Default, the
Administrative Agent or any Lender, as the case may be, receives any monies in
connection with the enforcement of any the Security Documents, or otherwise
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with respect to the realization upon any of the Collateral, such monies shall be
distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Administrative Agent for or in respect of the
Administrative Agent's fee payable pursuant to [Sections] 5.2 and all
reasonable costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Administrative Agent in connection with
the collection of such monies by the Administrative Agent, for the
exercise, protection or enforcement by the Administrative Agent of all or
any of the rights, remedies, powers and privileges of the Administrative
Agent under this Credit Agreement or any of the other Loan Documents or
in respect of the Collateral or in support of any provision of adequate
indemnity to the Administrative Agent against any taxes or liens which by
law shall have, or may have, priority over the rights of the
Administrative Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Lenders may determine; PROVIDED, HOWEVER, that distributions
in respect of Obligations owing to the Lenders with respect to each type
of Obligation such as interest, principal, fees and expenses, shall be
made among the Lenders PRO RATA; and PROVIDED, FURTHER, that the
Administrative Agent may in its discretion make proper allowance to take
into account any Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Lenders and the Administrative
Agent of all of the Obligations, to the payment of any obligations
required to be paid pursuant to [Section] 9-504(1)(c) of the Uniform
Commercial Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrowers or
to such other Persons as are entitled thereto.
15. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits or other sums credited by or due from any of
the Lenders to any of the Borrowers and any securities or other property of any
of the Borrowers in the possession of such Lender may be applied to or set off
by such Lender against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of such Borrower to such Lender. Each of the
Lenders agrees with each other Lender that (i) if an amount to be set off is to
be applied to Indebtedness of such Borrower to such Lender, other than
Indebtedness evidenced by the Notes held by such Lender or constituting
Reimbursement Obligations owed to such Lender, such amount shall be applied
ratably to such other Indebtedness and to the Indebtedness evidenced by all
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such Notes held by such Lender or constituting Reimbursement Obligations owed to
such Lender, and (ii) if such Lender shall receive from such Borrower, whether
by voluntary payment, exercise of the right of setoff, counterclaim, cross
action, enforcement of the claim evidenced by the Notes held by, or constituting
Reimbursement Obligations owed to, such Lender by proceedings against such
Borrower at law or in equity or by proof thereof in bankruptcy, reorganization,
liquidation, receivership or similar proceedings, or otherwise, and shall retain
and apply to the payment of the Note or Notes held by, or Reimbursement
Obligations owed to, such Lender any amount in excess of its ratable portion of
the payments received by all of the Lenders with respect to the Notes held by,
and Reimbursement Obligations owed to, all of the Lenders, such Lender will make
such disposition and arrangements with the other Lenders with respect to such
excess, either by way of distribution, PRO TANTO assignment of claims,
subrogation or otherwise as shall result in each Lender receiving in respect of
the Notes held by it or Reimbursement obligations owed it, its proportionate
payment as contemplated by this Credit Agreement; PROVIDED that if all or any
part of such excess payment is thereafter recovered from such Lender, such
disposition and arrangements shall be rescinded and the amount restored to the
extent of such recovery, but without interest.
16. THE AGENTS.
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16.1. AUTHORIZATION.
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(a) Each of the Agents is authorized to take such action on behalf of
each of the Lenders and to exercise all such powers as are hereunder and
under any of the other Loan Documents and any related documents delegated
to such Agent, together with such powers as are reasonably incident
thereto, PROVIDED that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by such Agents.
(b) The relationship between each of the Agents and each of the
Lenders is that of an independent contractor. The use of the term "Agent",
"Co-Agents" and "Agent" is for convenience only and is used to describe,
as a form of convention, the independent contractual relationship between
each of the Agents and each of the Lenders. Nothing contained in this
Credit Agreement nor the other Loan Documents shall be construed to create
an agency, trust or other fiduciary relationship between each of the
Agents and any of the Lenders.
(c) As an independent contractor empowered by the Lenders to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, each of the Agents is nevertheless a
"representative" of the Lenders, as that term is defined in Article 1 of
the Uniform Commercial Code, for purposes of actions for the benefit of
the Lenders and the Agents with respect to all collateral security and
guaranties contemplated by the Loan Documents. Such
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actions include the designation of the Agent as "secured party",
"mortgagee" or the like on all financing statements and other documents
and instruments, whether recorded or otherwise, relating to the
attachment, perfection, priority or enforcement of any security interests,
mortgages or deeds of trust in collateral security intended to secure the
payment or performance of any of the Obligations, all for the benefit of
the Lenders and the Agents.
16.2. EMPLOYEES AND AGENTS. Each of the Agents may exercise its powers and
execute its duties by or through employees or agents and shall be entitled to
take, and to rely on, advice of counsel concerning all matters pertaining to its
rights and duties under this Credit Agreement and the other Loan Documents. Each
of the Agents may utilize the services of such Persons as such Agent in its sole
discretion may reasonably determine, and all reasonable fees and expenses of any
such Persons shall be paid by the Borrower.
16.3. NO LIABILITY. None of the Agents nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that each of the Agents or
such other Person, as the case may be, may be liable for losses due to its
willful misconduct or gross negligence.
16.4. NO REPRESENTATIONS. None of the Agents shall be responsible for the
execution or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
for the value of any such collateral security or for the validity,
enforceability or collectability of any such amounts owing with respect to the
Notes, or for any recitals or statements, warranties or representations made
herein or in any of the other Loan Documents or in any certificate or instrument
hereafter furnished to it by or on behalf of CML, any of the Borrowers or any of
their Subsidiaries, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any instrument at any time constituting, or intended to constitute, collateral
security for the Notes or to inspect any of the properties, books or records of
CML, any of the Borrowers or any of their Subsidiaries. None of the Agents shall
be bound to ascertain whether any notice, consent, waiver or request delivered
to it by any of the Borrowers or any holder of any of the Notes shall have been
duly authorized or is true, accurate and complete. None of the Agents have made
nor do they now make any representations or warranties, express or implied, nor
does it assume any liability to the Lenders, with respect to the credit
worthiness or financial conditions of CML, any of the Borrowers or any of their
Subsidiaries. Each Lender acknowledges that it has, independently and without
reliance upon any of the Agents or any other Lender, and based upon
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such information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Credit Agreement.
16.5. PAYMENTS.
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16.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by any of the
Borrowers to the Administrative Agent hereunder or any of the other Loan
Documents for the account of any Lender shall constitute a payment to such
Lender. The Administrative Agent agrees promptly to distribute to each
Lender such Lender's PRO RATA share of payments received by the
Administrative Agent for the account of the Lenders except as otherwise
expressly provided herein or in any of the other Loan Documents.
16.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of
the Administrative Agent the distribution of any amount received by it in
such capacity hereunder, under the Notes or under any of the other Loan
Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the
Administrative Agent is to be repaid, each Person to whom any such
distribution shall have been made shall either repay to the Administrative
Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
16.5.3. DELINQUENT LENDERS. Notwithstanding anything to the
contrary contained in this Credit Agreement or any of the other Loan
Documents, any Lender that fails (i) to make available to the
Administrative Agent its PRO RATA share of any Loan or to purchase any
Letter of Credit Participation or (ii) to comply with the provisions of
ss.15 with respect to making dispositions and arrangements witH the other
Lenders, where such Lender's share of any payment received, whether by
setoff or otherwise, is in excess of its PRO RATA share of such payments
due and payable to all of the Lenders, in each case as, when and to the
full extent required by the provisions of this Credit Agreement, shall be
deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent
Lender until such time as such delinquency is satisfied. A Delinquent
Lender shall be deemed to have assigned any and all payments due to it
from the Borrowers, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Lenders for application to, and reduction of, their
respective PRO RATA shares of all outstanding Loans and Unpaid
Reimbursement Obligations. The Delinquent Lender hereby authorizes the
Administrative Agent to distribute such payments to the nondelinquent
Lenders in proportion to their respective PRO RATA shares of all
outstanding Loans and Unpaid Reimbursement Obligations. A
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Delinquent Lender shall be deemed to have satisfied in full a delinquency
when and if, as a result of application of the assigned payments to all
outstanding Loans and Unpaid Reimbursement Obligations of the
nondelinquent Lenders, the Lenders' respective PRO RATA shares of all
outstanding Loans and Unpaid Reimbursement Obligations have returned to
those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency. Until such time as its
delinquency is satisfied, a Delinquent Lender shall have no right to vote
with respect to any matters under or in respect of the Credit Agreement
and shall not be entitled to receive its portion of any commitment fee
paid in accordance with [Section] 2.2 of this Credit Agreement.
16.6. HOLDERS OF NOTES. The Administrative Agent may deem and treat the
payee of any Note or the purchaser of any Letter of Credit Participation as the
absolute owner or purchaser thereof for all purposes hereof until it shall have
been furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.
16.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold
harmless the Agents from and against any and all claims, actions and suits
(whether groundless or otherwise), losses, damages, costs, expenses (including
any expenses for which the Agents have not been reimbursed by the Borrowers as
required by [Section] 17), and liabilities of every nature and character
arising out of or related to this Credit Agreement, the Notes, or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agents' actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agents' willful
misconduct or gross negligence.
16.8. AGENTS AS LENDER. In its individual capacity, FNBB shall have the
same obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Administrative Agent and a Co-Agent. In its individual capacity,
BankAmerica shall have the same obligations and the same rights, powers and
privileges in respect to its Commitment and the Loans made by it, and as the
holder of any of the Notes and as the purchaser of any Letter of Credit
Participations, as it would have were it not also a Co-Agent.
16.9. RESIGNATION. Each Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Lenders and the Borrower. Upon any such
resignation, the Majority Lenders shall have the right to appoint a successor
Agent in such capacity. Unless a Default or Event of Default shall have occurred
and be continuing, such successor Agent shall be reasonably acceptable to the
Borrower. If no successor Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor Agent, which
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shall be a financial institution having a rating of not less than A or its
equivalent by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
Upon the acceptance of any appointment as an Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation, the provisions of this Credit Agreement
and the other Loan Documents shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
16.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Lender hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Administrative Agent thereof. The Administrative
Agent hereby agrees that upon receipt of any notice under this ss.16.10 it shalL
promptly notify the other Lenders of the existence of such Default or Event of
Default.
16.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Administrative Agent shall, if (i)
so requested by the Majority Lenders and (ii) the Lenders have provided to the
Administrative Agent such additional indemnities and assurances against expenses
and liabilities as the Administrative Agent may reasonably request, proceed to
enforce the provisions of the Security Documents authorizing the sale or other
disposition of all or any part of the Collateral and exercise all or any such
other legal and equitable and other rights or remedies as it may have in respect
of such Collateral. The Majority Lenders may direct the Administrative Agent in
writing as to the method and the extent of any such sale or other disposition,
the Lenders hereby agreeing to indemnify and hold the Administrative Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, PROVIDED that the Administrative
Agent need not comply with any such direction to the extent that the
Administrative Agent reasonably believes the Administrative Agent's compliance
with such direction to be unlawful or commercially unreasonable in any
applicable jurisdiction.
16.12. DUTIES OF CO-AGENTS. The Co-Agents as such shall have no duties or
responsibilities to the Administrative Agent, CML, any of the Borrowers or any
of the Lenders hereunder.
17. EXPENSES.
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Each of the Borrowers jointly and severally agrees to pay (i) the
reasonable costs of producing and reproducing this Credit Agreement, the other
Loan Documents and the other agreements and instruments mentioned herein, (ii)
any taxes (including any interest and penalties in respect thereto) payable by
any of the Agents or any of the Lenders (other than taxes based upon any
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Agent's or any Lender's net income) on or with respect to the transactions
contemplated by this Credit Agreement (the Borrowers hereby agreeing to
indemnify each Agent and each Lender with respect thereto); (iii) the reasonable
fees, expenses and disbursements of the Administrative Agent's Special Counsel,
either Co-Agent's counsel or any local counsel to the Administrative Agent
incurred in connection with the preparation, administration, interpretation or
syndication of the Loan Documents and other instruments mentioned herein, each
closing hereunder, and amendments, modifications, approvals, consents or waivers
hereto or hereunder (including in each case the allocated cost of staff counsel)
and the syndication and the termination hereof, and each Lenders' counsel in the
case of waivers or modifications of the Loan Documents; (iv) the reasonable
fees, expenses and disbursements of the Agents incurred by the Agents in
connection with the preparation, administration or interpretation of the Loan
Documents and other instruments mentioned herein, including all title insurance
premiums and surveyor, engineering and appraisal charges and the fees, expenses
and disbursements of the Agents and the Lenders for waivers and modifications of
the Loan Documents; (v) any reasonable fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by the Administrative Agent
in establishing, maintaining or handling agency accounts, lock box accounts and
other accounts for the collection of any of the Collateral; (vi) all reasonable
out-of-pocket expenses (including without limitation reasonable attorneys' fees
and costs, which attorneys may be employees of any Lender or any Agent, and
reasonable consulting, accounting, appraisal, investment banking and similar
professional fees and charges) incurred by any Lender or any Agent in connection
with (A) the enforcement of or preservation of rights under any of the Loan
Documents against CML, any of the Borrowers or any of their Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Lender's or any Agent's relationship with
CML, any of the Borrowers or any of their Subsidiaries; (vii) all reasonable
fees, expenses and disbursements of any Lender or any Agent incurred in
connection with UCC searches, UCC filings, intellectual property searches,
intellectual property filings, or mortgage recordings and (viii) all reasonable
costs of conducting commercial finance examinations and appraisals of the
Borrowers' properties, including the applicable daily time charges of the
Co-Agents' commercial finance examiners, agents, consultants and representatives
engaged in such examinations and appraisals as in effect from time to time and
reasonable out-of-pocket travel and other related expenses. The covenants of
this ss.17 shall survivE payment or satisfaction of all other Obligations.
18. INDEMNIFICATION.
---------------
Each of the Borrowers jointly and severally agrees to indemnify and hold
harmless the Agents and the Lenders from and against any and all claims, actions
and suits whether groundless or otherwise, and from and against any and all
liabilities, losses, damages and expenses of every nature and character arising
out of this Credit Agreement or any of the other Loan Documents or the
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transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by CML, any of the Borrowers or any of their Subsidiaries of the
proceeds of any of the Loans or Letters of Credit, (ii) the reversal or
withdrawal of any provisional credits granted by the Administrative Agent upon
the transfer of funds from bank agency or lock box accounts or in connection
with the provisional honoring of checks or other items, (iii) any actual or
alleged infringement of any patent, copyright, trademark, service mark or
similar right of CML, any of the Borrowers or any of their Subsidiaries
comprised in the Collateral, (iv) CML, any of the Borrowers or any of their
Subsidiaries entering into or performing this Credit Agreement or any of the
other Loan Documents or (v) with respect to CML, the Borrowers and their
Subsidiaries and their respective properties and assets, the violation of any
Environmental Law, the presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threatened release of any Hazardous Substances
or any action, suit, proceeding or investigation brought or threatened with
respect to any Hazardous Substances (including, but not limited to, claims with
respect to wrongful death, personal injury or damage to property), in each case
including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding. In litigation, or the preparation
therefor, the Lenders and the Agents shall be entitled to select their own
counsel and, in addition to the foregoing indemnity, the Borrowers agree to pay
promptly the reasonable fees and expenses of such counsel. If, and to the extent
that the obligations of the Borrowers under this [Section] 18 are unenforceable
for any reason, the Borrowers hereby agree to make the maximum contribution to
the payment in satisfaction of such obligations which is permissible under
applicable law. The covenants contained in this ss.18 shall survive payment or
satisfaction in full of all other Obligations.
19. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of CML, any of the Borrowers or any of their
Subsidiaries pursuant hereto shall be deemed to have been relied upon by the
Lenders and the Agents, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Lenders of
any of the Loans and the issuance, extension or renewal of any Letters of
Credit, as herein contemplated, and shall continue in full force and effect so
long as any Letter of Credit or any amount due under this Credit Agreement or
the Notes or any of the other Loan Documents remains outstanding or any Lender
has any obligation to make any Loans or the Issuing Bank has any obligation to
issue, extend or renew any Letter of Credit, and for such further time as may be
otherwise expressly specified in this Credit Agreement. All statements contained
in any certificate or other paper delivered to any Lender or any Agent at any
time by or on behalf of CML, any of the Borrowers or any of their Subsidiaries
pursuant hereto or in connection with the transactions
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contemplated hereby shall constitute representations and warranties by CML, such
Borrower or such Subsidiary hereunder.
20. ASSIGNMENT AND PARTICIPATION.
----------------------------
20.1. CONDITIONS TO ASSIGNMENT BY LENDERS. Except as provided herein, each
Lender may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); PROVIDED that (i) each
of the Administrative Agent and, unless a Default or Event of Default shall have
occurred and be continuing, the Borrowers shall have given its prior written
consent to such assignment, which consent, in the case of the Borrowers, will
not be unreasonably withheld or delayed, (ii) each such assignment shall be a
constant PRO RATA percentage, and not a varying percentage, of all the assigning
Lender's rights and obligations under this Credit Agreement, (iii) each
assignment shall be in an amount that is a whole multiple of $5,000,000 or, if
less, the entire remaining Commitment of such Lender and (iv) the parties to
such assignment shall execute and deliver to the Administrative Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of EXHIBIT G hereto (an "Assignment and
Acceptance"), together with any Notes subject to such assignment. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, (i) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (ii) the assigning Lender shall, to the extent provided in such
assignment and upon payment to the Administrative Agent of the registration fee
referred to in [Section] 20.3, be released from its obligations under this
Credit Agreement.
20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Lender makes no representation or
warranty, express or implied, and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection
with this Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or the attachment, perfection or priority of any
security interest or mortgage;
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(b) the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of CML,
the Borrowers and their Subsidiaries or any other Person primarily or
secondarily liable in respect of any of the Obligations, or the
performance or observance by CML, the Borrowers and their Subsidiaries or
any other Person primarily or secondarily liable in respect of any of the
Obligations of any of their obligations under this Credit Agreement or any
of the other Loan Documents or any other instrument or document furnished
pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in [Section] 8.4 and [Section] 9.4 and such other documents
and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Lender, the Administrative Agent, any Co-Agent or any other
Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Credit Agreement;
(e) such assignee represents and warrants that it is an
Eligible Assignee;
(f) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under
this Credit Agreement and the other Loan Documents as are delegated to the
Administrative Agent by the terms hereof or thereof, together with such
powers as are reasonably incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Lender;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with the
assigning Lender satisfactory to such assignee with respect to its PRO
RATA share of Letter of Credit Fees in respect of outstanding Letters of
Credit.
20.3. REGISTER. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register or similar list (the
"Register") for the recordation of the names and addresses of the Lenders and
the Commitment Percentage of, and principal amount of the Loans owing to and
Letter of Credit Participations purchased by, the Lenders from time to time. The
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entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Agents and the Lenders may treat each Person whose name
is recorded in the Register as a Lender hereunder for all purposes of this
Credit Agreement. The Register shall be available for inspection by the
Borrowers and the Lenders at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Lender agrees
to pay to the Administrative Agent a registration fee in the sum of $3,500.
20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed
by the parties to such assignment, together with each Note subject to such
assignment, the Administrative Agent shall (i) record the information contained
therein in the Register, and (ii) give prompt notice thereof to the Borrowers
and the Lenders (other than the assigning Lender). Within five (5) Business Days
after receipt of such notice, each Borrower, at its own expense, shall execute
and deliver to the Administrative Agent, in exchange for each surrendered Note,
a new Note with respect to such Borrower to the order of such Eligible Assignee
in an amount equal to the amount assumed by such Eligible Assignee pursuant to
such Assignment and Acceptance and, if the assigning Lender has retained some
portion of its obligations hereunder, a new Note to the order of the assigning
Lender in an amount equal to the amount retained by it hereunder. Such new Notes
shall provide that they are replacements for the surrendered Notes, shall be in
an aggregate principal amount equal to the aggregate principal amount of the
surrendered Notes, shall be dated the effective date of such in Assignment and
Acceptance and shall otherwise be substantially the form of the assigned Notes.
Within five (5) days of issuance of any new Notes pursuant to this [Section]
20.4, the Borrowers shall deliver an opinion of counsel, addressed to the
Lenders and the Agents, relating to the due authorization, execution and
delivery of such new Notes and the legality, validity and binding effect
thereof, in form and substance satisfactory to the Lenders. The surrendered
Notes shall be cancelled and returned to the Borrowers.
20.5. PARTICIPATIONS. Each Lender may sell participations to one or more
banks or other entities in all or a portion of such Lender's rights and
obligations under this Credit Agreement and the other Loan Documents; PROVIDED
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Lender hereunder to the Borrowers and (iii) the only
rights granted to the participant pursuant to such participation arrangements
with respect to waivers, amendments or modifications of the Loan Documents shall
be the rights to approve waivers, amendments or modifications that would reduce
the principal of or the interest rate on any Loans, extend the term or increase
the amount of the Commitment of such Lender as it relates to such participant,
reduce the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
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20.6. DISCLOSURE. CML and each of the Borrowers agrees that in addition to
disclosures made in accordance with standard and customary banking practices any
Lender may disclose information obtained by such Lender pursuant to this Credit
Agreement to assignees or participants and potential assignees or participants
hereunder; PROVIDED that such assignees or participants or potential assignees
or participants shall agree (i) to treat in confidence such information unless
such information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation.
20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWERS. If any
assignee Lender is an Affiliate of CML or any Borrower, then any such assignee
Lender shall have no right to vote as a Lender hereunder or under any of the
other Loan Documents for purposes of granting consents or waivers or for
purposes of agreeing to amendments or other modifications to any of the Loan
Documents or for purposes of making requests to the Administrative Agent
pursuant to [Section]14.1 or [Section]14.2, and the determination of the
Majority Lenders shall for all purposes of this Credit Agreement and the other
Loan Documents be made without regard to such assignee Lender's interest in any
of the Loans. If any Lender sells a participating interest in any of the Loans
or Reimbursement Obligations to a participant, and such participant is CML, a
Borrower or an Affiliate of a Borrower or CML, then such transferor Lender
shall promptly notify the Administrative Agent of the sale of such
participation. A transferor Lender shall have no right to vote as a Lender
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the
Administrative Agent pursuant to [Section]14.1 or [Section]14.2 to the extent
that such participation is beneficially owned by CML, a Borrower or any
Affiliate of a Borrower, and the determination of the Majority Lenders shall
for all purposes of this Agreement and the other Loan Documents be made without
regard to the interest of such transferor Lender in the Loans to the extent of
such participation.
20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Lender shall
retain its rights to be indemnified pursuant to [Section]17 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Lender is not incorporated under the laws of the United States of America or
any state thereof, it shall, prior to the date on which any interest or fees
are payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrowers and the Administrative Agent certification as to its
exemption from deduction or withholding of any United States federal income
taxes. If the Reference Bank transfers all of its interest, rights and
obligations under this Credit Agreement, the Administrative Agent shall, in
consultation with the Borrowers and with the consent of the Borrowers and the
Majority Lenders, appoint another Lender to act as the Reference Bank
hereunder. Anything contained in this [Section]20 to the contrary
notwithstanding, any Lender
<PAGE> 117
-109-
may at any time pledge all or any portion of its interest and rights under this
Credit Agreement (including all or any portion of its Notes) to any of the
twelve Federal Reserve Banks organized under [Section]4 of the Federal Reserve
Act, 12 U.S.C. [Section]341. No such pledge or the enforcement thereof shall
release the pledgor Lender from its obligations hereunder or under any of the
other Loan Documents.
20.9. ASSIGNMENT BY BORROWERS OR GUARANTORS. None of CML, any of the
Borrowers nor any of the Guarantors shall assign or transfer any of its rights
or obligations under any of the Loan Documents without the prior written consent
of each of the Lenders.
21. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to CML, at 524 Main Street, Acton, Massachusetts 01720,
Attention: Chief Financial Officer, or at such other address for notice as
CML shall last have furnished in writing to the Person giving the notice;
(b) if to any of the Borrowers, at c/o CML Group, Inc., 524 Main
Street, Acton, Massachusetts 01720, Attention: Chief Financial Officer, or
at such other address for notice as such Borrower shall last have
furnished in writing to the Person giving the notice with a copy to the
Chief Financial Officer of such Borrower at the address set forth for such
Borrower on SCHEDULE 8.21 hereto;
(c) if to any of the Guarantors or Foreign Guarantors, at c/o CML
Group, Inc., 524 Main Street, Acton, Massachusetts 01720, Attention: Chief
Financial Officer, or at such other address for notice as such Guarantor
shall last have furnished in writing to the Person giving the notice with
a copy to the Chief Financial Officer of such Guarantor or Foreign
Guarantor at the address set forth for such Guarantor or Foreign Guarantor
on SCHEDULE 8.21 hereto;
(d) if to the Administrative Agent, at 100 Federal Street, Boston,
Massachusetts 02110, USA, Attention: Brent E. Shay, Director, or such
other address for notice as the Administrative Agent shall last have
furnished in writing to the Person giving the notice; and
(e) if to any Co-Agent or any Lender, at such Co-Agent's or such
Lender's address set forth on SCHEDULE 1 hereto, or such other address for
<PAGE> 118
-110-
notice as such Co-Agent or such Lender shall have last furnished in
writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
22. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). CML, EACH OF THE
BORROWERS AND EACH OF THE GUARANTORS AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE
COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN
AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON CML, THE BORROWERS AND THE GUARANTORS
BY MAIL AT THE ADDRESS SPECIFIED IN [SECTION]21. CML, EACH OF THE BORROWERS AND
EACH OF THE GUARANTORS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS
BROUGHT IN AN INCONVENIENT COURT.
23. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference
only and shall not define or limit the provisions hereof.
24. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
<PAGE> 119
-111-
25. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Credit Agreement
nor any term hereof may be changed, waived, discharged or terminated, except as
provided in [Section]27.
26. WAIVER OF JURY TRIAL.
--------------------
CML, each Borrower and each Guarantor hereby waives its right to a jury
trial with respect to any action or claim arising out of any dispute in
connection with this Credit Agreement, the Notes or any of the other Loan
Documents, any rights or obligations hereunder or thereunder or the performance
of which rights and obligations. Except as prohibited by law, CML, each Borrower
and each Guarantor hereby waives any right it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. CML, each Borrower and each Guarantor (i) certifies that no
representative, agent or attorney of any Lender or any Agent has represented,
expressly or otherwise, that such Lender or such Agent, would not, in the event
of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that
the Agents and the Lenders have been induced to enter into this Credit
Agreement, the other Loan Documents to which it is a party by, among other
things, the waivers and certifications contained herein.
27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
The provisions of this Credit Agreement and the other Loan Documents may
from time to time be amended, modified or waived, and any Collateral may be
released, if such amendment, modification, waiver or release is consented to in
writing by the Majority Lenders and, in the case of any amendment or
modification, CML or its Subsidiaries party to the relevant Loan Document.
Notwithstanding the foregoing, no such amendment, modification, waiver or
release:
(a) which would modify any requirement hereunder that any particular
action be taken by all the Lenders shall be effective unless
consented to by each Lender;
(b) which would modify this [Section]27 or change the definition of
"Majority Lenders" shall be effective unless consented to by each
Lender;
(c) which would release any Collateral from the lien of the
Security Documents shall be effective unless consented to
by each Lender, unless (i) such release is in connection
with the sale of such Collateral and such sale is
permitted by this Credit Agreement, all Net Cash Proceeds
of such sale are used to prepay the Loans and, except with
respect to Permitted Dispositions, the Total
<PAGE> 120
-112-
Commitment is reduced, concurrently with such prepayment, by the
amount of such prepayment, (ii) such release is of Collateral
consisting of cash or cash equivalents and substantially all such
cash or cash equivalents is used to pay or prepay Obligations in
accordance with the Credit Agreement, (iii) such release is "cash
collateral", as defined in Section 363(a) of the federal Bankruptcy
Code, in any case where CML, a Borrower or a Guarantor is a debtor,
and the release is made under a cash collateral stipulation with the
debtor approved by the Majority Lenders and the Co-Agents, (iv) such
release is of foreign Collateral and such release is effected with
the approval of the Co-Agents pursuant to the last sentence of
this [Section]27, or (v) such release is of other Collateral and the
aggregate value of all Collateral releases permitted under this
clause (v) from and after the Closing Date shall not exceed
$1,000,000;
(d) which would increase the Commitment or Commitment Percentage of any
Lender, reduce any commitment fee, Letter of Credit Fee or other fees
payable to any Lender, extend the Maturity Date, increase the advance
rates of any Borrowing Base, or reduce the principal amount of or
rate of interest on any Loan of any Lender shall be effective unless
consented to by such Lender;
(e) which would adversely affect the interests, rights or obligations of
any Co-Agent, in its capacity as Co-Agent, shall be effective unless
consented to by such Co-Agent; or
(f) which would adversely affect the interests, rights or obligations of
the Administrative Agent, in its capacity as the Administrative
Agent, or would amend the provisions of [Sections]2.1 or 2.8
relating to the transfer of funds between the Administrative Agent
and the Lenders (including the types of funds or the method of such
transfer), shall be effective unless consented to by the
Administrative Agent.
The Guarantors (other than CML and the Borrowers) shall not be deemed a party to
this Credit Agreement for any purpose except for purposes of [Section]3.3,
[Section]7 and [Sections]21 through 28. The consent of any Guarantor (other
than CML and the Borrowers) shall not be required for any amendment,
modification or waiver of any provision of this Credit Agreement, unless such
amendment, modification or waiver relates to [Section]3.3, [Section]7, and
[Sections]21 through 28 and adversely affects such Guarantor. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of
any Agent or any Lender in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto. No notice to or demand upon CML or
any of the Borrowers shall entitle CML or any of the Borrowers to other or
further notice or demand in similar or other circumstances.
<PAGE> 121
-113-
If CML has demonstrated to the reasonable satisfaction of the Co-Agents
that the pledge of the stock of any foreign Subsidiary of CML (to the extent
greater than 65% of the outstanding stock of such foreign Subsidiary) or the
Foreign Guaranty given by any such foreign Subsidiary will result in material
tax obligations for CML and its Subsidiaries, which tax obligations would not
arise if such pledge or guaranty were released by the Administrative Agent
and/or the Lenders, the Administrative Agent and/or the Lenders, as appropriate,
upon ten (10) days' prior written request of CML delivered to the Administrative
Agent, the Co-Agents and the Lenders shall release such pledge (to the extent
applicable to greater than 65% of the outstanding stock of the relevant foreign
Subsidiary) or guaranty; PROVIDED that (i) no such release shall be required if
any Event of Default is continuing and (ii) no such release shall be required in
any event prior to July 15, 1997.
28. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
only such clause or provision, or part thereof, in such jurisdiction, and shall
not in any manner affect such clause or provision in any other jurisdiction, or
any other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE> 122
-114-
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CML GROUP, INC.
By: __________________________________
Glenn E. Davis, Vice President -
Finance
NORDICTRACK, INC.
NORDIC ADVANTAGE, INC.
THE NATURE COMPANY
SMITH & HAWKEN, LTD.
BISCUIT FACTORY PUBLICATIONS
INCORPORATED (D/B/A HEAR MUSIC)
By: __________________________________
Glenn E. Davis, Vice President
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Administrative
Agent and Co-Agent
By: __________________________________
Brent E. Shay, Director
BANKAMERICA BUSINESS CREDIT, INC.,
individually and as Co-Agent
By: __________________________________
Name:
Title:
<PAGE> 123
-115-
For purposes of [Section]3.3, [Section]7, and [Sections]21 through 28 hereof:
THE NATURE COMPANY INTERNATIONAL,
INC. (D/B/A THE NATURE COMPANY)
OCR, INC.
OBW, INC.
WFH GROUP, INC.
ATTESTED:
_________________________ ODG, INC.
ROBERT J. SAMUELSON,
SECRETARY OF ODG, INC.
C.R.S.S. ADVERTISING, INC.
By: _______________________________
Glenn E. Davis, Vice President
<PAGE> 1
Exhibit 11
<TABLE>
CML GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<CAPTION>
For the periods ended April 27, 1996 and April 29, 1995
Third Quarter Nine Months
------------- -----------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Primary earnings (loss) per share:
Weighted average number of shares
outstanding:
Common 49,171,210 49,536,857 49,175,007 49,795,869
Shares deemed outstanding from the
assumed exercise of stock options
and from deferred compensation
awards 298,875 680,142 425,439 769,933
----------- ----------- ----------- -----------
Total 49,470,085 50,216,999 49,600,446 50,565,802
=========== =========== =========== ===========
Net income (loss) ($36,245,000) ($39,630,000) ($81,316,000) $ 2,929,000
=========== =========== =========== ===========
Primary earnings (loss) per share ($ 0.74) ($ 0.80) ($ 1.65) $ 0.06
=========== =========== =========== ===========
Fully diluted earnings (loss) per share:
Weighted average number of shares
outstanding, as above 49,470,085 50,216,999 49,600,446 50,565,802
Shares deemed outstanding from the
assumed conversion of convertible
subordinated debentures 1,604,877 1,743,667 1,604,877 2,024,256
Additional shares deemed outstanding
from the assumed exercise of
stock options -- -- -- 2,642
----------- ----------- ----------- -----------
Total 51,074,962 51,960,666 51,205,323 52,592,700
=========== =========== =========== ===========
Additional income from the elimination of
the interest cost of the convertible subord-
inated debentures, net of income tax effect $ 393,000 $ 411,000 $ 1,174,000 $ 1,442,000
----------- ----------- ----------- -----------
Fully diluted earnings (loss) per share ($ 0.74) ($ 0.80) ($ 1.65) $ 0.06
=========== =========== =========== ===========
</TABLE>
142
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF CML GROUP, INC. FOR THE NINE MONTHS
ENDED APRIL 27, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-27-1996
<EXCHANGE-RATE> 1
<CASH> 3,475,000
<SECURITIES> 0
<RECEIVABLES> 16,529,000
<ALLOWANCES> 3,743,000
<INVENTORY> 30,314,000
<CURRENT-ASSETS> 160,892,000
<PP&E> 93,079,000
<DEPRECIATION> 32,799,000
<TOTAL-ASSETS> 241,824,000
<CURRENT-LIABILITIES> 86,860,000
<BONDS> 41,593,000
<COMMON> 5,222,000
0
0
<OTHER-SE> 98,527,000
<TOTAL-LIABILITY-AND-EQUITY> 241,824,000
<SALES> 469,753,000
<TOTAL-REVENUES> 469,753,000
<CGS> 220,039,000
<TOTAL-COSTS> 220,039,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,149,000
<INTEREST-EXPENSE> 2,093,000
<INCOME-PRETAX> (101,862,000)
<INCOME-TAX> (36,161,000)
<INCOME-CONTINUING> (65,701,000)
<DISCONTINUED> (15,615,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (81,316,000)
<EPS-PRIMARY> (1.65)
<EPS-DILUTED> (1.65)
</TABLE>
