SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
Quarterly Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended August 1, 1998
Commission file number 33-27126
PEEBLES INC.
Virginia 54-0332635
(State of Incorporation) (I.R.S. Employer
Identification No.)
One Peebles Street
South Hill, Virginia 23970-5001 (804) 447-5200
(Address of principal executive offices) (Telephone Number)
Indicate by check (x) whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) f the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes__x___. No_____.
As of August 1, 1998, 1,000 shares of Common Stock of Peebles Inc. were
outstanding.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
PEEBLES INC. & SUBSIDIARIES
(dollars in thousands, except per share amounts)
<TABLE>
<S> <C> <C> <C>
August 1, 1998 January 31,1998 August 2, 1997
ASSETS (Unaudited) (Unaudited)
-------------- --------------- --------------
CURRENT ASSETS
Cash $ 534 $ 432 $ 59
Accounts receivable, net 28,269 31,581 26,579
Merchandise inventories 70,257 57,967 56,057
Prepaid expenses 2,005 1,145 1,049
Income taxes receivable -- 303 --
Other 875 773 205
------------ ------------- ------------
TOTAL CURRENT ASSETS 101,940 92,201 83,949
PROPERTY AND EQUIPMENT, net 47,402 38,749 36,562
OTHER ASSETS
Excess of cost over net
assets acquired, net 41,623 35,460 35,274
Deferred financing costs, net 3,986 2,442 2,383
Other 2,816 3,604 3,180
-------- ------- -------
48,425 41,506 40,837
$ 197,767 $ 172,456 $ 161,348
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 16,489 $ 13,606 $ 11,188
Accrued compensation and
other expenses 5,197 5,055 4,286
Income taxes payable 466 -- 431
Deferred income taxes 4,592 4,592 2,934
Current maturities of long-term debt 5,832 4,653 8,965
Other 637 1,406 363
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 33,213 29,312 28,167
LONG-TERM DEBT 101,000 81,507 78,565
LONG-TERM CAPITAL LEASE OBLIGATIONS 1,037 1,139 1,188
DEFERRED INCOME TAXES 5,025 5,025 3,235
STOCKHOLDERS' EQUITY
Preferred stock- no par value,
authorized 1,000,000 shares, none
issued and outstanding -- -- --
Common stock-- par value $.10 per
share, authorized 5,000,000 shares,
1,000 issued and outstanding 1 1 1
Additional capital 59,307 59,307 59,307
Retained earnings (deficit):
accumulated from May 27, 1995; (1,816) (3,835) (9,115)
------------ ----------- -----------
57,492 55,473 50,193
$ 197,767 $ 172,456 $ 161,348
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
PEEBLES INC. & SUBSIDIARIES
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
Three-Month Period Ended Six-Month Period Ended
August 1, 1998 August 2, 1997 August 1, 1998 August 2, 1997
-------------- -------------- -------------- --------------
NET SALES $ 57,698 $ 49,808 $ 108,711 $ 94,958
COSTS AND EXPENSES
Cost of sales 33,512 29,515 64,737 57,777
Selling, general and
administrative expenses 17,467 15,183 32,280 28,320
Depreciation and
amortization 1,828 1,620 3,677 3,179
----------- ------------ ---------- -----------
52,807 46,318 100,694 89,276
----------- ------------ ---------- -----------
OPERATING INCOME 4,891 3,490 8,017 5,682
OTHER INCOME 17 25 30 57
INTEREST EXPENSE 2,482 2,313 4,682 4,456
----------- ------------ ---------- ----------
INCOME BEFORE
INCOME TAXES 2,426 1,202 3,365 1,283
INCOME TAXES
Federal, state
and deferred 970 481 1,346 513
----------- ------------ ---------- ----------
NET INCOME $ 1,456 $ 721 $ 2,019 $ 770
=========== ============ ========== ==========
EARNINGS PER SHARE $ 1,456 $ 721 $ 2,019 $ 770
Weighted average common
stock outstanding 1,000 1,000 1,000 1,000
=========== ============ ========== ==========
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
PEEBLES INC. & SUBSIDIARIES
(dollars in thousands)
(Unaudited)
Six-Month Period Ended
August 1, 1998 August 2, 1997
--------------- ----------------
OPERATING ACTIVITIES
Net Income $ 2,019 $ 770
Adjustments to reconcile
net income to net cash
Provided by operating activities:
Depreciation 2,646 2,241
Amortization 1,626 1,400
Provision for doubtful accounts 657 756
LIFO/LCM Reserve adjustment 608 479
Changes in operating assets
and liabilities:
Accounts receivable 4,140 4,727
Merchandise inventories (2,290) (2,105)
Accounts payable 2,378 451
Other assets and liabilities (3,319) (1,347)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,465 7,372
INVESTING ACTIVITIES
Acquisition of the Ira A. Watson Co. (4,451) --
Purchase of property and equipment (5,958) (5,436)
Other 383 (20)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (10,026) (5,456)
FINANCING ACTIVITIES
Proceeds from revolving line of credit
and long-term debt 188,248 126,798
Reduction in revolving line of credit
and long-term debt (191,577) (128,883)
Proceeds from 1998 Credit Agreement
- acquisition of Ira A. Watson Co. 24,000 --
Retirement of Ira A. Watson Co.
pre-acquisition bank debt & trade
liabilities (17,895) --
Financing Fees - Credit Agreement, as
amended and restated (1,113) --
---------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 1,663 (2,085)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 102 (169)
Cash and cash equivalents
beginning of period 432 228
--------- --------
CASH AND CASH EQUIVALENTS END OF PERIOD $ 534 $ 59
========= ========
See notes to condensed consolidated financial statements
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
PEEBLES INC. & SUBSIDIARIES
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
Common Stock
<S> <C> <C> <C> <C>
Par Additional Retained
Shares Value Capital Earnings (Deficit)
------- ------- ----------- ------------------
Balance February 1, 1997 1,000 $ 1 $ 59,307 $ (9,885)
Net income -- -- -- 770
------- -------- -------- ---------
Balance August 2, 1997 1,000 $ 1 $ 59,307 $ (9,115)
======= ========= ======== =========
Balance January 31,1998 1,000 $ 1 $ 59,307 $ (3,835)
Net income -- -- -- 2,019
------ -------- -------- --------
Balance August 1, 1998 1,000 $ 1 $ 59,307 $ (1,816)
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
PEEBLES INC. & SUBSIDIARIES
August 1, 1998
(dollars in thousands, except per share amounts)
NOTE A-ORGANIZATION AND BASIS OF PRESENTATION
Consolidation: The consolidated financial statements include the accounts of
Peebles Inc. and its wholly owned subsidiaries, Carlisle Retailers, Inc.
("Carlisle's") and the Ira A. Watson Co. ("Watson's"), (together "Peebles"
or the "Company"). All significant intercompany balances and transactions
have been eliminated.
Acquisition of the Ira A. Watson Co.: On June 29, 1998, a merger (the "Watson
Merger") was consummated whereby Watson's, a Delaware corporation, became a
wholly-owned subsidiary of Peebles Inc. Watson's, with its corporate
headquarters and distribution center located in Knoxville, TN, operated 24 store
locations in seven states immediately prior to the Watson Merger. The results
of operations for these 24 Watson's stores are included in Peebles' consolidated
financial statements beginning on June 29, 1998. The stores will continue to
carry the Watson's name through the end of the current fiscal year. The
distribution center in Knoxville will remain in operation as a component of the
Peebles logistics network. The Watson's corporate office functions were
transferred to the Peebles corporate office and the Knoxville offices were
closed during August.
The $4,451 cash purchase price included $1,848 to the equity holders of
Watson's, $1,352 to a financial services company for the Watson's proprietary
credit card accounts receivable, and $1,251 in acquisition expenses. Proceeds
used to fund the Watson Merger were provided by the Credit Agreement, as amended
and restated on June 29, 1998 (the "Amended and Restated Credit Agreement").
The Watson Merger has been accounted for using the purchase method of
accounting. The preliminary allocation of the purchase price is as follows:
Purchase Price $ 4,451
Tangible net assets (liabilities) acquired:
Accounts receivable, net $ 1,185
Merchandise inventory, net 10,000
Fixed assets, net 5,446
Bank debt (10,403)
Trade liabilities, net (6,290)
Other net liabilities (1,589)
---------
Tangible net assets (liabilities) acquired (1,651)
Excess of cost over net assets acquired $ 6,102
The excess of cost over net assets acquired is being amortized over a
twenty-five year period beginning June 29, 1998.
Pro-Forma Financial Information: The following unaudited pro-forma financial
information reflects the results of operations as if the Watson Merger occurred
at the beginning of the six-month periods ended August 1, 1998 and August 1,
1997, respectively. These pro-forma results have been prepared for comparison
purposes only and do not purport to be indicative of what would have occurred
had the Watson Merger been completed at the beginning of either of the six-month
periods.
Six-Month Period Ended
August 1, 1998 August 2, 1997
-------------- --------------
Net sales $ 132,919 $ 128,171
Net loss (2,008) (1,070)
Net loss per share (2,008) (1,070)
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
PEEBLES INC. & SUBSIDIARIES
NOTE A-ORGANIZATION AND BASIS OF PRESENTATION -- Continued
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal and
recurring accruals) considered necessary for a fair presentation have been
included. In addition, the operating results for the current fiscal periods are
not necessarily indicative of the results that may be expected for the fiscal
year ending January 30, 1999, due to the seasonal nature of the business of
Peebles. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the fiscal year ended January 31, 1998.
NOTE B-ACCOUNTS RECEIVABLE
Accounts receivable are shown net of $1,700, $1,400 and $1,349 representing the
allowance for uncollectible accounts at August 1, 1998, January 31, 1998 and
August 2, 1997, respectively. As a service to its customers, the Company offers
credit through the use of its own charge card, certain major credit cards and a
layaway plan. The Peebles' customer usually resides in the local community
immediately surrounding the store location. Peebles stores serve these local
customers in 15 states: Virginia, Tennessee, North Carolina, Maryland, Kentucky,
West Virginia, Alabama, Pennsylvania, South Carolina, Ohio, Delaware, New York,
Indiana, New Jersey, and Missouri. The Company does not require collateral from
its customers.
NOTE C-MERCHANDISE INVENTORIES
Merchandise inventories are accounted for by the retail inventory method applied
on a last in, first out ("LIFO") basis. Due to an acquisition in 1995 accounted
for using the purchase method, the recorded value of merchandise inventories was
increased to fair value (the "Fair Value Adjustment"). The net effect of the
LIFO and market reserves adjusts inventory to lower of LIFO cost or market.
Merchandise inventories consisted of the following:
<TABLE>
<S> <C> <C> <C>
August 1, 1998 January 31, 1998 August 2, 1997
--------------- ---------------- --------------
Merchandise inventories at FIFO cost $ 64,132 $ 51,234 $ 49,553
Fair Value Adjustment 7,436 7,436 7,436
LIFO/ market reserve (1,311) (703) (932)
----------- ----------- -----------
Merchandise inventories at lower of cost
Or market $ 70,257 $ 57,967 $ 56,057
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
PEEBLES INC. & SUBSIDIARIES
NOTE D - LONG-TERM DEBT
Long -term debt consisted of the following:
<TABLE>
<S> <C> <C> <C>
August 1,1998 January 31, 1998 August 2, 1997
-------------- ---------------- --------------
Senior Revolving Facility $ 30,500 $ 32,000 $ 31,000
Senior Term Note A 14,250 15,275 16,625
Senior Term Note B 59,850 37,094 37,298
Swingline Facility 2,232 1,791 2,607
--------- --------- -----------
106,832 86,160 87,530
Less current maturities:
Senior Term Notes A & B 3,600 4,083 2,858
Senior Revolving &
Swingline Facilities 2,232 570 6,107
--------- --------- ----------
Total current maturities 5,832 4,653 8,965
--------- --------- ----------
$ 101,000 $ 81,507 $ 78,565
The Company has a credit facility (the "Credit Agreement") which provides a
Senior Term Facility, a Senior Revolving Facility, and a Swingline Facility.
The Credit Agreement was amended and restated (the "1998 Credit Agreement") on
June 29, 1998 (the "Restatement Date") to facilitate the Watson Merger. The
1998 Credit Agreement i) provided an additional $24 million in proceeds under
the Senior Term Facility; ii) reduced the scheduled principal payments under the
Senior Term Facility; iii) extended the maturity dates of both the Senior Term
Facility and the Senior Revolving Facility; and iv) adjusted the applicable
interest rates to vary based on certain Company performance criteria, tied to
certain restrictive covenants. The Company deferred an additional $1,113 in
financing fees to amend and restate the Credit Agreement. These financing fees
are being amortized over a five-year period. The 1998 Credit Agreement is
secured by a first priority security interest in substantially all the personal
property and certain real property of Peebles. Restrictive covenants prohibit
the payment of cash dividends in any fiscal year.
The Senior Term Facility includes two notes, Senior Term Note A and Senior Term
Note B. On the Restatement Date, the outstanding principal balances of Senior
Term Note A and Senior Term Note B were increased $644 to $15,000 and $23,008
to $60,000, respectively. Under the 1998 Credit Agreement, Senior Term Note A
and Senior Term Note B accrue interest quarterly in arrears at a LIBOR based
rate which is expected to vary 25 to 50 basis points, dependent primarily on the
Company's operating performance in relation to outstanding debt at the end of
each fiscal quarter. Senior Term Note A and Senior Term Note B currently bear
interest at LIBOR plus 2.50% and LIBOR plus 3.00%, respectively. Senior Term
Note A and Senior Term Note B mature April 30, 2003 and 2004, respectively.
The amount available under the Senior Revolving Facility (the "Revolver") is
determined by a defined asset based formula with maximum borrowings limited to
$75 million less outstanding amounts under letters of credit. The Revolver
matures on April 30, 2003. The Revolver has no specific paydown provisions.
However, the Company classifies a portion of the Revolver outstanding balance as
short-term, if based on the projected operations during the current fiscal year,
the Revolver outstanding balance is expected to be less at any fiscal month
end than the outstanding balance at the end of the current fiscal period. The
Company pays a fee of 1/2 of 1% per annum on any unused portion of the Senior
Revolving Facility. Under the 1998 Credit Agreement, the Revolving Facility
bears interest at the same rate as Senior Term Note A.
Loans under the Swingline Facility are drawn and repaid daily based on the
operating activity of the Company. Aggregate amounts outstanding under the
Swingline Facility cannot exceed $5 million. Excess borrowings or funding
outside these amounts revert to the Revolver. The Swingline
Facility bears interest at prime plus 1-1/2% and has no LIBOR conversion option.
Aggregate principal payments under the 1998 Credit Agreement are as follows:
six-month period ended January 30, 1999 -- $1,800; Fiscal Years: 1999 -
$3,600; 2000 -- $3,600; 2001 -- $3,600; 2002 -- $3,600; 2003 -- $1,350.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
PEEBLES INC. & SUBSIDIARIES
NOTE E-INCOME TAXES
Differences between the effective rate of income taxes and the statutory rate
arise principally from state income taxes and non-deductible amortization
related to certain purchase accounting adjustments.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(dollars in thousands, except per share amounts)
The following management's discussion and analysis provides information with
respect to the results of operations for the three-month period (or "Fiscal
Quarter") and six-month period ended August 1, 1998 in comparison with the
Fiscal Quarter and six-month period ended August 2, 1997. With the consummation
of the Watson Merger on June 29, 1998, Watson's became a wholly owned subsidiary
of Peebles Inc. The results of consolidated operations includes the 24 Watson's
stores beginning June 29, 1998.
Consolidated net sales and results of consolidated operations, expressed as
a percentage of net sales are presented below for the three-month and six-month
periods ended August 1, 1998 and August 2, 1997.
Three-Month Period Ended Six-Month Period Ended
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
August 1,1998 August 2,1997 August 1,1998 August 2, 1997
------------- ------------- ------------- --------------
Net sales $ 57,698 $ 49,808 $ 108,711 $ 94,958
% increase 15.8% 17.6% 14.5% 18.1%
Comparable stores % increase in sales: 2.9% 8.1% 4.5% 6.5%
Total stores in operation at period end 112 79 112 79
Total stores opened (closed) during the period 24 (1) 28 3
Operations as a Percentage of Net Sales:
Cost of sales 58.1% 59.3% 59.5% 60.8%
Selling, general & administrative expenses 30.2 30.4 29.7 29.8
Depreciation and amortization 3.2 3.3 3.4 3.4
------- ------- ------ ------
Operating Income 8.5 7.0 7.4 6.0
Interest Expense 4.3 4.6 4.3 4.7
Other income -- .1 -- --
Provision for income taxes 1.7 1.0 1.2 .5
------- ------ ------
Net Income 2.5% 1.5% 1.9% .8%
</TABLE>
In both the Fiscal Quarter and six-month period ended August 1, 1998, new store
growth was the primary reason total net sales increased 15.8% and 14.5%,
respectively, in comparison to the same periods in the prior year. Net sales at
comparable stores, benefiting from greater consumer spending on soft apparel
also showed increases in both the Fiscal Quarter and six-month period ended
August 1, 1998. A number of the Company's markets experienced a milder than
normal winter, allowing for somewhat earlier and stronger sales of Spring and
summer merchandise. As a result, net sales at comparable stores increased 6.2%
in the first Fiscal Quarter ended May 1, 1998. Strong comparable store net
sales through May and early June fueled increases in the second Fiscal Quarter.
The strength of these sales early in the season left less clearance merchandise
toward the end of the season, which moderated the increases in comparable store
net sales, but benefited gross margin. As a result, net sales at comparable
stores increased 2.9% for the second Fiscal Quarter and 4.5% for the six-month
period ended August 1, 1998.
The Watson Merger added 24 new stores beginning June 29, 1998. From that date
to August 1, 1998, these stores contributed $4,587 in net sales to both the
Fiscal Quarter and six-month period ended August 1, 1998. The Company opened
four new stores in the first Fiscal Quarter that contributed $1,058 and $1,756
to the second Fiscal Quarter and the six-month period ended August 1, 1998,
respectively. A full fiscal three months and six-months of operation of a net
seven stores opened in 1997 provided the remainder of the sales increases
at non-comparable stores.
Cost of sales as a percentage of net sales declined in both the second Fiscal
Quarter and the six-month period ended August 1, 1998, measured against the
same periods in the prior year. In the second fiscal quarter, strong sales
beginning with Mother's Day and continuing through early June resulted in a
higher seasonal sell through, requiring fewer clearance markdowns later in the
season, all lowering cost of sales. In the first Fiscal Quarter, stronger net
sales in the fourth fiscal quarter of 1997, the milder than normal winter and
earlier delivery of Spring 1998 merchandise also resulted in fewer clearance
markdowns and a greater proportion of non-promotional seasonal sales. As a
result, the cost of sales percentage for the six-month period ended August 1,
1998 was 59.5%, down from 60.8% for the prior year comparable period. Partially
offsetting these positive influences over cost of sales were the new store
locations which typically run a higher cost of sales percentage relative to
mature stores, especially those in markets new to the Company, due to heavier
promotions and the lack of comparable sales history. The Watson's stores are
expected to adversely impact cost of sales in the third and fourth Fiscal
Quarters as the inventory mix is aligned to the Peebles merchandising strategy.
Prior to the merger, Watson's experienced liquidity problems which adversely
impacted both the inventory level and the inventory assortment. Deeper
discounting will be required to clear existing merchandise and several fiscal
quarters will be required to increase inventory levels and adjust assortments to
meet consumer demand.
Selling, general and administrative ("SG&A") expenses, exclusive of depreciation
and amortization, improved slightly in both the second Fiscal Quarter and the
six-month period ended August 1, 1998. Reductions came from the Company's
ability to successfully leverage its SG&A expenses as the economies of scale
are realized in the central office and distribution facilities. Offsetting
these reductions in SG&A expenses, are the new stores' higher occupancy,
payroll, and advertising expenses as a percentage of net sales as compared to
mature stores. The Company has been successful in controlling these expenses
during growth periods, and expects to realize further efficiencies through
economies of scale in succeeding Fiscal Quarters.
The distribution center in Knoxville, TN obtained in the Watson Merger will be
a component of the Peebles logistics network, serving store locations primarily
west of the Appalachian Mountains. The operation of this second distribution
center will create additional SG&A expense in the short term, but as a platform
for store location growth, is expected to reduce SG&A expense as a percentage
of sales in succeeding fiscal years. The Watson's corporate office was closed
in August 1998 as the responsibilities were absorbed by the Peebles corporate
office in South Hill, VA.
Depreciation and amortization expense as a percentage of net sales for both the
second Fiscal Quarter and the six-month period ended August 1, 1998 remained
consistent with the same periods in the prior year as capital expenditures were
proportionate to sales growth. Depreciation and amortization expense is
expected to increase as a result of the additional goodwill from the Watson
Merger and the new fixturing required to upgrade the merchandise presentation in
a certain number of the Watson's stores. Both major and minor remodelings will
be undertaken over the next eight to ten Fiscal Quarters.
Interest expense for the Fiscal Quarters ended August 1, 1998 and August 2, 1997
was $2,482 and $2,313, respectively, and $4,682 and $4,456, respectively for the
six-month periods then ended. New stores requirements, primarily inventory,
account for the increase in interest expense dollars. As a percentage of net
sales, however, interest expense declined to 4.3% in the fiscal quarter ended
August 1, 1998. For the six-month periods ended August 1, 1998 and August 2,
1997, interest expense as a percentage of sales was 4.3% and 4.7%, respectively.
Additional debt incurred to consummate the Watson Merger on June 29, 1998 will
increase interest expense in the third and fourth Fiscal Quarters of the current
year relative to the prior year.
The income tax expense for the three-month and six-month periods ended August 1,
1998 and August 2, 1997 was accrued at an effective tax rate of 40%. The
effective tax rate differs from the statutory rate primarily due to state income
taxes and nondeductible amortization relating to certain acquisition related
assets.
As a result of the changes discussed above, net income as a percentage of net
sales for the three-month and six-month periods ended August 1, 1998 was 2.5%
and 1.9%, respectively. In the prior year comparable periods ended August 2,
1997, net income as a percentage of net sales was 1.5% and .8%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for capital expenditures in
connection with both the Company's new store expansion and remodeling program
and for working capital needs. The Company's primary sources of funds are
cash flow from continuing operations, borrowings under the Credit Agreement and
trade accounts payable. The Company's inventory levels typically build
throughout the fall, peaking during the Christmas selling season, while accounts
receivable peak during December and decrease during the first fiscal quarter.
Capitalexpenditures typically occur evenly throughout the first three quarters
of each year.
The Company's operating activities provided net cash of $8,465 and $7,372 in the
six-month periods ended August 1, 1998 and August 2, 1997, respectively. The
Company had working capital of $68.7 million and $55.8 million at August 1, 1998
and August 2, 1997, respectively. The Watson Merger had a significant impact
on working capital at August 1, 1998 as approximately $10 million in merchandise
inventory and $1.2 million in accounts receivable were added as of June 29,
1998. Operations provided more net cash in the current six-month period in
comparison to the prior year as operations were more profitable during the
six-month period ended August 1, 1998. Gross margin revenue increased
proportionately faster than SG&A and cash interest expenses. Also, inventory
turnover increased resulting in accounts payable providing cash ratably faster
than the cash used to build inventories.
Net cash used in investing activities totaled $10,026 and $5,456 for the
six-month periods ended August 1, 1998 and August 2, 1997, respectively.
Capital expenditures, increased from $5,436 to $5,958 for the six-month periods
ended August 2, 1997 and August 1, 1998, respectively. The Company opened four
new stores, with 62,000 of net selling square footage of in the six-month period
ended August 1, 1998, and three new stores with 65,000 of net selling square
footage in the comparable prior year period. In the prior year, two store re-
locations were underway at August 2, 1997, adding to capital expenditures. In
the current year, one major store remodeling is nearly complete, several minor
remodeling projects are underway, and expenditures are being incurred for the
continuing enhancement of the Company's register systems and distribution center
handling equipment. Further, capital expenditures in July included enhancements
to the handling equipment at the distribution center in Knoxville, and
merchandise presentation fixturing at a number of the acquired
Watson's stores.
The Watson Merger impacted cash used in investing activities and cash provided
by financing activities. An additional $24 million was added to the Senior Term
Facility as the Company's Credit Agreement was amended and restated to
facilitate the Watson Merger on June 29, 1998. These proceeds were used in
investing activities to: a) acquire the outstanding equity of Watson's for
$1,848; b) acquire the outstanding proprietary Watson's charge card receivables
from a third party financial services company for $1,352; and c) pay related
acquisition fees of $1,251, for a total impact on investing activities of
$4,451. The remaining proceeds were used to retire Watson's pre-acquisition:
a) bank debt; b) remaining liabilities under a plan of reorganization approved
by a bankruptcy court in 1995; and c) outstanding trade liabilities. The total
impact on financing activities was to use $17,895 for these activities. To
amend and restate the Credit Agreement, $1,113 in financing fees were paid.
In addition to the 4 new Peebles stores added during the six-month period ended
August 1, 1998 and the 24 Watson's stores added by Watson Merger, the Company
currently plans to open 7 additional store locations in the third and fourth
Fiscal Quarters of 1998. The Company has signed non-cancelable leases for two
new store locations, one opening in the third Fiscal Quarter and one opening in
the fourth Fiscal Quarter. These two stores will add 44,000 net selling square
footage, and are located in markets contiguous to existing Peebles markets in
states which Peebles currently operates stores. The Company has signed a
purchase agreement to acquire 5 former Stone & Thomas store locations from
Elder-Beerman (the "Stone & Thomas Purchase"). The projected closing date for
this purchase is September 30, 1998 and the stores are projected to open under
the Peebles name in the fourth Fiscal Quarter. The stores are located in
strategic markets, contiguous to Peebles' existing markets, and in states which
Peebles currently operates stores. Existing merchandise inventory
and proprietary charge accounts receivable are not included in the Stone &
Thomas Purchase.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
Based on historical experience, the Company estimates that the cost of opening a
new store will include capital expenditures of approximately $425 for leasehold
improvements and fixtures and approximately $425 for initial inventory,
approximately one-third of which is normally financed through vendor credit.
Accounts receivable for new stores typically build to 15% of net sales or
approximately $300 within 24 months of the store opening. The Company may also
incur capital expenditures to acquire existing stores.
The Company finances its operations, capital expenditures, and debt service
payments with funds available under the Revolver. The maximum
amount available under the Senior Revolving Facility is $75 million less amounts
outstanding under letters of credit. The actual amount available is determined
by an asset- based formula, adjusted for seasonal working capital requirements.
The Company believes the cash flow generated from operating activities together
with funds available under the Senior Revolving Facility will be sufficient to
fund the investing activities and the required payments under the 1998 Credit
Agreement.
SEASONALITY AND INFLATION
As a retailer offering predominately soft-apparel and selected home accessories,
the Company's business is seasonal, although less heavily weighted in the fourth
fiscal quarter than retailers with comparable offerings of merchandise. Over
the past three fiscal years, quarterly sales as a percentage of total sales have
been consistent at approximately 21%, 22%, 24% and 33% for the first through
fourth fiscal quarters, respectively. Peebles believes the positioning of its
stores in small to medium sized communities with limited competition, along with
the Company's less-promotional, every day fair value, pricing strategy, produces
operations less dependent on the fourth fiscal quarter. However, the third and
fourth fiscal quarters are bolstered by the important back-to-school and
Christmas holiday selling seasons.
The Company does not believe that inflation has had a material effect on its
results of operations during the past three fiscal years. Peebles uses the
retail inventory method applied on a LIFO basis in accounting for its
inventories. Under this method, the cost of products sold reported in the
financial statements approximates current costs and thus reduces the likelihood
of a material impact that increases costs. However, there can be no assurance
that the Company's business will not be impacted by inflation in the future.
YEAR 2000 TECHNOLOGICAL ISSUES
In 1997, the Company began a comprehensive analysis of its information systems
to determine the impact of date-related processing when the year changes to
2000 and the systems do not recognize this year as greater than 1999. This
analysis was completed in the second Fiscal Quarter.
Management expects the Company's information systems to be prepared to
accurately process information after the year changes to 2000 by June 1999. The
Company's primary information systems are on two IBM AS400 mainframes, with the
majority of the software developed internally. In 1985, Peebles implemented
standards for in-house programmers to follow which considered the year 2000
issue. As a result, many of the Company's in-house information systems, with
programs written or modified after 1985, are already year 2000 compliant.
However, four programmers began a detailed review of all in-house programming
code in March 1998. To date, this review and the correction of any
non-compliant programming is approximately 50% completed, with a targeted
completion date of March 1999.
Packaged software, which includes the IBM 4690 register systems, and certain
PC-based systems serve as supplemental support, sub-systems, to the mainframe
systems. The Company has reviewed these systems in context with the mainframe
systems and determined that modifications required are immaterial and can be
completed in the first Fiscal Quarter of 1999. IBM has certified the register
systems and personal computers used in sub-systems to be year 2000 compliant.
The costs associated with the evaluation and modification to the information
systems are being expensed as incurred, and are not significant to the overall
financial position or results of operations of the Company. Management expects
the Company to have identified and addressed material problems,if any, caused by
third-party service interruptions, including suppliers, by the second fiscal
quarter of 1999.
FORWARD-LOOKING STATEMENTS
Certain statements in this quarterly report on Form 10-Q are forward-looking,
based on the Company's evaluation of historical information and judgments on
future events, based on the best information available at the time. Underlying
these statements are risks and uncertainties which could cause actual results to
differ materially from those forward-looking statements. These risks and
uncertainties include, but are not limited to: i) consumer demand for the
Company's soft-apparel merchandise; ii) competitive and consumer demographic
shifts within the Company's markets; iii) the Company's access to, and cost of,
capital; iv) the Company's ability to locate and open new store locations on a
timely and profitable basis; v) the Company's ability to integrate acquired
store into Peebles' overall operations on a timely basis; and vi) the successful
managementof inventory levels, related costs and selling, general and
administrative costs.
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.68 Amended and Restated Credit Agreement dated as of June 29,
1998 by and among Peebles Inc., Fleet Bank, N.A., as agent,
and the financial institutions parties thereto
27 Financial Data Schedule
b. Reports on Form 8-K:
1) May 29, 1998, reporting Item 5, Other Events
2) July 14, 1998, reporting Item 2, Acquisition of Assets
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PEEBLES INC.
Date: September 10, 1998 By /s/ Michael F. Moorman
-------------------------
Michael F. Moorman
President and Chief Executive Officer
(Principal Executive Officer)
By /s/ E. Randolph Lail
-------------------------
E. Randolph Lail
Chief Financial Officer, Senior Vice President-
Finance, Treasurer and Secretary
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-30-1998 JAN-30-1998
<PERIOD-END> AUG-01-1998 AUG-01-1998
<CASH> 534 534
<SECURITIES> 0 0
<RECEIVABLES> 29969 29969
<ALLOWANCES> 1700 1700
<INVENTORY> 70257 70257
<CURRENT-ASSETS> 101940 101940
<PP&E> 73345 73345
<DEPRECIATION> 26593 26593
<TOTAL-ASSETS> 197767 197767
<CURRENT-LIABILITIES> 33213 33213
<BONDS> 107062 107062
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 57491 57491
<TOTAL-LIABILITY-AND-EQUITY> 197767 197767
<SALES> 57698 108711
<TOTAL-REVENUES> 57698 108711
<CGS> 33512 64737
<TOTAL-COSTS> 19278 35927
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2482 4682
<INCOME-PRETAX> 2426 3365
<INCOME-TAX> 970 1346
<INCOME-CONTINUING> 1456 2019
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1456 2019
<EPS-PRIMARY> 1456 2019
<EPS-DILUTED> 1456 2019
</TABLE>
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of June 29, 1998
by and among
PEEBLES INC.,
FLEET BANK, N.A.,
AS AGENT,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. Amount and Terms of Credit -2-
1.01 Commitment -2-
1.02 Minimum Borrowing Amounts, etc. -5-
1.03 Notice of Borrowing -5-
1.04 Disbursement of Funds -6-
1.05 Notes -7-
1.06 Conversions -8-
1.07 Pro Rata Borrowings -9-
1.08 Interest -9-
1.09 Interest Periods -10-
1.10 Increased Costs, Illegality, etc -11-
1.11 Compensation -13-
1.12 Change of Lending Office -13-
1.13 Replacement of Lenders -14-
SECTION 2. Letters of Credit. -14-
2.01 Letters of Credit -14-
2.02 Minimum Stated Amount -15-
2.03 Letter of Credit Requests; Notices of Issuance -16-
2.04 Agreement to Repay Letter of Credit Drawings -16-
2.05 Letter of Credit Participations -16-
2.06 Increased Costs -19-
SECTION 3. Fees; Commitments -19-
3.01 Fees -19-
3.02 Voluntary Reduction of Commitments -20-
3.03 Mandatory Adjustments of Commitments, etc -21-
SECTION 4. Payments -21-
4.01 Voluntary Prepayments -21-
4.02 Mandatory Prepayments. -22-
4.03 Method and Place of Payment -28-
4.04 Net Payments -28-
4.05 Blocked Accounts -29-
SECTION 5. Conditions Precedent -30-
5.01 Execution of Agreement; Notes -31-
5.02 No Default; Representations and Warranties -31-
5.03 Notice of Borrowing; Letter of Credit Request; Etc. -31-
5.04 Officer's Certificate -31-
5.05 Opinions of Counsel -31-
5.06 Corporate Documents; Proceedings -31-
5.07 Plans; Existing Indebtedness Agreements; Shareholders'
Agreements; Management Agreements; Employment Agreements -32-
5.08 Adverse Change, etc -33-
5.09 Litigation -33-
5.10 Approvals -33-
5.11 Consummation of the Watson Merger -33-
5.12 Common Stock Issuance -34-
5.13 Minimum Availability -34-
5.14 Guaranties -34-
5.15 Security Documents -34-
5.16 Solvency -37-
5.17 Insurance Policies -37-
5.18 Fees -37-
5.19 Environmental Reports -37-
5.20 Consent Letter -37-
5.21 Initial Borrowing Base Certificate -37-
5.22 Projections; Pro Forma Financial Statements -37-
5.23 Existing Indebtedness -38-
5.24 Repayment and Termination of Prior Indebtedness and Related Liens -38-
5.25 Intentionally Omitted -38-
5.26 Letter Agreement -38-
5.27 Inventory Appraisal -38-
5.28 Examination -38-
5.29 Letter of Direction and Flow of Funds -38-
5.30 Intentionally Omitted -39-
5.31 Kelso Letter Agreement -39-
5.32 Other Documents -39-
SECTION 6. Representations, Warranties and Agreements -39-
6.01 Corporate Status -39-
6.02 Corporate Power and Authority -39-
6.03 No Violation -40-
6.04 Litigation -40-
6.05 Use of Proceeds; Margin Regulations -40-
6.06 Governmental Approvals -41-
6.07 Investment Company Act -41-
6.08 Public Utility Holding Company Act -41-
6.09 True and Complete Disclosure -41-
6.10 Financial Condition; Financial Statements -42-
6.11 Security Interests -42-
6.12 Representations and Warranties in Documents -43-
6.13 Consummation of Merger and Stock Issuances -43-
6.14 Tax Returns and Payments -43-
6.15 Compliance with ERISA -43-
6.16 Subsidiaries -44-
6.17 Patents, etc -44-
6.18 Pollution and Other Regulations -45-
6.19 Properties -45-
6.20 Labor Relations -46-
6.21 Existing Indebtedness -46-
6.22 Capitalization -46-
6.23 Compliance with Statutes, etc. -46-
6.24 Inventory and Accounts -46-
6.25 Consummation of Watson Merger -47-
SECTION 7. Affirmative Covenants -47-
7.01 Information Covenants -48-
7.02 Books, Records and Inspections -49-
7.03 Maintenance of Property; Insurance -50-
7.04 Payment of Taxes -50-
7.05 Consolidated Corporate Franchises -50-
7.06 Compliance with Statutes, etc -50-
7.07 ERISA -50-
7.08 Good Repair -51-
7.09 End of Fiscal Years; Fiscal Quarters -51-
7.10 Use of Proceeds -51-
7.11 Additional Security; Further Assurances -52-
7.12 Interest Rate Agreement -53-
7.13 Additional Mortgages -53-
7.14 Merger of Appalachian Distributing Corporation -54-
7.15 Repayment of Indebtedness and Release of Liens. -54-
SECTION 8. Negative Covenants -54-
8.01 Changes in Business -54-
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc -54-
8.03 Liens -55-
8.04 Indebtedness -57-
8.05 Capital Expenditures -57-
8.06 Advances, Investments and Loans -58-
8.07 Prepayments of Indebtedness, etc -62-
8.08 Capital Stock and Dividends, etc -62-
8.09 Transactions with Affiliates -64-
8.10 Fixed Charge Coverage Ratio -64-
8.11 Minimum Consolidated EBITDA -65-
8.12 Total Leverage Ratio -66-
8.13 Interest Coverage Ratio -67-
8.14 Subsidiary Stock -68-
SECTION 9. Events of Default -68-
9.01 Payments -68-
9.02 Representations, etc. -68-
9.03 Covenants -68-
9.04 Default Under Other Agreements -68-
9.05 Bankruptcy, etc. -68-
9.06 ERISA -69-
9.07 Liens -69-
9.08 Guaranties -69-
9.09 Judgments -70-
9.10 Change of Control -70-
SECTION 10. Definitions -70-
SECTION 11. The Agent -101-
11.01 Appointment -101-
11.02 Nature of Duties -101-
11.03 Lack of Reliance on the Agent -101-
11.04 Certain Rights of the Agent -102-
11.05 Reliance -102-
11.06 Indemnification -102-
11.07 The Agent in Its Individual Capacity -102-
11.08 Holders -103-
11.09 Resignation by the Agent -103-
SECTION 12. Miscellaneous. -103-
12.01 Payment of Expenses, etc -103-
12.02 Right of Setoff -104-
12.03 Notices -104-
12.04 Benefit of Agreement -105-
12.05 No Waiver; Remedies Cumulative -106-
12.06 Payments Pro Rata -107-
12.07 Calculations; Computations -107-
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury
Trial -108-
12.09 Counterparts -108-
12.10 Effectiveness -108-
12.11 Headings Descriptive -109-
12.12 Amendment or Waiver -109-
12.13 Survival -110-
12.14 Domicile of Loans -110-
12.15 Confidentiality -110-
12.16 Consent of Carlisle and Holdings -110-
SCHEDULES
SCHEDULE 1.01 -- Commitments
SCHEDULE 5.24 -- Prior Indebtedness
SCHEDULE 6.06 -- Government Approvals
SCHEDULE 6.16 -- Subsidiaries
SCHEDULE 6.19 -- Properties
SCHEDULE 6.21 -- Existing Indebtedness
SCHEDULE 6.22 -- Capitalization
SCHEDULE 6.24 -- Inventory and Accounts
SCHEDULE 7.03 -- Insurance Policies
SCHEDULE 7.09 -- Fiscal Quarters and Years
SCHEDULE 8.03 -- Existing Liens
SCHEDULE 8.06 -- Investments
SCHEDULE 8.09 -- Management Fees
SCHEDULE 12.03 -- Notice Address
EXHIBITS
EXHIBIT 1.03 -- Form of Notice of Borrowing
EXHIBIT 1.05(A) -- Form of A Term Note
EXHIBIT 1.05(B) -- Form of B Term Note
EXHIBIT 1.05(C) -- Form of Bridge Note
EXHIBIT 1.05(D) -- Form of Revolving Note
EXHIBIT 1.05(E) -- Form of Swingline Note
EXHIBIT 2.01 -- Existing Letters of Credit
EXHIBIT 2.03 -- Form of Letter of Credit Request
EXHIBIT 5.14 -- Form of Holdings Guaranty
EXHIBIT 5.15(A) -- Form of Holdings Pledge Agreement
EXHIBIT 5.15(B) -- Form of Borrower Security Agreement
EXHIBIT 5.15(C) -- Form of Trademark Security Agreement
EXHIBIT 5.15(D) -- Real Property Collateral
EXHIBIT 5.16 -- Form of Solvency Certificate
EXHIBIT 5.21 -- Form of Borrowing Base Certificate
EXHIBIT 7.01(e) -- Form of Compliance Certificate
EXHIBIT 7.01(i) -- Form of Inventory Schedule
EXHIBIT 12.04 -- Form of Assignment Agreement
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of June 29, 1998, is by and among PEEBLES INC. a Virginia
corporation (the "Borrower"), the lending institutions from time to time parties
hereto (each a "Lender" and, collectively, the "Lenders"), and FLEET BANK,
N.A., as agent (the "Agent") for the Lenders. Unless otherwise defined herein,
all capitalized terms used herein and defined in Section 10 are used herein as
so defined.
RECITALS:
WHEREAS, PHC Retail Holding Company, a Delaware corporation ("Holdings"), and
Peebles Acquisition Corp., a Delaware corporation and a Wholly-Owned Subsidiary
of Holdings ("Acquisition Corp."), were formed for the purpose of acquiring
all of the issued and outstanding capital stock of the Borrower;
WHEREAS, the acquisition was accomplished by the merger of
Acquisition Corp. with and into the Borrower, with the Borrower as the surviving
corporation, pursuant to term and conditions of the Agreement and Plan of
Merger dated as of April 3, 1995 as amended as of June 2, 1995 (the "Merger
Agreement") by and among Holdings, Acquisition Corp. and the Borrower;
WHEREAS, the Borrower, the Agent and the Lenders have
entered into that certain Credit Agreement dated as of June 9, 1995, as amended
as of September 15, 1995, March 8, 1996, May 16, 1997, July 30, 1997 and April
9, 1998 (as so amended, the "Existing Credit Agreement") whereunder the
Lenders extended an A Term Facility in an aggregate principal amount of
$20,000,000, a B Term Facility in an aggregate principal amount of $40,000,000,
a Bridge Facility in an aggregate principal amount of $6,623,286 and a Revolving
Facility in an aggregate principal amount not to exceed $75,000,000, the
proceeds of which have been used by the Borrower as provided therein; and
WHEREAS, the Borrower has requested that certain Lenders make
additional A Term Loans in an aggregate principal amount of $643,750 and
additional B Term Loans in an aggregate principal amount of $23,008,000,
subject to certain restrictions set forth herein, the proceeds of which
additional A Term Loans and B Term Loans will be used by the Borrower (i) to
finance the Watson Merger (as defined below) and (ii) to pay fees and expenses
incurred in connection with the Watson Merger;
WHEREAS, the Borrower and Peebles Acquisition Subsidiary,
Inc., a Delaware corporation ("PAS"), have entered into that certain Merger
Agreement dated as of May 21, 1998 (the "Watson Merger Agreement") with Ira
A. Watson Co., a Delaware corporation ("Watson"), pursuant to which PAS will
merge with and into Watson (the "PAS/Watson Merger") with Watson as the
surviving corporation and becoming a Wholly-Owned Subsidiary of the
Borrower;
WHEREAS, the Lenders are willing to continue to make term
loans and to continue to extend commitments to continue to make revolving credit
loans and certain Lenders are willing to make additional A Term Loans and B
Term Loans, in each case for the respective purposes specified above and only on
the terms and subject to the conditions set forth herein;
WHEREAS, the Borrower, the Lenders and the Agent now wish to
amend and restate the Existing Credit Agreement to, among other things, set
forth the terms and conditions under which certain Lenders will make additional
A Term Loans and B Term Loans to the Borrower and to restate the Existing Credit
Agreement to reflect the amendments thereto; and
WHEREAS, this Agreement shall become effective upon the date
(the "Restatement Date") on which (i) this Agreement has been duly executed by
the Borrower, the Agent and each Lender, and (ii) the Borrower has satisfied all
of the conditions precedent more particularly set forth in Section 5 (but in the
event such conditions have not been satisfied or waived on or before July 15,
1998, this Agreement shall be of no force or effect and the Existing Credit
Agreement shall continue in full force and effect);
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
1. SECTION Amount and Terms of Credit.
1.01 Commitment . Subject to and upon the terms and conditions
herein set forth and in reliance upon the representations and warranties set
forth herein and in the other Loan Documents, each Lender severally agrees to
make a loan or loans (each a "Loan" and, collectively, the "Loans") to the
Borrower, which Loans shall be drawn, to the extent such Lender has a commitment
under such Facility, under the A Term Facility, B Term Facility, Bridge Facility
and the Revolving Facility, as set forth below:
(a) Loans under the A Term Facility (each an "A Term Loan" and,
collectively, the "A Term Loans"), (i) shall be made pursuant to (A) a
drawing by the Borrower on the Closing Date in the aggregate principal
amount of $20,000,000 and (B) a drawing by the Borrower on the
Restatement Date in the aggregate principal amount of $643,750 and made
by the Lenders with Increased A Term Commitments, (ii) shall be made
and initially maintained as a single Borrowing of Base Rate Loans (subject
to the option to convert such A Term Loans pursuant to Section 1.06) and
(iii) shall not exceed in aggregate principal amount for any Lender at the
time of occurrence thereof (A) the A Term Commitment, if any, of such
Lender or (B) solely with respect to additional A Term Loans made on the
Restatement Date, the Increased A Term Commitment, if any, of such
Lender. Once repaid, A Term Loans borrowed hereunder may not be
reborrowed. The Borrower and the Lenders acknowledge (i) the
repayment of $5,643,750 in aggregate principal amount of A Term Loans
under the Existing Credit Agreement and (ii) the making of $20,000,000
in aggregate principal amount of A Term Loans on the Closing Date in
accordance with the terms of the Existing Credit Agreement, and agree
that $14,356,250 in aggregate outstanding principal amount of such A
Term Loans (in addition to the additional A Term Loans being made on
the Restatement Date) continue to be outstanding pursuant to the terms
and conditions of this Agreement and the other Loan Documents.
(b) Loans under the B Term Facility (each a "B Term Loan" and,
collectively, the "B Term Loans") (i) shall be made pursuant to (A) a
drawing by the Borrower on the Closing Date in the aggregate principal
amount of $30,000,000, (B) a pro rata repayment to the Lenders with
Revolving Commitments of $10,000,000 in principal amount of
outstanding Revolving Loans owing to the Lenders by an additional
$10,000,000 principal amount B Term Loan made by Fleet Bank to the
Borrower on the Conversion Date, and (C) a drawing by the Borrower on
the Restatement Date in the aggregate principal amount of $23,008,000
and made by the Lenders with Increased B Term Commitments, (ii) shall
be made and initially maintained as Borrowings of Base Rate Loans
(subject to the option to convert such B Term Loans pursuant to Section
1.06) and (iii) shall not exceed in aggregate principal amount for any
Lender at the time of occurrence thereof (A) the B Term Commitment, if
any, of such Lender or (B) solely with respect to additional B Term Loans
made on the Restatement Date, the Increased B Term Commitment, if any,
of such Lender. Once repaid, B Term Loans borrowed hereunder may not
be reborrowed. The Borrower and the Lenders acknowledge (i) the
repayment of $3,008,000 in aggregate principal amount of B Term Loans
under the Existing Credit Agreement and (ii) the making of $30,000,000
in aggregate principal amount of B Term Loans on the Closing Date and
an additional $10,000,000 B Term Loan on the Conversion Date in
accordance with the terms of the Existing Credit Agreement, and agree
that $36,992,000 in aggregate outstanding principal amount of such B
Term Loans (in addition to the additional B Term Loans being made on
the Restatement Date) continue to be outstanding pursuant to the terms
and conditions of this Agreement and the other Loan Documents.
(c) Loans under the Bridge Facility (each a "Bridge Loan" and,
collectively, the "Bridge Loans"), (i) shall be made pursuant to a single
drawing which shall be on the Closing Date, (ii) shall be made and
maintained as a single Borrowing of Base Rate Loans and (iii) shall not
exceed in aggregate principal amount for any Lender at the time of
occurrence thereof the Bridge Commitment, if any, of such Lender. Once
repaid, Bridge Loans borrowed hereunder may not be reborrowed.
(d) Loans under the Revolving Facility (each a "Revolving Loan" and,
collectively, the "Revolving Loans"), (i) shall be made at any time and
from time to time on and after the Closing Date and prior to the Expiry
Date, (ii) except as hereinafter provided, may, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, provided that (A) all Revolving Loans made
as part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Loans of the same Type and (B) Revolving
Loans maintained as Eurodollar Loans may not be incurred prior to the
Syndication Date, (iii) may be repaid and reborrowed in accordance with
the provisions hereof, (iv) shall not exceed in the aggregate for all Lenders
at any time outstanding, when combined with the aggregate principal
amount of all Swingline Loans then outstanding and all Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time, the Borrowing Base at such
time and (v) shall not exceed for any Lender at any time outstanding that
aggregate principal amount which, when combined with the aggregate
outstanding principal amount of all other Revolving Loans of such Lender
and with such Lender's Adjusted Revolving Commitment Percentage, if
any, of the sum of (A) the Letter of Credit Outstandings (exclusive of
Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time and (B) the outstanding principal amount
of Swingline Loans (exclusive of Swingline Loans which are repaid with
the proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time, equals (1) if such Lender is a
Non-Defaulting Lender, the Adjusted Revolving Commitment, if any, of
such Lender at such time and (2) if such Lender is a Defaulting Lender,
the Revolving Commitment, if any, of such Lender at such time. The
Borrower, the Agent and all of the Lenders agree and acknowledge that, as
of the Conversion Date, $10,000,000 in principal amount of outstanding
Revolving Loans owing to the Lenders were repaid pro rata from the
proceeds of a $10,000,000 principal amount B Term Loan made by Fleet
Bank to the Borrower pursuant to Section 1.01(b). The Borrower and the
Lenders acknowledge the making of the Revolving Loans which are
outstanding on the Restatement Date in accordance with the terms of the
Existing Credit Agreement and agree that such Revolving Loans shall
continue to be outstanding pursuant to the terms and conditions of this
Agreement and the other Loan Documents.
(e) Subject to and upon the terms and conditions herein set forth, Fleet
Bank in its individual capacity agrees to make at any time and from time
to time on or after the Initial Borrowing Date and prior to the Swingline
Expiry Date, a loan or loans to the Borrower (each a "Swingline Loan,"
and, collectively, the "Swingline Loans"), which Swingline Loans (i) shall
be made and maintained as Base Rate Loans, (ii) may be repaid and
reborrowed in accordance with the provisions hereof, (iii) shall not exceed
in aggregate principal amount at any time outstanding, when combined
with the aggregate principal amount of all Revolving Loans made by
Non-Defaulting Lenders then outstanding and the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid with the
proceeds of, and simultaneously with the incurrence of, the respective
incurrence of Revolving Loans) at such time, an amount equal to the
Adjusted Total Revolving Commitment then in effect (after giving effect
to any reductions to the Adjusted Total Revolving Commitment on such
date), (iv) shall not exceed in aggregate principal amount at any time
outstanding, when combined with the aggregate principal amount of all
Revolving Loans then outstanding and all Letter of Credit Outstandings
(exclusive of Unpaid Drawings which are repaid with the proceeds of, and
simultaneously with the incurrence of, the respective incurrence of
Revolving Loans) at such time, the Borrowing Base at such time and (v)
shall not exceed in aggregate principal amount at any time outstanding the
Maximum Swingline Amount. Fleet Bank will not make a Swingline
Loan after it has received written notice from the Required Lenders that
one or more of the applicable conditions to Credit Events specified in
Section 5 are not then satisfied.
(f) On any Business Day, Fleet Bank may, in its sole discretion, give
notice to the Revolving Lenders that its outstanding Swingline Loans shall
be repaid with a Borrowing of Revolving Loans (provided that each such
notice shall be deemed to have been automatically given upon the
occurrence of an Event of Default under Section 9.05 or upon the exercise
of any of the remedies provided in the last paragraph of Section 9), in
which case a Borrowing of Revolving Loans constituting Base Rate Loans
(each such Borrowing, a "Mandatory Borrowing") shall be made on the
immediately succeeding Business Day by all Revolving Lenders pro rata
based on each Revolving Lender's Adjusted Revolving Commitment
Percentage, and the proceeds thereof shall be applied directly to repay
Fleet Bank for such outstanding Swingline Loans. Each Revolving
Lender hereby irrevocably agrees to make Base Rate Loans upon one
Business Day's notice pursuant to each Mandatory Borrowing in the
amount and in the manner specified in the preceding sentence and on the
date specified in writing by Fleet Bank notwithstanding (i) that the amount
of the Mandatory Borrowing may not comply with the Minimum
Borrowing Amount otherwise required hereunder, (ii) whether any
conditions specified in Section 5 are then satisfied, (iii) whether a Default
or an Event of Default has occurred and is continuing, (iv) the date of such
Mandatory Borrowing and (v) any reduction in the Total Revolving
Commitment, the Adjusted Total Revolving Commitment or the
Borrowing Base after any such Swingline Loans were made. In the event
that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of the
commencement of a proceeding under the Bankruptcy Code in respect of
the Borrower), each Revolving Lender (other than Fleet Bank) hereby
agrees that it shall forthwith purchase from Fleet Bank (without recourse
or warranty) such assignment of the outstanding Swingline Loans as shall
be necessary to cause the Revolving Lenders to share in such Swingline
Loans ratably based upon their respective Adjusted Revolving
Commitment Percentages, provided that all interest payable on the
Swingline Loans shall be for the account of Fleet Bank until the date the
respective assignment is purchased and, to the extent attributable to the
purchased assignment, shall be payable to the Revolving Lender
purchasing same from and after such date of purchase.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing under a Facility shall not be less than the Minimum
Borrowing Amount for such Facility. The aggregate principal amount of each
Borrowing of Swingline Loans shall not be less than $25,000, and, if greater,
shall be in an integral multiple of $25,000. More than one Borrowing may be
incurred on any day; provided, however, that at no time shall there be
outstanding more than five (5) Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing . Whenever the Borrower desires to incur
Loans under any Facility (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each a "Notice of Borrowing")
shall be in the form of Exhibit 1.03 hereto and shall be irrevocable and shall
specify (i) the Facility pursuant to which such Borrowing is being made, (ii)
the aggregate principal amount of the Loans to be made pursuant to such
Borrowing, (iii) the date of Borrowing (which shall be a Business Day) and (iv)
whether the respective Borrowing shall consist of Base Rate Loans or (to the
extent permitted) Eurodollar Loans and, if Eurodollar Loans, the Interest Period
to be initially applicable thereto. The Agent shall promptly give each Lender
written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing, of such Lender's proportionate share thereof and of the
other matters covered by the Notice of Borrowing.
(b) (i) Whenever the Borrower desires to make a Borrowing of
Swingline Loans hereunder, it shall give Fleet Bank, prior to 1:00 P.M. (New
York time) on the day such Swingline Loan is to be made, written notice (or
telephonic notice promptly confirmed in writing) of each Swingline Loan to be
made hereunder. Each such notice shall be irrevocable and shall specify in each
case (A) the date of such Borrowing (which shall be a Business Day) and (B) the
aggregate principal amount of the Swingline Loan to be made pursuant to such
Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(f), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section.
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or Fleet Bank (in the case of a Borrowing of Swingline Loans), as the case
may be, may prior to receipt of written confirmation act without liability upon
the basis of such telephonic notice, believed by the Agent or Fleet Bank in good
faith to be from an Authorized Officer of the Borrower. In each such case, the
Borrower hereby waives the right to dispute the Agent's or Fleet Bank's record
of the terms of such telephonic notice.
1.04 Disbursement of Funds . No later than 2:00 P.M. (New York
time) on the date specified in each Notice of Borrowing, each Lender with a
Commitment under the respective Facility will make available its pro rata share
of each Borrowing requested to be made on such date in the manner provided
below, provided that all Revolving Loans made pursuant to Section 1.01(e) to
refund outstanding Swingline Loans shall be made available to Fleet Bank no
later than 2:00 P.M. (New York time) on the date so requested. All such amounts
shall be made available to the Agent in Dollars and immediately available funds
at the Payment Office and the Agent promptly will make available to the Borrower
by depositing to its account at the Payment Office the aggregate of the amounts
so made available in the type of funds received. Unless the Agent shall have
been notified by any Lender prior to the date of Borrowing that such Lender does
not intend to make available to the Agent its portion of the Borrowing or
Borrowings to be made on such date, the Agent may assume that such Lender has
made such amount available to the Agent on such date of Borrowing, and the
Agent, in reliance upon such assumption, may (in its sole discretion and without
any obligation to do so) make available to the Borrower a corresponding amount.
If such corresponding amount is not in fact made available to the Agent by such
Lender and the Agent has made available same to the Borrower, the Agent shall
be entitled to recover such corresponding amount from such Lender. If such
Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Agent. The Agent shall
also be entitled to recover on demand from such Lender or the Borrower, as the
case may be, interest on such corresponding amount in respect of each day from
the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at a
rate per annum equal to (i) if paid by such Lender, the overnight Federal Funds
Effective Rate or (ii) if paid by the Borrower, the then applicable rate of
interest, calculated in accordance with Section 1.08, for the respective Loans.
(b) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights which
the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
1.05 Notes .(a) The Borrower's obligation to pay the principal of, and
interest on, the Loans made to it by each Lender shall be evidenced (i) if A
Term Loans, by a promissory note substantially in the form of Exhibit 1.05(A)
hereto with blanks appropriately completed in conformity herewith (each an
"A Term Note" and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a
promissory note substantially in the form of Exhibit 1.05(B) hereto with blanks
appropriately completed in conformity herewith (each a "B Term Note" and,
collectively, the "B Term Notes"), (iii) if Bridge Loans, by a promissory note
substantially in the form of Exhibit 1.05(C) hereto with blanks appropriately
completed in conformity herewith (each "Bridge Note" and, collectively, the
"Bridge Notes"), (iv) if Revolving Loans, by a promissory note substantially in
the form of Exhibit 1.05(D) hereto with blanks appropriately completed in
conformity herewith (each a "Revolving Note" and, collectively, the
"Revolving Notes") and (v) if Swingline Loans, by a promissory note
substantially in the form of Exhibit 1.05(E) hereto with blanks appropriately
completed in conformity herewith (the "Swingline Note").
(b) The A Term Note issued to each Lender that makes any A Term Loan shall (i)
be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the A Term Loans made by such Lender on the Initial Borrowing
Date (or subsequently purchased by such Lender) and be payable in the principal
amount of A Term Loans evidenced thereby, (iv) mature on the A Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Loan Documents.
(c) The B Term Note issued to each Lender that makes any B Term Loan shall (i)
be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the B Term Loans made by such Lender on the Initial Borrowing
Date (or subsequently purchased by such Lender) and be payable in the principal
amount of B Term Loans evidenced thereby, (iv) mature on the Final Maturity
Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in
respect of the Base Rate Loans and Eurodollar Loans, as the case may be,
evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Loan Documents.
(d) The Bridge Note issued to each Lender that makes any Bridge Loan shall
(i) be executed by the Borrower, (ii) be payable to the order of such
Lender and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the Bridge Loans made by such Lender on the Initial Borrowing
Date and be payable in the principal amount of Bridge Loans evidenced thereby,
(iv) mature on the Bridge Maturity Date, (v) bear interest as provided in the
appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 4.02 and
(vii) be entitled to the benefits of this Agreement and the other Loan
Documents.
(e) The Revolving Note issued to each Lender with a Revolving
Commitment shall (i) be executed by the Borrower, (ii) be payable to the order
of such Lender and be dated the Initial Borrowing Date, (iii) be in a stated
principal amount equal to the Revolving Commitment of such Lender and be payable
in the principal amount of the Revolving Loans evidenced thereby, (iv) mature on
the Expiry Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to mandatory repayment as provided in
Section 4.02 and (vii) be entitled to the benefits of this Agreement and the
other Loan Documents.
(f) The Swingline Note issued to Fleet Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of Fleet Bank and be dated the
Initial Borrowing Date, (iii) be in a stated principal amount equal to the
Maximum Swingline Amount and be payable in the principal amount of Swingline
Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear
interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced
thereby and (vi) be entitled to the benefits of this Agreement and the other
Loan Documents.
(g) Each Lender will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will, prior to any
transfer of any of its Notes, endorse on the reverse side thereof the
outstanding principal amount of Loans evidenced thereby. Failure to make any
such notation shall not affect the Borrower's obligations in respect of such
Loans.
1.06 Conversions . The Borrower shall have the option to convert on
any Business Day occurring on and after the Syndication Date all or a portion at
least equal to the applicable Minimum Borrowing Amount of the outstanding
principal amount of the Loans owing (other than Swingline Loans and Bridge
Loans, which at all times shall be maintained as Base Rate Loans) pursuant to a
single Facility into a Borrowing or Borrowings pursuant to such Facility of
another Type of Loan, provided that (i) except as otherwise provided in
Section 1.10(b), Eurodollar Loans may be converted into Base Rate Loans only
on the last day of an Interest Period applicable thereto and no partial
conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding
principal amount of the Eurodollar Loans made pursuant to such Borrowing to less
than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may
only be converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion and (iii) Borrowings of Eurodollar Loans
resulting from this Section 1.06 shall be limited in number as provided in
Section 1.02. Each such conversion shall be effected by the Borrower giving the
Agent at its Notice Office, prior to 11:00 A.M. (New York time), at least three
Business Days' (or one Business Days', in the case of a conversion into Base
Rate Loans) prior written notice (or telephonic notice promptly confirmed in
writing) (each a "Notice of Conversion") specifying the Loans to be so
converted, the Type of Loans to be converted into and, if to be converted into
a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Lender prompt notice of any such proposed
conversion affecting any of its Loans.
1.07 Pro Rata Borrowings . All Loans under this Agreement (other than
Swingline Loans) shall be made by the Lenders pro rata on the basis of their A
Term Commitments, B Term Commitments, Bridge Commitments or Revolving
Commitments, as the case may be; provided, however, that additional A Term
Loans and B Term Loans made on the Restatement Date shall be made by the
Lenders based on their Increased A Term Commitments and Increased B Term
Commitments, respectively. It is understood that no Lender shall be responsible
for any default by any other Lender in its obligation to make Loans hereunder
and that each Lender shall be obligated to make the Loans provided to be made by
it ereunder, regardless of the failure of any other Lender to fulfill its
commitments hereunder.
1.08 Interest . (a) The unpaid principal amount of each Base Rate Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum which shall at all
times be the Applicable Base Rate Margin plus the Base Rate in effect from time
to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Applicable Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall bear interest at a rate per annum equal to the Base Rate in effect from
time to time plus the sum of (i) 2% and (ii) the Applicable Base Rate Margin for
Revolving Loans; provided, however, that no Loan shall bear interest after
maturity (whether by acceleration or otherwise) at a rate per annum less than 2%
plus the rate of interest applicable thereto at maturity.
(d) Interest shall accrue from and including the date of any Borrowing
to but excluding the date of any repayment thereof and shall be payable (i) in
respect of each Base Rate Loan, quarterly in arrears on the last Business Day
of each April, July, October and January, (ii) in respect of each Eurodollar
Loan, on the last day of each Interest Period applicable thereto and, in the
case of an Interest Period of six months, on the date occurring three (and in
respect of a 12 month interest period, if any, also six and nine) months after
the first day of such Interest Period and (iii) in respect of each Loan, on any
prepayment or conversion (other than the prepayment and conversion of Base Rate
Revolving Loans) (on the amount prepaid or converted), at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in accordance
with Section 12.07(b).
(f) The Agent, upon determining the interest rate for any Borrowing
of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower
and the Lenders thereof.
1.09 Interest Periods . (a) At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Agent written notice (or telephonic notice promptly confirmed in writing) of the
Interest Period applicable to such Borrowing, which Interest Period shall, at
the option of the Borrower, be a one, two, three or six month, or if available
to all Lenders, twelve month period. Notwithstanding anything to the contrary
contained above:
(i) all Eurodollar Loans comprising a Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar Loans
shall commence on the date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence
on the day on which the next preceding Interest Period expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided, however, that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period shall extend beyond the Expiry Date (in the case
of Revolving Loans), the A Term Loan Maturity Date (in the case of A
Term Loans) or the Final Maturity Date (in the case of B Term Loans);
(vi) no Interest Period with respect to any Borrowing of Term Loans
under a Facility may be elected that would extend beyond any date upon
which a Scheduled Repayment or a mandatory repayment is required to be
made in respect of such Facility, as the case may be, if, after giving effect
to the selection of such Interest Period, the aggregate principal amount of
Term Loans maintained as Eurodollar Loans under such Facility with
Interest Periods ending after such date would exceed the aggregate
principal amount of Term Loans of such Facility permitted to be
outstanding after such Scheduled Repayment or mandatory repayment, as
the case may be; and
(vii) no Interest Period may be elected at any time when a Default or an
Event of Default is then in existence.
(b) If upon the expiration of any Interest Period, the Borrower has
failed to elect, or is not permitted to elect, a new Interest Period to be
applicable
to the respective Borrowing of Eurodollar Loans as provided above, the Borrower
shall be deemed to have elected to convert such Borrowing into a Borrowing of
Base Rate Loans effective as of the expiration date of such current Interest
Period.
1.10 Increased Costs, Illegality, etc . (a) In the event that (x) in the
case of clause (i) below, the Agent or (y) in the case of clauses (ii) and (iii)
below,any Lender shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any Interest
Period that, by reason of any changes arising after the Closing Date
affecting the interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided for
in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of taxes or similar charges) because of (x) any change since the
Closing Date in any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or administration thereof and
including the introduction of any new law or governmental rule,
regulation, guideline or order) (such as, for example, but not limited to, a
change in official reserve requirements, but, in all events, excluding
reserves required under Regulation D to the extent included in the
computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Lender, the interbank Eurodollar market or the position of
such Lender in such market since the Closing Date (or, if such Lender
becomes a Lender after the Closing Date, since the date such Lender
becomes a Lender hereunder); or
(iii) at any time, that the making or continuance of any Eurodollar Loan
has become unlawful by compliance by such Lender in good faith with
any law, governmental rule, regulation, guideline (or would conflict with
any such governmental rule, regulation, guideline or order not having the
force of law but with which such Lender customarily complies even
though the failure to comply therewith would not be unlawful), or has
become impracticable as a result of a contingency occurring after the
Closing Date which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, such Lender (or the Agent in the case of clause (i)
above) shall, (A) on such date and (B) within ten Business Days of the date on
which such event no longer exists, give notice (by telephone confirmed in
writing) to the Borrower and to the Agent of such determination (which notice
the Agent shall promptly transmit to each of the other Lenders). Thereafter (A)
in the case of clause (i) above, Eurodollar Loans shall no longer be available
until such time as the Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice by the Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower, (B) in the case of clause (ii) above, the Borrower shall pay to
such Lender, upon written demand therefor, such additional amounts (in the form
of an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as shall be
required to compensate such Lender for such increased costs or reductions in
amounts receivable hereunder (a written notice as to the additional amounts owed
to such Lender, showing the basis for the calculation thereof, submitted to the
Borrower by such Lender shall, absent manifest error, be final and conclusive
and binding upon all parties hereto) and (C) in the case of clause (iii) above,
the Borrower shall take one of the actions specified in Section 1.10(b) as
promptly as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the circumstances
described in Section 1.10(a)(ii) or (iii), the Borrower may (and in
the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Lender pursuant to Section 1.10(a)(ii) or (iii), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Lender to convert each
such Eurodollar Loan into a Base Rate Loan, provided that if more than one
Lender is affected at any time, then all affected Lenders must be treated the
same pursuant to this Section 1.10(b).
(c) If any Lender shall have determined that after the Closing Date, the
adoption or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Lender with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Lender's capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then
from time to time, within 15 days after demand by such Lender (with a copy to
the Agent), the Borrower shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. Each Lender, upon
determining in good faith that any additional amounts will be payable pursuant
to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall set forth the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice, and
shall, absent manifest error, be final and conclusive and binding on all parties
hereto.
1.11 Compensation . (a) The Borrower shall compensate each Lender, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by reason of the liquidation
or reemployment of deposits or other funds required by such Lender to fund its
Eurodollar Loans) which such Lender may sustain: (i) if for any reason (other
than a default by such Lender or the Agent) a Borrowing of Eurodollar Loans
does not occur on a date specified therefor in a Notice of Borrowing or Notice
of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any prepayment, repayment (including any
prepayment or repayment made pursuant to Section 4.01 or 4.02 or as a result of
an acceleration of the Loans pursuant to Section 9) or conversion of any of its
Eurodollar Loans occurs on the date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (A) any other default by the Borrower to
repay its Eurodollar Loans when required by the terms of this Agreement or (B)
an election made pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the contrary, to the
extent any notice required by Section 1.10, 2.06 or 4.04 is given by any Lender
more than 180 days after such Lender obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the additional
costs of the type described in such Section, such Lender shall not be entitled
to compensation under Section 1.10, 2.06 or 4.04 for any amounts incurred or
accruing prior to the giving of such notice to the Borrower.
(h)
1.12 Change of Lending Office . Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.06 or 4.04 with respect to such Lender, it will, if requested
by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any
Loans affected by such event, provided that such designation is made on such
terms that such Lender and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Lender provided in Section 1.10, 2.06 or 4.04.
1.13 Replacement of Lenders . Upon the occurrence of any event
giving rise to the operation of Section 1.10(a)(ii), Section 1.10(c), Section
2.06 or
Section 4.04 with respect to any Lender which results in such Lender charging to
the Borrower increased costs in excess of those being generally charged by the
other Lenders, or if a Lender becomes a Defaulting Lender or, in the case of a
refusal by a Lender to consent to a proposed change, waiver, discharge or
termination with respect to this Agreement which has been approved by the
Required Lenders as provided in Section 12.12, the Borrower shall have the
right,
if no Default or Event of Default then exists, to replace such Lender (the
"Replaced Lender") with one or more other Eligible Transferee or Transferees,
none of whom shall constitute a Defaulting Lender at the time of such
replacement (collectively, the "Replacement Lender") reasonably acceptable to
the Agent, provided that (i) at the time of any replacement pursuant to this
Section 1.13, the Replacement Lender shall enter into one or more Assignment
Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to
said Section 12.04(b) to be paid by the Replacement Lender) pursuant to which
the Replacement Lender shall acquire all of the Commitments and outstanding
Loans of, and in each case participations in Letters of Credit by, the Replaced
Lender and, in connection therewith, shall pay to (A) the Replaced Lender in
respect thereof an amount equal to the sum of (1) an amount equal to the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, (2) an amount equal to all Unpaid Drawings that have been funded by
(and not reimbursed to) such Replaced Lender, together with all then unpaid
interest with respect thereto at such time and (3) an amount equal to all
accrued, but theretofore
unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01 and (B) the
Letter of Credit Issuer an amount equal to such Replaced Lender's Adjusted
Revolving Commitment Percentage of any Unpaid Drawing (which at such time
remains an Unpaid Drawing) to the extent such amount was not theretofore
funded by such Replaced Lender, and (ii) all obligations of the Borrower owing
to the Replaced Lender (other than those specifically described in clause (i)
above in respect of which the assignment purchase price has been, or is
concurrently being, paid) shall be paid in full to such Replaced Lender
concurrently with such replacement. Upon the execution of the respective
Assignment Agreements, the payment of amounts referred to in clauses (i) and
(ii) above and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of the appropriate Note or Notes executed by the Borrower,
the Replacement Lender shall become a Lender hereunder and the Replaced Lender
shall cease to constitute a Lender hereunder, except with respect to
indemnification provisions applicable to the Replaced Lender under this
Agreement, which shall survive as to such Replaced Lender.
SECTION 2. Letters of Credit.
2.01 Letters of Credit . (a) Subject to and upon the terms and conditions
herein set forth, the Borrower may request that a Letter of Credit Issuer at any
time and from time to time on or after the Initial Borrowing Date and prior to
the Expiry Date to issue, for the account of the Borrower and in support of (i)
trade obligations of the Borrower and/or its Subsidiaries (each such letter of
credit a "Trade Letter of Credit" and, collectively, the "Trade Letters of
Credit") and/or (ii) such other obligations of the Borrower that are acceptable
to the Agent (each such letter of credit a "Standby Letter of Credit" and,
collectively, the "Standby Letters of Credit" and together with the Trade
Letters of Credit, the "Letters of Credit"), and subject to and upon the terms
and conditions herein set forth the Letter of Credit Issuer agrees to issue from
time to time, irrevocable letters of credit in such form as may be approved by
the Letter of Credit Issuer and the Agent. The Borrower, the Agent and each of
the Lenders hereby agree that each of the letters of credit set forth on Exhibit
2.01 hereto issued by Fleet Bank and outstanding on the Closing Date under the
Prior Credit Agreement shall be deemed to be a Letter of Credit issued and
continuing under, and governed by all of the terms and conditions of, this
Agreement, with Fleet Bank acting as the Letter of Credit Issuer with respect
thereto. The Borrower and the Lenders acknowledge the making of the Letters of
Credit which are outstanding on the Restatement Date in accordance with the
terms of the Existing Credit Agreement and agree that such Letters of Credit
shall continue to be outstanding pursuant to the terms and conditions of this
Agreement and the other Loan Documents.
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued, the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (A) $7,500,000 or (B) when added to the aggregate principal
amount of all Revolving Loans made by Non-Defaulting Lenders and Swingline
Loans then outstanding, the Adjusted Total Revolving Commitment at such time;
and (ii) (A) each Standby Letter of Credit shall have an expiry date occurring
not
later than one year after such Lender of Credit's date of issuance although any
Letter of Credit may be renewable for successive periods of up to 12 months, but
not beyond the Business Day next preceding the Expiry Date, on terms acceptable
to the Letter of Credit Issuer and in no event shall any Standby Letter ofCredit
have an expiry date occurring later than the Business Day next preceding the
Expiry Date and (B) such Trade Letter of Credit shall have an expiry date
occurring no later than the earlier of (1) 180 days after the issuance thereof
or (2) 30 days prior to the Expiry Date.
(c) Notwithstanding the foregoing, in the event a Lender Default
exists, the Letter of Credit Issuer shall not be required to issue any Letter
of Credit unless the Letter of Credit Issuer has entered into arrangements
satisfactory to it and the Borrower to eliminate the Letter of Credit Issuer's
risk with respect to the participation in Letters of Credit of the Defaulting
Lender or Lenders, including by cash collateralizing such Defaulting Lender's
or Lenders' Revolving Percentage of the Letter of Credit Outstandings.
2.02 Minimum Stated Amount . The initial Stated Amount of each
Letter of Credit shall not be less than $10,000 or such lesser amount acceptable
to the Letter of Credit Issuer and the Agent.
2.03 Letter of Credit Requests; Notices of Issuance . (a) Whenever it
desires that a Letter of Credit be issued, the Borrower shall give the Agent and
the Letter of Credit Issuer written notice (including by way of telecopier), in
the form of Exhibit 2.03 hereto, prior to 1:00 P.M. (New York time) at least
three Business Days (or such shorter period as may be acceptable to the Letter
of Credit Issuer) prior to the proposed date of issuance (which shall be a
Business Day) (each a "Letter of Credit Request"), which Letter of Credit
Request shall include an application for such Letter of Credit and any other
documents that the Letter of Credit Issuer customarily requires in connection
therewith. The Agent shall promptly notify each Lender of each Letter of Credit
Request.
(b) The Letter of Credit Issuer shall, on the date of each issuance of a
Letter of Credit by it, give the Agent, each Lender and the Borrower written
notice of the issuance of such Letter of Credit, accompanied by a copy to the
Agent of the Letter of Credit or Letters of Credit issued by it.
2.04 Agreement to Repay Letter of Credit Drawings . (a) The Borrower
hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the
Agent at the Payment Office, for any payment or disbursement made by the Letter
of Credit Issuer under any Letter of Credit (each such amount so paid or
disbursed until reimbursed, an "Unpaid Drawing") immediately after, and in any
event on the date on which the Borrower is notified by the Letter of Credit
Issuer of such payment or disbursement with interest on the amount so paid or
disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to
1:00 P.M. (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but not including the date the Letter
of Credit Issuer is reimbursed therefor at a rate per annum which shall be
1-1/2% in excess of the Base Rate as in effect from time to time (plus an
additional 2% per annum if not reimbursed by the third Business Day after the
date of such notice of payment or disbursement), such interest also to be
payable on demand.
(b) The Borrower's obligation under this Section 2.04 to reimburse the
Letter of Credit Issuer with respect to Unpaid Drawings (including, in each
case, interest thereon) shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Letter of Credit Issuer, the
Agent or any Lender, including, without limitation, any defense based upon the
failure of any drawing under a Letter of Credit to conform to the terms of the
Letter of Credit or any non-application or misapplication by the beneficiary of
the proceeds of such drawing; provided, however, that the Borrower shall not be
obligated to reimburse the Letter of Credit Issuer for any wrongful payment made
by the Letter of Credit Issuer under a Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the
Letter of Credit Issuer.
2.05 Letter of Credit Participations . (a) Immediately upon the issuance by
the Letter of Credit Issuer of any Letter of Credit, the Letter of Credit Issuer
shall be deemed to have sold and transferred to each other Revolving Lender, and
each such Revolving Lender (each a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from such Letter of Credit
Issuer,without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Adjusted Revolving Commitment Percentage, in such
Letter of Credit, each drawing made thereunder and the obligations of the
Borrower under this Agreement with respect thereto (although the Letter of
Credit Fee shall be payable directly to the Agent for the account of the Lenders
as provided in Section 3.01(b) and the Participants shall have no right to
receive any portion of any Facing Fees) and any security therefor or guaranty
pertaining thereto. Uponany change in the Revolving Commitments or Adjusted
Revolving Commitment Percentages of the Revolving Lenders pursuant to Section
12.04(b) or upon a Lender Default, it is hereby agreed that, with respect to all
outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic
adjustment to the participations pursuant to this Section 2.05 to reflect the
new Adjusted Revolving Commitment Percentages of the assigning and assignee
Lender or of all Revolving Lenders, as the case may be.
(b) In determining whether to pay under any Letter of Credit, the
Letter of Credit Issuer shall not have any obligation relative to the
Participants other than to determine that any documents required to be delivered
under such Letter of Credit have been delivered and that they strictly comply
on their face with the requirements of such Letter of Credit. Any action taken
or omitted to be taken by the Letter of Credit Issuer under or in connection
with any Letter of Credit if taken or omitted in the absence of gross
negligence or willful misconduct, shall not create for the Letter of Credit
Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Letter of Credit and the Borrower shall not have reimbursed such
amount in full to the Letter of Credit Issuer pursuant to Section 2.04(a), the
Letter of Credit Issuer shall promptly notify the Agent, and the Agent shall
promptly notify each Participant of such failure, and each Participant shall
promptly and unconditionally pay to the Agent for the account of the Letter of
Credit Issuer, the amount of such Participant's Adjusted Revolving Commitment
Percentage of such payment in Dollars and in same day funds; provided, however,
that no Participant shall be obligated to pay to the Agent its Adjusted
Revolving Commitment Percentage of such unreimbursed amount for any wrongful
payment made by the Letter of Credit Issuer under a Letter of Credit as a result
of acts or omissions constituting willful misconduct or gross negligence on the
part of the Letter of Credit Issuer. If the Agent so notifies any Participant
required to fund an Unpaid Drawing under a Letter of Credit prior to 11:00 A.M.
(New York time) on any Business Day, such Participant shall make available to
the Agent for the account of the Letter of Credit Issuer such Participant's
Adjusted Revolving Commitment Percentage of the amount of such payment on such
Business Day in same day funds. If and to the extent such Participant shall not
have so made its Adjusted Revolving Commitment Percentage of the amount of such
Unpaid Drawing available to the Agent for the account of the Letter of Credit
Issuer, such Participant agrees to pay to the Agent for the account of the
Letter of Credit Issuer, forthwith on demand such amount, together with interest
thereon, for each day from such date until the date such amount is paid to the
Agent for the account of the Letter of Credit Issuer at the overnight Federal
Funds Effective Rate. The failure of any Participant to make available to the
Agent for the account of the Letter of Credit Issuer its Adjusted Revolving
Commitment Percentage of any Unpaid Drawing under any Letter of Credit shall not
relieve any other Participant of its obligation hereunder to make available to
the Agent for the account of the Letter of Credit Issuer its Adjusted Revolving
Commitment Percentage of any payment under any Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Agent for the account
of the Letter of Credit Issuer such other Participant's Adjusted Revolving
Commitment Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
the Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, the Letter of Credit Issuer shall pay to the Agent and the
Agent shall promptly pay to each Participant which has paid its Adjusted
Revolving Commitment Percentage thereof, in Dollars and in same day funds, an
amount equal to such Participant's Adjusted Revolving Commitment Percentage of
the principal amount thereof and interest thereon accruing at the overnight
Federal Funds Effective Rate after the purchase of the respective
participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the Letter of Credit Issuer with respect to Letters of Credit
shall be irrevocable and not subject to counterclaim, set-off or other defense
or any other qualification or exception whatsoever (provided that no Participant
shall be required to make payments resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct) and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of
the other Loan Documents;
(ii) the existence of any claim, set-off, defense or other right which the
Borrower may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), the Agent, the Letter of Credit Issuer, any
Lender or other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
and the beneficiary named in any such Letter of Credit);
(iii) any draft, certificate or other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
(f) To the extent the Letter of Credit Issuer is not indemnified by the
Borrower, the Participants will reimburse and indemnify the Letter of Credit
Issuer, in proportion to their respective "percentages" of the Total Revolving
Commitment, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, costs, expenses or disbursements
of whatsoever kind or nature which may be imposed on, asserted against or
incurred by the Letter of Credit Issuer in performing its respective duties in
any way relating to or arising out of its issuance of Letters of Credit;
provided, however, that no Participants shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Letter of Credit Issuer's
gross negligence or willful misconduct.
2.06 Increased Costs . If at any time after the Closing Date, the
adoption or effectiveness of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Letter of Credit
Issuer or any Lender with any request or directive (whether or not having the
force of law) by any such authority, central bank or comparable agency shall
either (i) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by the Letter
of Credit Issuer or such Lender's participation therein, or (ii) shall impose on
the Letter of Credit Issuer or any Lender any other conditions affecting this
Agreement, any Letter of Credit or such Lender's participation therein; and the
result of any of the foregoing is to increase the cost to the Letter of Credit
Issuer or such Lender of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the Letter
of Credit issuer or such Lender hereunder (other than any increased cost or
reduction in the amount received or receivable resulting from the imposition of
or a change in the rate of taxes or similar charges), then, upon demand to the
Borrower by the Letter of Credit Issuer or such Lender (a copy of which notice
shall be sent by the Letter of Credit Issuer or such Lender to the Agent), the
Borrower shall pay to the Letter of Credit Issuer or such Lender such additional
amount or amounts as will compensate the Letter of Credit Issuer or such Lender
for such increased cost or reduction. A certificate submitted to the Borrower
by the Letter of Credit Issuer or such Lender, as the case may be (a copy of
which certificate shall be sent by the Letter of Credit Issuer or such Lender
to the Agent), setting forth the basis for the determination of such additional
amount or amounts necessary to compensate the Letter of Credit Issuer or such
Lender as aforesaid shall be conclusive and binding on the Borrower absent
manifest error, although the failure to deliver any such
certificate shall not release or diminish any of the Borrower's obligations to
pay additional amounts pursuant to this Section 2.06 upon the subsequent receipt
thereof.
SECTION 3. Fees; Commitments.
3.01 Fees . (a) The Borrower agrees to pay to the Agent a commitment fee
("Commitment Fee") for the account of each Non-Defaulting Lender with a
Revolving Commitment for the period from and including the date of this
Agreement to, but not including, the date the Total Revolving Commitment has
been terminated, computed at a rate for each day equal to the Applicable
Commitment Fee. Such Commitment Fee shall be due and payable in arrears on
the last Business Day of each April, July, October and January and on the date
upon which the Total Revolving Commitment is terminated.
(b) The Borrower agrees to pay to the Agent for the account of each
Non-Defaulting Lender pro rata on the basis of their respective Adjusted
Revolving Commitment Percentages, a fee in respect of each Letter of Credit (the
"Letter of Credit Fee") computed at the rate equal to the Applicable Eurodollar
Margin then in effect with respect to Revolving Loans on the average daily
Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be
due and payable quarterly in arrears on the last Business Day of each April,
July, October and January of each year and on the date upon which the Total
Revolving Commitment is terminated.
(c) The Borrower agrees to pay to the Agent for the account of the
Letter of Credit Issuer a fee in respect of each Letter of Credit (the "Facing
Fee") computed at the rate of 1/2 of 1% per annum on the average daily Stated
Amount of such Letter of Credit, provided, that in no event shall the annual
Facing Fee be less than $500. Accrued Facing Fees shall be due and payable
quarterly in arrears on the last Business Day of each April, July, October
and January of each year and on the date upon which the Total Revolving
Commitment is terminated.
(d) The Borrower agrees to pay directly to the Letter of Credit Issuer
upon each issuance of, drawing under, and/or amendment of, a Letter of Credit
such amount as shall at the time of such issuance, drawing or amendment be the
administrative charge which the Letter of Credit Issuer is customarily charging
for issuances of, drawings under or amendments of, letters of credit issued by
it.
(e) The Borrower shall pay (i) to Fleet Bank on the Restatement Date
for its own account and/or for distribution to the Lenders as determined by
Fleet Bank in its sole discretion, such fees as heretofore separately agreed by
the Borrower and Fleet Bank pursuant to the letter agreement dated as of May 12,
1998 and executed by them and (ii) the Agent on the Effective Date and on each
anniversary thereof for its own account such fee as separately agreed to
between the Borrower and the Agent pursuant to the letter agreement dated as
of May 2, 1995.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
3.02 Voluntary Reduction of Commitments . Upon at least three Business Days'
prior written notice (or telephonic notice confirmed in writing) to the Agent at
its Notice Office (which notice the Agent shall promptly transmit to
each of the Lenders), the Borrower shall have the right, without premium or
penalty, to terminate or partially reduce the Total Unutilized Revolving
Commitment; provided, however, that (i) any such termination shall apply to
proportionately and permanently reduce the Revolving Commitment of each
Lender, (ii) no such reduction shall reduce any Non-Defaulting Lender's
Revolving Commitment to an amount that is less than the sum of (A) the
outstanding Revolving Loans of such Lender plus (B) such Lender's Adjusted
Revolving Commitment Percentage of outstanding Swingline Loans and of Letter of
Credit Outstandings and (iii) any partial reduction pursuant to this Section
3.02 shall be in the amount of at least $1,000,000, and, if greater, shall be
in an integral multiple of $1,000,000.
3.03 Mandatory Adjustments of Commitments, etc . (a) The Total
Commitment (and the A Term Commitment, B Term Commitment, Bridge
Commitment and Revolving Commitment of each Lender) shall terminate on the
Expiration Date unless the Initial Borrowing Date has occurred on or before such
date.
(b) Each of the Total A Term Commitment, B Term Commitment and Total Bridge
Commitment shall terminate in its entirety on the Initial Borrowing
Date (after giving effect to the making of the A Term Loans, B Term Loans and
Bridge Loans on such date), provided that the Increased A Term Commitments
and Increased B Term Commitments shall terminate in their entirety on the
Restatement Date (after giving effect to the making of the additional A Term
Loans and B Term Loans on the Restatement Date).
(c) The Total Revolving Commitment (and the Revolving
Commitment of each Revolving Lender) shall terminate on the Expiry Date.
(d) Intentionally Omitted.
(e) Intentionally Omitted.
(f) Any partial reduction of the Total Revolving Commitment
pursuant to this Section 3.03 shall apply proportionately to the Revolving
Commitment of each Revolving Lender.
SECTION 4. Payments.
4.01 Voluntary Prepayments . The Borrower shall have the right to prepay Loans
in whole or in part, without premium or penalty, from time to time on the
following terms and conditions: (i) the Borrower shall give the Agent at the
Payment Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans, whether such Loans are A Term Loans,
B Term Loans, Bridge Loans, Revolving Loans or Swingline Loans, the amount of
such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower at least one
Business Day prior to the date of such prepayment with respect to Base Rate
Loans (other than Swingline Loans, with respect to which notice shall be given
by the Borrower on the day of prepayment) and two Business Days prior to the
date of such prepayment with respect to Eurodollar Loans, which notice shall
promptly be transmitted by the Agent to each of the Lenders, provided that no
notice shall be required with respect to any prepayments made with funds
received by the Agent from the Blocked Accounts (such funds, "Blocked Account
Proceeds") as provided in Section 4.05, which funds shall be applied by the
Agent on a daily basis or such other frequency as the Agent may determine,
(ii) each partial prepayment of any Borrowing (other than any Borrowing of
Swingline Loans or a Borrowing of Revolving Loans that is prepaid solely with
Blocked Account Proceeds) shall be in an aggregate principal amount of at least
$500,000 and, if greater in an integral multiple of $100,000, provided that no
partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce
the aggregate principal amount of the Loans outstanding pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto; (iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest Period
applicable thereto, the Borrower shall pay the amounts required pursuant to
Section 1.11; (iv) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans, provided that (A) at the
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01, such prepayment shall not be applied to any
Revolving Loans of a Defaulting Lender, and (B) Blocked Account Proceeds
shall be applied first to prepay any outstanding Swingline Loans and second
to prepay any outstanding Revolving Loans, and, with respect to such Revolving
Loans, first to prepay any Base Rate Loans and second to prepay any Eurodollar
Loans; and (v) each prepayment of Term Loans pursuant to this Section 4.01
shall be applied to A Term Loans (in an amount equal to the A Term Loan
Percentage of such prepayment) and B Term Loans (in an amount equal to
the B Term Loan Percentage of such prepayment) and shall be applied first to
reduce the remaining Scheduled Repayments in the then current fiscal year of the
Borrower of each of the A Term Loans and B Term Loans in the direct order of
their maturity and second to reduce the remaining Scheduled Repayments of each
of the A Term Loans and the B Term Loans in the inverse order of their maturity.
4.02 Mandatory Prepayments.
(A) Requirements:
(a) (i) If on any date (i) the sum of the aggregate outstanding principal
amount of Revolving Loans made by Non-Defaulting Lenders, Swingline Loans
and the Letter of Credit Outstandings exceeds the Adjusted Total Revolving
Commitment as then in effect or (ii) the aggregate outstanding principal amount
of all Revolving Loans and of all Swingline Loans and the Letter of Credit
Outstandings shall have exceeded the Borrowing Base at such time for any period
of two consecutive Business Days, the Borrower shall repay on such date the
principal of Swingline Loans, and if no Swingline Loans are or remain
outstanding, Revolving Loans of Non-Defaulting Lenders, in an aggregate
amount equal to such excess. If, after giving effect to the repayment of all
outstanding Swingline Loans and Revolving Loans of Non-Defaulting Lenders,
the aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total
Revolving Commitment then in effect, the Borrower shall pay to the Agent an
amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate
amount of the Letter of Credit Outstandings at such time) and the Agent shall
hold
such payment as security for the obligations of the Borrower hereunder pursuant
to a cash collateral agreement to be entered into in form and substance
satisfactory to the Agent (which shall permit certain investments in Cash
Equivalents satisfactory to the Agent, until the proceeds are applied to the
secured obligations).
(ii) If on any date the aggregate outstanding principal amount
of the Revolving Loans made by a Defaulting Lender exceeds the Revolving
Commitment of such Defaulting Lender, the Borrower shall repay principal of
Revolving Loans of such Defaulting Lender in an amount equal to such excess.
(b) (i) On each date set forth below, the Borrower shall be required to
repay the principal amount of A Term Loans set forth opposite such date (each
such repayment, together with each repayment of B Term Loans required by
clause (b)(ii) below, a "Scheduled Repayment"):
Repayment Date Amount
July 31, 1995 $250,000
October 31, 1995 $250,000
January 31, 1996 $250,000
April 30, 1996 $250,000
July 31, 1996 $425,000
October 31, 1996 $425,000
January 31, 1997 $425,000
April 30, 1997 $425,000
July 31, 1997 $675,000
October 31, 1997 $675,000
January 31, 1998 $675,000
April 30, 1998 $918,750
July 31, 1998 $750,000
October 31, 1998 $750,000
January 31, 1999 $750,000
April 30, 1999 $750,000
July 31, 1999 $750,000
October 31, 1999 $750,000
January 31, 2000 $750,000
April 30, 2000 $750,000
July 31, 2000 $750,000
October 31, 2000 $750,000
January 31, 2001 $750,000
April 30, 2001 $750,000
July 31, 2001 $750,000
October 31, 2001 $750,000
January 31, 2002 $750,000
April 30, 2002 $750,000
July 31, 2002 $750,000
October 31, 2002 $750,000
January 31, 2003 $750,000
A Term Loan Maturity Date $750,000 or the then outstanding
principal amount of A Term Loans
(ii) The Borrower shall be required to repay the principal amount of B
Term Loans on each date set forth below as set forth opposite such date:
Repayment Date Amount
July 31, 1995 $75,000
October 31, 1995 $75,000
January 31, 1996 $75,000
April 30, 1996 $75,000
July 31, 1996 $75,000
October 31, 1996 $75,000
January 31, 1997 $75,000
April 30, 1997 $75,000
July 31, 1997 $102,000
October 31, 1997 $102,000
January 31, 1998 $102,000
April 30, 1998 $102,000
July 31, 1998 $150,000
October 31, 1998 $150,000
January 31, 1999 $150,000
April 30, 1999 $150,000
July 31, 1999 $150,000
October 31, 1999 $150,000
January 31, 2000 $150,000
April 30, 2000 $150,000
July 31, 2000 $150,000
October 31, 2000 $150,000
January 31, 2001 $150,000
April 30, 2001 $150,000
July 31, 2001 $150,000
October 31, 2001 $150,000
January 31, 2002 $150,000
April 30, 2002 $150,000
July 31, 2002 $150,000
October 31, 2002 $150,000
January 31, 2003 $150,000
April 30, 2003 $150,000
July 31, 2003 $150,000
October 31, 2003 $150,000
January 31, 2004 $150,000
Final Maturity Date $56,550,000 or the then outstanding
principal amount of B Term Loans
(c) On the Business Day following the date of receipt thereof by the Borrower
and/or any of its Subsidiaries of the Cash Proceeds from any Asset Sale,
an amount equal to 100% of the Net Cash Proceeds from such Asset Sale shall be
applied first as a mandatory repayment of principal of the then outstanding Term
Loans (with the A Term Loan Percentage of such Net Cash Proceeds applied as a
prepayment of the outstanding principal amount of A Term Loans and the B Term
Loan Percentage of such Net Cash Proceeds applied as a prepayment of the
outstanding principal amount of B Term Loans) and second, after the Term Loans
have been paid in full and are no longer outstanding, as a mandatory repayment
of principal of the then outstanding Revolving Loans, provided that up to an
aggregate of $250,000 of Net Cash Proceeds from Asset Sales shall not be
required to be used to so repay Term Loans to the extent the Borrower elects, as
hereinafter provided, to cause such Net Cash Proceeds to be reinvested in
Reinvestment Assets (a "Reinvestment Election"). The Borrower may exercise its
Reinvestment Election (within the parameters specified in the preceding
sentence) with respect to an Asset Sale if (i) no Default or Event of Default
exists and (ii) the Borrower delivers a Reinvestment Notice to the Agent on the
Business Day following the date of the consummation of the respective Asset
Sale, with such Reinvestment Election being effective with respect to the Net
Cash Proceeds of such Asset Sale equal to the Anticipated Reinvestment Amount
specified in such Reinvestment Notice.
(d) On the date of the receipt thereof by the Borrower and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
the incurrence of Indebtedness by the Borrower and/or any of its Subsidiaries
(other than Indebtedness permitted by Section 8.04), shall be applied first as a
mandatory repayment of principal of the then outstanding Term Loans (with the A
Term Loan Percentage of such proceeds applied as a prepayment of the
outstanding principal amount of A Term Loans and the B Term Loan Percentage
of such proceeds applied as a prepayment of the outstanding principal amount of
B Term Loans) and second, after the Term Loans have been paid in full and are
no longer outstanding, as a mandatory repayment of principal of the then
outstanding Revolving Loans.
(e) On the date of the receipt thereof by the Borrower, an amount
equal to 100% of the proceeds (net of underwriting discounts and commissions
and other reasonable costs associated therewith) of any sale or issuance of its
equity and 100% of any amount of cash received by the Borrower in connection
with any capital contributions shall be applied as a mandatory repayment of
principal of the then outstanding Revolving Loans and Term Loans, with 50% of
such amount being applied to the outstanding Revolving Loans and 50% of such
amount being applied to the outstanding Term Loans (such amount, the "Term
Loan Portion") (with the A Term Loan Percentage of the Term Loan Portion
applied as a prepayment of the outstanding principal amount of A Term Loans
and the B Term Loan Percentage of the Term Loan Portion applied as a
prepayment of the outstanding principal amount of B Term Loans); provided,
however, that equity proceeds received by the Borrower shall first be applied as
a mandatory repayment of principal of the then outstanding Bridge Loans as
required by Section 4.02(A)(j); and provided further, that capital contributions
received by the Borrower from Holdings from proceeds of common stock of
Holdings issued to management and other employees of the Borrower and its
Subsidiaries after repayment of the Bridge Loan shall be applied as a mandatory
repayment of principal of the then outstanding Revolving Loans.
(f) On each date which is 90 days after the last day of each fiscal year
of the Borrower (commencing with the fiscal year ending on February 3, 1996),
75% of Excess Cash Flow (such amount the "ECF Prepayment Amount") of the
Borrower and its Subsidiaries for the fiscal year then last ended shall be
applied first as a mandatory repayment of principal of the then outstanding
Term Loans (with the A Term Loan Percentage of such ECF Prepayment Amount
applied as a prepayment of the outstanding principal amount of A Term Loans
and the B Term Loan Percentage of such ECF Prepayment Amount applied as a
prepayment of the outstanding principal amount of B Term Loans) and second,
after the Term Loans have been paid in full and are no longer outstanding, as
a mandatory repayment of principal of the then outstanding Revolving Loans.
(g) On the Reinvestment Prepayment Date with respect to a
Reinvestment Election, an amount equal to the Reinvestment Prepayment
Amount, if any, for such Reinvestment Election shall be applied first as a
repayment of the principal amount of the then outstanding Term Loans (with the
A Term Loan Percentage of such Reinvestment Prepayment Amount applied as a
prepayment of the outstanding principal amount of it A Term Loans and the B
Term Loan Percentage of such Reinvestment Prepayment Amount applied as a
prepayment of the outstanding principal amount of B Term Loans) and second,
after the Term Loans have been paid in full and are no longer outstanding, as a
mandatory repayment of principal of the then outstanding Revolving Loans.
(h) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Revolving Loans
shall be repaid in full on the Expiry Date.
(i) On the Contemplated Acquisition Termination Date the Borrower
shall be required to repay $2,000,000 of the principal amount of B Term Loans if
the Specified Acquisition has not been consummated on or prior to such date
pursuant to the terms and conditions of this Agreement.
(j) On the Bridge Maturity Date the Borrower shall be required to
repay the Bridge Loan in full.
(B) Application:
(a) Each mandatory repayment of A Term Loans and B Term Loans
required to be made pursuant to Sections 4.02(A) (other than pursuant to clause
(b) and (e) thereof) shall be applied to reduce the Scheduled Repayments of A
Term Loans and B Term Loans, respectively, on a pro rata basis (based upon the
then remaining outstanding principal amount of each such Scheduled Repayments
of A Term Loans and B Term Loans, respectively), with any such repayment of
the A Term Loans, and any repayment of A Term Loans under Section
4.02(A)(e), applied to reduce the then remaining A Term Loan Scheduled
Repayments in the inverse order of their maturity, and each such repayment of B
Term Loans, and any repayment of B Term Loans under Section 4.02(A)(e),
applied to reduce the then remaining B Term Loan Scheduled Repayments in the
inverse order of their maturity.
(b) With respect to each prepayment of Loans required by
Section 4.02, the Borrower may designate the Types of Loans which are to be
prepaid and the specific Borrowing(s) under the affected Facility pursuant to
which made; provided, however, that (i) Eurodollar Loans may so be designated
for prepayment pursuant to this Section 4.02 only on the last day of an Interest
Period applicable thereto unless all Eurodollar Loans made pursuant to such
Facility with Interest Periods ending on such date of required prepayment and
all Base Rate Loans made pursuant to such Facility have been paid in full; (ii)
if any prepayment of Eurodollar Loans made pursuant to a single Borrowing shall
reduce the outstanding Loans made pursuant to such Borrowing to an amount less
than the Minimum Borrowing Amount for such Borrowing, such Borrowing shall
be immediately converted into Base Rate Loans; (iii) each prepayment of any
Revolving Loans made by Non-Defaulting Lenders pursuant to a Borrowing shall
be applied pro rata among such Revolving Loans; and (iv) each prepayment of
any Revolving Loans made by Defaulting Lenders pursuant to a Borrowing shall
be applied pro rata among such Revolving Loans. In the absence of a designation
by the Borrower as described in the preceding sentence, the Agent shall, subject
to the above and Section 4.02(B)(c), make such designation.
(c) In the event that the amount of any required prepayment of Loans
under Section 4.01 with respect to prepayments from Blocked Account Proceeds
or under this Section 4.02 exceeds the aggregate principal amount of the then
respective outstanding Term Loans, Revolving Loans or Swingline Loans, as the
case may be, being prepaid which consist of Base Rate Loans (the amount of any
such excess being called the "Excess Amount"), the Borrower shall have the
right, in lieu of making such prepayment in full, to prepay such outstanding
Base Rate Loans and to deposit an amount equal to the Excess Amount with the
Agent in a cash collateral account maintained by and in the sole dominion and
control of the Agent for the ratable benefit of the Lenders holding Term Loans
or Revolving Loans entitled thereto. Any amount so deposited shall be held by
the Agent as collateral for the Obligations and applied to the prepayment of
Eurodollar Loans at the end of the current Interest Period(s) applicable
thereto. On any day on which collected amounts remain on deposit in or to
the credit of such cash collateral account after giving effect to the payment
made on such day pursuant to such Section 4.01 or 4.02 and the Borrower shall
have delivered to the Agent a written request or a telephonic request (which
shall be promptly confirmed in writing) prior to 11:00 A.M. (New York time)
that such remaining collected amounts be invested in Cash Equivalents specified
in such request, the Agent shall invest such funds, to the extent the Agent is
reasonably able to do so, in such Cash Equivalents (as are acceptable to, and
with no risk to, the Agent) on an overnight basis or with maturities such that
amounts will be available to pay the Obligations secured thereby as they become
due, whether at maturity, by acceleration or otherwise; provided, however, that
any loss resulting from such investments shall be charged to and be immediately
payable by the Borrower upon demand by the Agent.
4.03 Method and Place of Payment . Except as otherwise specifically
provided herein, all payments under this Agreement shall be made to the Agent
for the ratable (based on its pro rata share) account of the Lenders entitled
thereto, not later than 1:00 P.M. (New York time) on the date when due and shall
be made in immediately available funds and in Dollars at the Payment Office, it
being understood that written notice by the Borrower to the Agent to make a
payment from the funds in the Borrower's account at the Payment Office shall
constitute the making of such payment to the extent of such funds held in such
account. Any payments under this Agreement which are made later than 1:00 P.M.
(New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to
be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and, with respect to payments of
principal, interest shall be payable during such extension at the applicable
rate in effect immediately prior to such extension.
4.04 Net Payments . (a) All payments made by the Borrower hereunder,
under any Note or any other Loan Document, will be made without setoff,
counterclaim or other defense. Except as provided for in Section 4.04(b), all
such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by
any jurisdiction or by any political subdivision or taxing authority thereof
or therein (but excluding any tax imposed on or measured by the net income
(or any franchise tax) of a Lender pursuant to the laws of the jurisdiction
in which the principal office or applicable lending office of such Lender is
located or under the laws of which such Lender is organized or under the laws
of any political subdivision or taxing authority of any such jurisdiction in
which the principal office or applicable lending office of such Lender is
located) and all interest, penalties or similar liabilities with respect
thereto (collectively, "Taxes"). If any Taxes are so levied or imposed or
required to be withheld, the Borrower agrees to pay the full amount of such
Taxes and, if any, such additional amounts ("Additional Amounts") as may be
necessary so that every payment of all amounts due hereunder, under any Note
or under any other Loan Document, after withholding or deduction for or on
account of any Taxes and such Additional Amounts, will not be less than the
amount provided for herein or in such Note or in such other Loan Document.
The Borrower will indemnify and hold harmless the Agent and each Lender, and
reimburse the Agent or such Lender upon its written request, for the amount of
any Taxes so levied or imposed and paid or withheld by such Lender.
Notwithstanding anything in this Section 4.04, the Borrower shall only be
required to pay any Additional Amounts for the account of any Lender, if such
Taxes arise by reason of changes in applicable income tax law, regulation,
governmental rule, guideline, order or income tax treaty, or in the official
interpretation of any thereof, from and after the date such Lender becomes a
"Lender" under this Agreement; provided, however, that the Borrower shall not be
required to pay any Additional Amounts, or indemnify or reimburse any Lender, in
respect of, against or for any Taxes imposed as a result of such Lender's
failure to comply with Section 4.04(b). The Borrower will furnish to the
Agent within 45 days after the date the payment of any Taxes, or any
withholding or deduction on account thereof, is due pursuant to applicable
law certified copies of tax receipts evidencing such payment by the
Borrower.
(b) Each Lender, which is not a United States person (as such term is defined
in Section 7701(a)(30) of the Code) for Federal income tax purposes agrees to
provide to the Borrower on or prior to the Initial Borrowing Date or, in the
case of a Lender that is an assignee or transferee of an interest under this
Agreement pursuant to Section 12.04 (unless the respective Lender was already a
Lender hereunder immediately prior to such assignment or transfer), upon the
date of such assignment or transfer to such Lender, two original signed copies
of Internal Revenue Service Form 4224 or Form 1001 certifying to such Lender's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement, under any Note and under
any other Loan Document. Each Lender which so delivers such Form 1001 or Form
4224 (or any successor forms), as the case may be, further agrees to deliver
to the Borrower and the Agent two original signed copies of Form 1001 or Form
4224, as the case may be, before the date that the previously delivered form
expires or becomes obsolete or prior to the occurrence of any event requiring a
change in the most recent form so delivered, and such amendment thereto or
extensions or renewal thereof as may be reasonably requested by the Borrower or
the Agent, in each case, certifying to such Lender's entitlement to a complete
exemption from, or reduction in, United States withholding tax with respect to
payments to be made under this Agreement, under any Note and under any other
Loan Document. Notwithstanding anything to the contrary contained in Section
4.04(a), the Borrower and the Agent shall be entitled, to the extent itis
required to do so by law, to deduct or withhold income or other similar taxes
imposed by the United States (or any political subdivision or taxing authority
thereof or therein) from interest fees or other amounts payable hereunder
(without any obligation under Section 4.04(a) to pay the respective Lender
such taxes or any additional amounts with respect thereto) for the account of
any Lender which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for United States federal income tax purposes
and which has not provided to the Borrower and the Agent such forms required to
be provided to the Borrower and the Agent by a Lender pursuant to the first
sentence of this Section 4.04(b), provided that if the Borrower or the Agent
shall so deduct or withhold any such taxes, it shall provide to such Lender
certified copies of tax receipts evidencing such payment by the Borrower or
the Agent. Notwithstanding anything to the contrary contained in the preceding
sentence, the Borrower agrees to indemnify each Lender in the manner set forth
in Section 4.04(a) in respect of any amounts deducted or withheld by it as
described in the previous sentence as a result of any changes after the date
of this Agreement in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of income or similar Taxes, provided that each such Lender shall
at the Borrower's reasonable request provide to the Borrower any applicable tax
form or certificate necessary or appropriate for any exemption of the United
States withholding tax or the reduction in the rate of such withholding tax.
4.05 Blocked Accounts . At the request of the Agent which may be
made upon the occurrence and during the continuance of an Event of Default, the
Borrower shall establish blocked account arrangements and depository accounts
(collectively, the "Blocked Accounts") with such depository institutions that
receive payments or remittances with respect to the Borrower's or any
Subsidiary's Accounts, or such other depository institutions as the Agent may
determine, pursuant to blocked account agreements and subject to irrevocable
instructions in form and substance satisfactory to the Agent, and in which the
Borrower shall immediately deposit all payments made for Inventory or other
payments constituting proceeds of Collateral (including, without limitation,
remittances with respect to the Borrower's or any Subsidiary's Accounts) in the
identical form in which such payment is made, whether by cash, check or
otherwise, duly endorsed for collection, if necessary.
Pursuant to the aforementioned irrevocable instructions and
blocked account agreements, all amounts held or deposited in the Blocked
Accounts, upon collection of good funds in such Blocked Accounts, shall be wire
transferred (or, at the Agent's election, transferred via ACH) to the Agent at
its Payment Office as Agent may specify in writing and, upon becoming available
funds, shall be applied first to pay any Obligations (other than principal or
interest
on the Loans) then due and payable and second to reduce the then outstanding
principal balance of Swingline Loans and Revolving Loans pursuant to Section
4.01. If at any time the then outstanding balance of Swingline Loans and
Revolving Loans shall be zero and no other Obligations are then due and payable,
the Agent shall, on the Business Day following the Borrower's request, pay over
to the Borrower amounts received by the Agent from the Blocked Accounts
constituting available funds in excess of Obligations then due and payable
(provided, that if a Default or an Event of Default shall have occurred and then
be continuing, such amounts shall also be in excess of all Letter of Credit
Outstandings and other outstanding Obligations, whether or not then due and
payable).
Subject to the foregoing, the Borrower hereby agrees and each depository
institution shall, at the Agent's request, acknowledge that all payments
received by the Agent or any Lender, whether by cash, check, wire transfer or
any other instrument, made to such Blocked Accounts or otherwise received by the
Agent or any Lender and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of the Agent and
the Lenders and such depository institution has no right of setoff against the
Blocked Accounts. The Borrower, and any Affiliates and any employees, agents
or other Persons acting for or in concert with the Borrower or any Affiliates,
shall, acting as trustee for the Agent and the Lenders, receive, as the sole and
exclusive property of the Lenders, any monies, checks, notes, drafts or any
other payments relating to and/or proceeds of Accounts or other Collateral which
come into the possession or under the control of the Borrower or any Affiliates,
or any employees, agents or other Persons acting for or in concert with the
Borrower or any Affiliate, and immediately upon receipt thereof, the Borrower or
such Persons shall deposit the same or cause the same to be deposited, in kind,
in a Blocked Account.
SECTION 5. Conditions Precedent. The obligation of the Lenders to
make each Loan hereunder (excluding Mandatory Borrowings made after the Initial
Borrowing Date, which shall be made as provided in Section 1.01(e)), the
obligation of the Letter of Credit Issuer to issue Letters of Credit hereunder,
the amendments to the Existing Credit Agreement embodied in this Agreement and
the effectiveness of this Agreement, are subject, at the time of each such
Credit Event (except as otherwise hereinafter indicated), to the satisfaction of
each of the following conditions:
5.01 Execution of Agreement; Notes . On or prior to the Restatement Date, (i)
this Agreement shall have become effective as provided in Section 12.10
and (ii) there shall have been delivered to the Agent for the account of each
Lender the appropriate A Term Note, B Term Note and/or Revolving Note and, in
the case of Fleet Bank, the Swingline Note, in each case, executed by the
Borrower, and in the amount, maturity and as otherwise provided herein.
5.02 No Default; Representations and Warranties . At the time of each Credit
Event and also after giving effect thereto, (i) there shall exist no Default or
Event of Default and (ii) all representations and warranties contained herein or
in the other Loan Documents in effect at such time shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of such Credit Event, except to
the extent that such representations and warranties expressly relate to a
specified date.
5.03 Notice of Borrowing; Letter of Credit Request; Etc. . (a) Prior to
the making of each Loan (excluding Swingline Loans), the Agent shall have
received a Notice of Borrowing meeting the requirements of Section 1.03(a).
Prior to the making of any Swingline Loan, Fleet Bank shall have received the
notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and
the respective Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 2.03, and the respective Letter of
Credit Issuer shall have received any documentation requested by it in
connection with the issuance of the respective Letter of Credit.
5.04 Officer's Certificate . On the Restatement Date, the Agent shall have
received a certificate dated such date signed by the President or the Chief
Financial Officer of the Borrower stating that all of the applicable conditions
set forth in this Section 5 have been fully satisfied on such date.
5.05 Opinions of Counsel . On the Restatement Date, the Agent shall
have received an opinion, addressed to the Agent, and each of the Lenders and
dated the Restatement Date, from McGuire Woods Battle & Boothe, counsel to
the Borrower, which opinion shall cover the matters incident to the transactions
contemplated herein as the Agent may reasonably request and shall be in form
and substance satisfactory to the Agent.
5.06 Corporate Documents; Proceedings . (a) On the Restatement
Date, the Agent shall have received from each Credit Party executing a document
on the Restatement Date an incumbency certificate, dated the Restatement Date,
signed by the President or any Vice-President of each such Credit Party, and
attested to by the Secretary of any Assistant Secretary of such Credit Party,
together with copies of the certificate of incorporation, the by-laws, or other
organizational documents of each such Credit Party and the resolutions, or such
other administrative approval, of each such Credit Party referred to in such
certificate, certified by the Secretary or any Assistant Secretary of such
Credit Party, and all of the foregoing shall be satisfactory to the Agent.
(b) On the Restatement Date, all corporate and legal proceedings and all
instruments and agreements in connection with the transactions contemplated by
this Agreement and the other Documents shall be satisfactory in form and
substance to the Agent, and the Agent shall have received all information and
copies of all certificates, documents and papers, including good standing
certificates and any other records of corporate proceedings and governmental
approvals, if any, which the Agent may have requested in connection therewith,
such documents and papers, where appropriate, to be certified by proper
corporate or governmental authorities.
5.07 Plans; Existing Indebtedness Agreements; Shareholders'
Agreements; Management Agreements; Employment Agreements . On or prior
to the Initial Borrowing Date, there shall have been delivered to the Agent
true and correct copies of:
(i) any Plans maintained or contributed to by the Borrower or
any of its Subsidiaries, and for each Plan (x) that is a "single-employer
plan" (as defined in Section 4001(a)(15) of ERISA) the most recently
completed actuarial valuation prepared therefor by such Plan's regular
enrolled actuary and the Schedule B, "Actuarial Information" to the
Internal Revenue Service Form 5500 (Annual Report) most recently filed
with the Internal Revenue Service and (y) that is a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA), each of the documents
referred to in clause (x) either in the possession of the Borrower or any of
its Subsidiaries, or any ERISA Affiliate or reasonably available thereto
from the sponsor or trustees of such Plan;
(ii) all agreements evidencing or relating to Existing
Indebtedness (the "Existing Indebtedness Agreements");
(iii) all agreements entered into by the Borrower or any of its
Subsidiaries governing the terms and relative rights of its capital stock,
and any agreements entered into by members or shareholders relating to
any such entity with respect to their capital stock (collectively, the
"Shareholders' Agreements");
(iv) any agreement with members of, or with respect to, the
management of the Borrower or any of its Subsidiaries (collectively, the
"Management Agreements");
(v) any material employment agreements entered into by the
Borrower or any of its Subsidiaries (collectively, the "Employment
Agreements");
(vi) all collective bargaining agreements applying or
relating to any employee of the Borrower or any of its Subsidiaries
(collectively, the "Collective Bargaining Agreements"); and
(vii) all tax sharing, tax allocation and other similar
agreements entered into by the Borrower or any Subsidiary of the
Company (collectively, the "Tax Sharing Agreements");
all of which Plans, Existing Indebtedness Agreements, Shareholders' Agreements,
Management Agreements, Employment Agreements, Collective Bargaining
Agreements and Tax Sharing Agreements shall be in form and substance
satisfactory to the Agent.
5.08 Adverse Change, etc . From January 31, 1998 to the Restatement
Date, nothing shall have occurred (and neither the Lenders nor the Agent shall
have become aware of any facts or conditions not previously known) which the
Agent or the Required Lenders shall determine (a) has, or could reasonably be
expected to have, a material adverse effect on the rights or remedies of the
Lenders or the Agent, or on the ability of the Credit Parties to perform their
respective obligations, in each case contained in the Documents, or (b) has, or
could reasonably be expected to have, a Material Adverse Effect.
5.09 Litigation . On the Restatement Date, there shall be no actions,
suits or proceedings pending or threatened (a) with respect to this Agreement or
any other Document or the transactions contemplated hereby or thereby
(including the Watson Merger) or (b) which the Agent or the Required Lenders
shall determine could reasonably be expected to (i) have a Material Adverse
Effect or (ii) have a material adverse effect on the rights or remedies of the
Lenders hereunder or under any other Loan Document or on the ability of any
Credit Party to perform its respective obligations to the Lenders hereunder or
under any other Loan Document.
5.10 Approvals . On the Restatement Date, all material
necessary governmental and third party approvals and/or consents in connection
with the transactions contemplated by the Loan Documents and the other
Documents and otherwise referred to herein or therein shall have been obtained
and remain in effect, and all applicable waiting periods shall have expired
without any action being taken by any competent authority which restrains or
prevents the consummation of such transactions or imposes, in the reasonable
judgment of the Required Lenders or the Agent, materially adverse conditions
upon the consummation of such transactions. Additionally, there shall not
exist any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the transactions
contemplated by the Documents, the making of the Loans or the issuance of
Letters of Credit.
5.11 Consummation of the Watson Merger . On or prior to the Restatement Date,
there shall have been delivered to the Lenders true and correct
copies of the Watson Merger Documents, and all terms of the Watson Merger
Agreement and the other Watson Merger Documents shall be satisfactory in form
and substance to the Agent. The Watson Merger Documents (and the transactions
contemplated thereby) shall have been duly approved by the board of directors
and, to the extent required under applicable law, the stockholders of the
Borrower and Watson, and all Watson Merger Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force and
effect. Each of the conditions precedent to the obligations of the Borrower,
PAS and Watson to consummate the Watson Merger as set forth in the Watson
Merger Documents shall have been satisfied, or waived, all to the satisfaction
of the Agent, and, concurrently with the making of the Term Loans on the
Restatement Date, the Watson Merger shall have been consummated in accordance
with the Watson Merger Documents and all applicable laws, rules and regulations.
5.12 Common Stock Issuance . (a) On or prior to the Initial
Borrowing Date, the Borrower shall have received cash proceeds of at least
$48,000,000 (less the amounts, which are satisfactory to the Agent, invested by
the Management Investors) in connection with the sale of Common Stock of
Holdings to the Investors (the "Stock Issuances"), which cash proceeds, when
aggregated with the Term Loans and the Revolving Loans incurred by the
Borrower on the Initial Borrowing Date, shall be sufficient to consummate the
Merger and to pay all fees, costs and expenses owing in connection therewith and
herewith, and the Lenders shall have received true and correct copies of all
documents executed and delivered in connection with such issuances, each of
which shall be in full force and effect and shall be in form and substance
satisfactory to the Agent.
(b) On or prior to the Bridge Maturity Date, together with the
cash proceeds received by the Borrower from the sale of equity referred to in
Section 5.12(a), the Borrower shall have received cash proceeds of at least
$59,300,000 (less the amounts, which are satisfactory to the Agent, invested by
the Management Investors) in connection with the sale of Common Stock of
Holdings to the Investors.
5.13 Minimum Availability . On the Initial Borrowing Date, after giving effect
to the Borrowing of the Term Loans and any Revolving Loans and Letters of
Credit, if any, on the Initial Borrowing Date, and after giving effect to the
Borrowing Base as in effect the Initial Borrowing Date, the Borrower shall
be able to incur additional Revolving Loans in an aggregate principal amount of
not less than $10,000,000, after the payment of all fees, costs and expenses in
connection with the transactions contemplated by this Agreement and the other
Documents, and with all trade payables aged in accordance with normal terms.
5.14 Guaranties . On or prior to the Restatement Date, Holding and each
Subsidiary of the Borrower shall have duly authorized, executed and
delivered a Guaranty in the form of Exhibit 5.14 hereto (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof, the "Guaranties"), and the Guaranties shall be in full
force and effect.
5.15 Security Documents . (a) On or prior to the Restatement Date, Holdings
and the Borrower shall have each duly authorized, executed and delivered a
Pledge Agreement in the form of Exhibit 5.15(A) hereto (as amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof and hereof, the "Pledge Agreements"), and Holdings and
the Borrower shall have delivered to the Agent, as pledgee thereunder, all of
the certificates representing the Pledged Securities referred to therein,
accompanied by undated stock powers executed in blank, and such Pledge
Agreements shall be in full force and effect.
(b) On or prior to the Restatement Date, the Borrower and each
Subsidiary of the Borrower shall have each duly authorized, executed and
delivered (A) a Security Agreement in the form of Exhibit 5.15(B) hereto (as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, the "Security Agreements") and (B)
a Trademark Security Agreement in the form of Exhibit 5.15(C) hereto (as
amended, restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, the "Trademark Security
Agreements"), covering all of the Borrower's and each Subsidiary's present and
future Security Agreement Collateral, together with:
(i) executed copies of Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
necessary to perfect the security interests purported to be created by such
Security Agreement;
(ii) copies of searches of financing statements filed under the
UCC, lien and judgment searches and title searches, as appropriate, with
respect to the Collateral and the Mortgaged Properties which searches are
satisfactory to the Agent;
(iii) evidence of the completion of all other recordings and
filings of, or with respect to, such Security Agreement as may be
necessary or, in the opinion of the Agent, desirable to perfect the security
interests intended to be created by such Security Agreement; and
(iv) evidence that all other actions necessary or, in the opinion
of the Agent, desirable to perfect and protect the security interests
purported to be created by such Security Agreement have been taken.
(c) On or prior to the Restatement Date (or such other date as
referenced below), the Agent shall have received:
(i) fully executed counterparts of deeds of trust, mortgages and
similar documents in each case in form and substance satisfactory to the
Agent (each as amended, restated, supplemented or otherwise modified
from time to time in accordance with the terms thereof and hereof, a
"Mortgage" and collectively, the "Mortgages") covering the Borrower's
owned Real Property located in South Hill, Virginia and arrangements
reasonably satisfactory to the Agent shall be in place to provide that
counterparts of such Mortgages shall be recorded on the Initial Borrowing
Date or within a reasonable period thereafter in all places to the extent
necessary or desirable, in the judgment of the Agent, effectively to create a
valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, on each Mortgaged Property in favor of the Agent (or such
other trustee as may be required or desired under local law) for the benefit
of the Lenders;
(ii) mortgagee title insurance policies issued by title insurers
reasonably satisfactory to the Agent (the "Mortgage Policies") in amounts
reasonably satisfactory to the Agent, not to exceed the value of such Real
Properties as reasonably determined by the Agent, and assuring the Agent
that the Mortgages in respect of the South Hill, Virginia Real Properties
are valid and enforceable first priority mortgage Liens on such Real
Properties, free and clear of all defects and encumbrances except
Permitted Encumbrances. Such Mortgage Policies shall be in form and
substance satisfactory to the Agent and shall include an endorsement for
future advances under this Agreement, the Notes and the Mortgages, for
mechanics liens and for any other matter that the Agent in its discretion
may request;
(iii) within 45 days after the Restatement Date, an appraisal, in
form and substance satisfactory to the Agent, for the owned Real
Properties of Watson from an appraiser satisfactory to the Agent; and
(iv) a survey, in form and substance satisfactory to the Agent, to
each Mortgaged Property, each certified by a licensed professional
surveyor satisfactory to the Agent and revealing no facts which would
materially interfere with the use of such properties by the Borrower and its
Subsidiaries, or an update of an existing survey provided the title company
will delete the exception for existing facts which a current survey would
disclose.
(d) On or prior to the Restatement Date, the Agent shall have received:
(i) fully executed counterparts of leasehold deeds of trust,
mortgages and similar documents, in each case in form and substance
satisfactory to the Agent (each as amended, restated, supplemented or
otherwise modified from time to time in accordance with the terms thereof
and hereof, a "Leasehold Mortgage" and collectively, the "Leasehold
Mortgages") covering the leased Real Property of the Borrower identified
on Exhibit 5.15(D) hereto, and arrangements reasonably satisfactory to the
Agent shall be in place to provide that counterparts of such Leasehold
Mortgages shall be recorded on the Initial Borrowing Date or within a
reasonable period thereafter in all places to the extent necessary or
desirable, in the judgment of the Agent effectively to create a valid and
enforceable first priority Lien, subject only to Permitted Encumbrances,
with respect to such leased Real Property in favor of the Agent (or such
other trustee as may be required or desired under local law) for the benefit
of the Lenders; and
(ii) fully executed counterparts of collateral assignments of
leases in form and substance satisfactory to the Agent (each as amended,
restated, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof, a "Collateral Assignment of
Lease" and collectively, the "Collateral Assignments of Leases") covering
the leased Real Property of the Borrower as identified in Exhibit 5.15(D)
hereto.
(e) Within 60 days after the Restatement Date, the Borrower shall use
its reasonable best efforts to obtain and deliver to the Agent duly executed
landlord consents and waivers and similar documents with respect to all leased
Real Property of Watson, in form and substance reasonably satisfactory to the
Agent, and shall take all actions to obtain such documents as the Agent may
reasonably request.
5.16 Solvency . On the Restatement Date, the Borrower shall have delivered,
or shall cause to be delivered to the Agent a certificate in the form of Exhibit
5.16 hereto, addressed to the Agent and each of the Lenders and dated
the Restatement Date, from the Chief Financial Officer of the Borrower,
providing the opinion of the Chief Financial Officer of the Borrower that, after
giving effect to the Watson Merger and the incurrence of all financings
contemplated herein, each of the Borrower, on a stand-alone basis, and the
Borrower and its Subsidiaries taken as a whole, is not insolvent and will not be
rendered insolvent by the indebtedness incurred in connection herewith, will not
be left with unreasonably small capital with which to engage in its business and
will not have incurred debts beyond its ability to pay such debts as they mature
and become due.
5.17 Insurance Policies . On the Initial Borrowing Date, the
Agent shall have received evidence of insurance complying with the requirements
of Section 7.03 for the business and properties of the Borrower and its
Subsidiaries, in form and substance satisfactory to the Agent with respect to
all casualty insurance, naming the Agent as an additional insured, loss payee
and mortgagee.
5.18 Fees . On the Restatement Date, the Borrower shall have
paid to the Agent and Fleet Bank all Fees and expenses agreed upon by such
parties to be paid on or prior to such date.
5.19 Environmental Reports . Within 45 days after the
Restatement Date, the Agent shall have received Phase I environmental
assessment reports prepared by an environmental consultant acceptable to the
Agent with respect to the owned Real Properties of Watson, which reports shall
include analyses by such consultant of their liabilities with respect to
"superfund sites" and worker safety issues, the results of which shall be in
form and substance acceptable to the Agent.
5.20 Consent Letter . On the Initial Borrowing Date, the Agent
shall have received a letter from CT Corporation System indicating its consent
to its appointment by each Credit Party as such Credit Party's agent to receive
service of process as specified in Section 12.08.
5.21 Initial Borrowing Base Certificate . On or prior to the Initial Borrowing
Date, the Agent shall have received a certificate in the form of
Exhibit 5.21 hereto (a "Borrowing Base Certificate") executed by the Chief
Financial Officer of the Borrower setting forth the Borrowing Base, determined
as of such date, in such Borrowing Base Certificate.
5.22 Projections; Pro Forma Financial Statements . On or prior
to the Restatement Date (or such other date as referenced below), the Borrower
shall have delivered to each Lender:
(i) projected financial statements for the Borrower and
its Subsidiaries for the period from the Restatement Date to and including
the eighth anniversary of the Initial Borrowing Date (the "Projections"),
which Projections (A) shall reflect the forecasted financial condition and
income and expenses of the Borrower and its Subsidiaries after giving
effect to the Watson Merger and the related financing thereof and the other
transactions contemplated hereby and thereby, (B) shall reflect the
forecasted financial condition and income and expenses of the Borrower
and its Subsidiaries, (C) with respect to the initial twelve months only,
shall be prepared on a month-by-month basis (which shall be delivered
within 30 days after the Restatement Date), (D) shall be certified by the
Chief Financial Officer of the Borrower and (E) shall be satisfactory in
form and substance to the Lenders; and
(ii) pro forma financial statements (including a balance
sheet and income statement) for the Borrower and its Subsidiaries for the
one year period ended on the last day of the fiscal quarter of the Borrower
last ended prior to the Restatement Date, assuming the Watson Merger
was effected on the first day of such one year period, and the Agent and
the Lenders shall be satisfied with such pro forma financial statements and
the accounting practices and procedures to be utilized by the Borrower and
its Subsidiaries following the consummation of the Watson Merger.
5.23 Existing Indebtedness . On the Restatement Date, neither the
Borrower nor the Subsidiaries of the Borrower shall have any Indebtedness
outstanding except for the Loans and the Existing Indebtedness. On the
Restatement Date, the terms and conditions of the Existing Indebtedness referred
to in the immediately preceding sentence shall be on terms and conditions
satisfactory to the Agent and the Lenders.
5.24 Repayment and Termination of Prior Indebtedness and Related Liens .
The Agent shall have received a pay-off letter from each holder of Prior
Indebtedness identified on Schedule 5.24 hereto, together with duly executed
UCC-3 termination statements, mortgage releases and such other instruments, in
form and substance satisfactory to the Agent, as shall be necessary to terminate
and satisfy all Liens created pursuant to the Prior Indebtedness and all other
Liens except Permitted Liens and Permitted Encumbrances.
5.25 Intentionally Omitted .
5.26 Letter Agreement . On the Initial Borrowing Date, the Borrower and the
Agent shall have duly executed and delivered a letter agreement dated as of the
date hereof in form and substance satisfactory to the Agent, authorizing the
Agent to advance Swingline Loans.
5.27 Inventory Appraisal . On the Initial Borrowing Date, the Agent
shall have received an appraisal of the Borrower's inventory in form and
substance, and from an appraiser; satisfactory to the Agent.
5.28 Examination . On or prior to the Initial Borrowing Date, the Agent shall
have conducted, at the Borrower's cost and expense, an inspection and audit of
the working capital and related books and records of the Borrower, the results
of which shall be satisfactory to the Agent.
5.29 Letter of Direction and Flow of Funds . On the Restatement Date,
the Borrower shall have delivered to the Agent an executed letter of direction
together with a flow of funds detailing all transfers of funds in connection
with the Loans made on the Restatement Date and the consummation of the Watson
Merger, all in form and substance satisfactory to the Agent.
5.30 Intentionally Omitted .
5.31 Kelso Letter Agreement . On the Initial Borrowing Date, the
Borrower shall have delivered to the Agent the Kelso Letter Agreement.
5.32 Other Documents . On or prior to the Restatement Date, the Agent
shall have received such other agreements, certificates and documents as the
Agent may request.
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by the Borrower to the Agent and each of the Lenders
that all of the applicable conditions specified above exist as of that time.
All of the certificates, legal opinions and other documents and papers referred
to in this Section 5, unless otherwise specified, shall be delivered to the
Agent at its Notice Office for the account of each of the Lenders and, except
for the Notes, in sufficient counterparts for each of the Lenders and shall be
satisfactory in form and substance to the Agent.
In the event that all of the foregoing conditions precedent have not been
satisfied or waived on or before July 15, 1998, this Agreement (other than the
required payment of certain fees as separately agreed to between the Borrower
and the Agent) shall be of no further force and effect and the Existing Credit
Agreement shall continue in full force and effect.
SECTION 6. Representations, Warranties and Agreements. In order
to induce the Lenders to enter into this Agreement and to make the Loans and
issue and/or participate in Letters of Credit provided for herein, the Borrower
makes the following representations and warranties to, and agreements with, the
Lenders, all of which shall survive the execution and delivery of this Agreement
and the making of the Loans (with the making of each Credit Event thereafter
being deemed to constitute a representation and warranty that the matters
specified in this Section 6 are true and correct in all material respects on and
as of the date of each such Credit Event unless such representation and warranty
expressly indicates that it is being made as of a specific date):
6.01 Corporate Status . Each of the Borrower and its Subsidiaries (i) is
a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its organization and has the corporate power and
authority to own its property and assets and to transact the business in which
it is engaged and presently proposes to engage and (ii) has duly qualified and
is authorized to do business and is in good standing in all jurisdictions where
it is required to be so qualified and where the failure to be so qualified would
have a Material Adverse Effect.
6.02 Corporate Power and Authority . Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Person enforceable
in accordance with its terms.
6.03 No Violation . Neither the execution, delivery and performance by
any Credit Party of the Documents to which it is a party nor compliance with
the terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of the Borrower or any
of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, agreement or other instrument to which the Borrower or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject or (iii) will violate any provision of the
Articles or Certificate of Incorporation or By-Laws of the Borrower or any of
its Subsidiaries.
6.04 Litigation . There are no actions, suits or proceedings pending or,
to the knowledge of the Borrower, threatened, with respect to the Borrower or
any of its Subsidiaries (i) that could reasonably be expected to have a Material
Adverse Effect or (ii) that could reasonably be expected to have a material
adverse effect on the ability to consummate the Watson Merger.
6.05 Use of Proceeds; Margin Regulations . (a) The proceeds of all Term
Loans and the Bridge Loans funded on the Closing Date shall be used by the
Borrower (i) to finance, in whole, the repayment of prior existing Indebtedness,
(ii) to pay fees, costs and expenses in connection with this Agreement, (iii) to
fund, in part, the cash payments owing to the holders of the Borrower's Common
Stock as a result of the effectiveness of the Merger and in accordance with the
terms and conditions of the Merger Agreement, and (iv) to pay fees, costs and
expenses relating to the Merger.
(b) The proceeds of all Revolving Loans may be used (i) on the Initial
Borrowing Date for the purposes described in Section 6.05(a), (ii) to fund any
additional payments required by Section 2.2 of the Merger Agreement as in effect
on the date hereof and (iii) for the ongoing working capital and general
corporate purposes of the Borrower and its Subsidiaries; provided, however, that
in no event shall proceeds of any Revolving Loans be used to repay any principal
amount of the Bridge Loans.
(c) The proceeds of all Swingline Loans shall be used for the ongoing
working capital and general corporate purposes of the Borrower and its
Subsidiaries; provided, however, that in not event shall proceeds of any
Swingline Loans be used to repay any principal amount of the Bridge Loans.
(d) Letters of Credit shall be used for general corporate purposes and
the ordinary course of business needs of the Borrower and its Subsidiaries.
(e) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock in violation of Regulation U or to extend credit for the purpose of
purchasing or carrying any Margin Stock.
(f) The proceeds of the additional Term Loans funded on the Restatement Date
shall be used by the Borrower (i) to finance the Watson Merger, (ii) to repay
the Prior Indebtedness and (iii) to pay fees, costs and expenses incurred in
connection with the Watson Merger.
6.06 Governmental Approvals . Except for filings and recordings in
connection with the Security Documents and those items listed on Schedule 6.06
hereto, no order, consent, approval, license, authorization, or validation of,
or filing, recording or registration with, or exemption by, any foreign or
domestic governmental or public body or authority, or any subdivision thereof,
is required to authorize or is required in connection with (i) the execution,
delivery and performance of any Document or (ii) the legality, validity, binding
effect or enforceability of any such Document.
6.07 Investment Company Act . Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
6.08 Public Utility Holding Company Act . Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
6.09 True and Complete Disclosure . All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower or any of its Subsidiaries in writing to the Agent or any Lender
(including, without limitation, all information contained in the Documents) for
purposes of or in connection with this Agreement or the other Loan Documents or
any transaction contemplated herein or therein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of any such
Person in writing to the Agent or any Lender will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. The projections and
pro forma financial information contained in such materials are based on good
faith estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by the Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no fact known to the Borrower which would have a Material
Adverse Effect, which has not been disclosed herein or in any Schedule hereto.
6.10 Financial Condition; Financial Statements . On and as of the
Restatement Date, on a pro forma basis after giving effect to the Watson Merger
and to all Indebtedness incurred, and to be incurred, and Liens created, and to
be created, by each Credit Party in connection therewith, (i) the sum of the
assets, at a fair valuation, of the Borrower and its Subsidiaries taken as a
whole will exceed its debts, (ii) the Borrower and its Subsidiaries taken as a
whole has not incurred, and does not intend to incur, and does not believe that
they will incur, debts beyond their ability to pay such debts as such debts
mature and (iii) the Borrower and its Subsidiaries taken as a whole will not
have unreasonably small capital with which to conduct its business. For
purposes of this Section 6.10, "debt" means any liability on a claim, and
"claim" means (A) right to payment, whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (B) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured.
(b) (i) The consolidated balance sheet of the Borrower at January 30,
1998, 1997, 1996 and the related consolidated statements of operations and cash
flows of the Borrower for the fiscal year ended as of said dates, have been
examined by Ernst & Young, independent certified public accountants, who
delivered an unqualified opinion in respect therewith, and (ii) the pro forma
consolidated balance sheet of the Borrower as of April 30, 1998, copies of which
have heretofore been furnished to each Lender, present fairly the financial
position of such entities at the dates of said statements and the results for
the period covered thereby (or, in the case of the pro forma balance sheet,
presents a good faith estimate of the consolidated pro forma financial condition
of the Borrower (after giving effect to the Watson Merger and the related
financing thereof) at the date thereat) in accordance with GAAP, except to the
extent provided in the notes to said financial statements. All such financial
statements (other than the aforesaid pro forma balance sheet) have been prepared
in accordance with generally accepted accounting principles and practices
consistently applied except to the extent provided in the notes to said
financial statements. Except for the incurrence of indebtedness to finance the
Watson Merger and the other transactions contemplated by the Documents, nothing
has occurred since January 30, 1998 that has had or could reasonably be expected
to have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the notes thereto
described in Section 6.10(b), there were, as of the Restatement Date, no
liabilities or obligations with respect to the Borrower or any of its
Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and
whether or not due) which, either individually or in aggregate, would be
material to the Borrower and its Subsidiaries taken as a whole, except as
incurred in the ordinary course of business consistent with past practices
subsequent to January 30, 1998.
6.11 Security Interests . On and after the Restatement Date, each of the
Security Documents creates, as security for the Obligations purported to be
secured thereby, a valid and enforceable perfected security interest in and Lien
on all of the Collateral subject thereto, superior to and prior to the rights of
all third Persons and subject to no other Liens (except (i) that the Security
Agreement Collateral may be subject to the security interests evidenced by
Permitted Liens relating thereto and (ii) the Mortgaged Properties may be
subject to Permitted Encumbrances and Permitted Liens relating thereto), in
favor of the Agent for the benefit of the Lenders. No filings or recordings
are required in order to perfect the security interests created under any
Security Document except for filings or recordings required in connection
with any such Security Document (other than the Pledge Agreements) which
shall have been made upon or prior to (or are the subject of arrangements,
satisfactory to the Agent, for filing and/or recording on or promptly after
the date of) the execution and delivery thereof.
6.12 Representations and Warranties in Documents . All representations
and warranties set forth in the Documents were true and correct in all material
respects as of the time such representations and warranties were made and shall
be true and correct in all material respects as of the Restatement Date as if
such representations and warranties were made on and as of such date, unless
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date.
6.13 Consummation of Merger and Stock Issuances . As of the Initial
Borrowing Date, the Merger and the Stock Issuances shall be or, shall have
been, consummated substantially simultaneously with the making of the initial
Term Loans and the initial Revolving Loan, in accordance with the terms and
conditions of the Documents and all applicable laws. All applicable waiting
periods with respect thereto have or, prior to the time when required, will
have, expired without, in all such cases, any action being taken by any
competent authority which restrains, prevents, or imposes material adverse
conditions upon the consummation of the Merger or the Stock Issuances. As of
the Initial Borrowing Date, there does not exist any judgment, order, or
injunction prohibiting the consummation of the Merger or the Stock Issuances,
or the making of Loans or the performance by any Credit Party of their
respective obligations under the Documents.
6.14 Tax Returns and Payments . Each of the Borrower and each of its
Subsidiaries has timely filed all federal income tax returns and all other
material tax returns, domestic and foreign, required to be filed by it and has
paid all material taxes and assessments payable by it which have become due,
other than those not yet delinquent and except for those contested in good
faith. The Borrower and each of its Subsidiaries have paid, or have provided
adequate reserves (in the good faith judgment of the management of the Borrower)
for the payment of, all federal, state and foreign income taxes applicable for
all prior fiscal years and for the current fiscal year to the Restatement Date.
6.15 Compliance with ERISA . Each Plan is in substantial compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan; no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability; no Plan has an accumulated or waived funding deficiency, has
permitted decreases in its funding standard account or has applied for an
extension of any amortization period within the meaning of Section 412 of the
Code; neither the Borrower, nor any Subsidiary nor any ERISA Affiliate has
incurred any material liability to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212
of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code; no proceedings
have been instituted by the PBGC to terminate or appoint a trustee to administer
any Plan; no condition exists which presents a material risk to the Borrower or
any Subsidiary or any ERISA Affiliate of incurring a liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; using
actuarial assumptions and computation methods consistent with Part 1 of subtitle
E of Title IV of ERISA, the aggregate liabilities of the Borrower and its
Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans
(as defined in Section 4001(a)(3) of ERISA) in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
such Plan ended prior to the date of the most recent Credit Event, would not
exceed $250,000; no lien imposed under the Code or ERISA on the assets of the
Borrower or any Subsidiary or any ERISA Affiliate exists or is likely to arise
on account of any Plan; and the Borrower and its Subsidiaries do not maintain or
contribute to any employee welfare benefit plan (as defined in Section 3(1) of
ERISA) which provides benefits to retired employees (other than as required by
Section 601 of ERISA) or any employee pension benefit plan (as defined in
Section 3(2) of ERISA), except to the extent that all events described in the
preceding clauses of this Section 6.15 and then in existence would not, in the
aggregate, have or be likely to have a Material Adverse Effect. With respect to
Plans that are multiemployer plans (within the meaning of Section 4001(a)(3) of
ERISA) the representations and warranties in this Section 6.16 are made to the
best knowledge of the Borrower.
6.16 Subsidiaries . (a) Schedule 6.16 hereto lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein), in each case existing on the Restatement Date. The Borrower will at
all times own directly the percentages specified in said Schedule 6.16 of the
outstanding capital stock of all of said entities except to the extent otherwise
permitted pursuant to Section 8.02.
(b) There are no restrictions on the Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of the Borrower to the Borrower, other than
prohibitions or restrictions existing under or by reason of (i) this Agreement
and the other Loan Documents, (ii) applicable law, (iii) customary
non-assignment provisions entered into in the ordinary course of business and
consistent with past practices, (iv) any restriction or encumbrance with respect
to a Subsidiary of the Borrower imposed pursuant to an agreement which has been
entered into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or disposition
is permitted under this Agreement, and (v) any documents or instruments
governing the terms of any Indebtedness or other obligations secured by Liens
permitted by Section 8.03, provided that such prohibitions or restrictions apply
only to the assets subject to such Liens.
6.17 Patents, etc . The Borrower and each of its Subsidiaries have
obtained all material patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their businesses taken as a whole as
presently conducted and as proposed to be conducted.
6.18 Pollution and Other Regulations . (a) Each of the Borrower and its
Subsidiaries is in compliance with all applicable Environmental Laws governing
its business for which failure to comply could reasonably be expected to have a
Material Adverse Effect, and neither the Borrower nor any of its Subsidiaries is
liable for any material penalties, fines or forfeitures for failure to comply
with any of the foregoing in the manner set forth above. All licenses, permits,
registrations or approvals required for the business of the Borrower and each of
its Subsidiaries, as conducted as of the Restatement Date, under any
Environmental Law have been secured and the Borrower and each of its
Subsidiaries is in substantial compliance therewith, except such licenses,
permits, registrations or approvals the failure to secure or to comply therewith
could not reasonably be expected to have a Material Adverse Effect. Neither the
Borrower nor any of its Subsidiaries is in any respect in noncompliance with,
breach of or default under any applicable writ, order, judgment, injunction, or
decree to which the Borrower or such Subsidiary is a party or which would affect
the ability of the Borrower or such Subsidiary to operate any real property and
no event has occurred and is continuing which, with the passage of time or the
giving of notice or both, would constitute noncompliance, breach of or default
thereunder, except in each such case, such noncompliance, breaches or defaults
as could not reasonably be expected to have a Material Adverse Effect. There
are as of the Restatement Date no Environmental Claims pending or, to the best
knowledge of the Borrower, threatened, which (i) question the validity, term or
entitlement of the Borrower or any of its Subsidiaries for any permit, license,
order or registration required for the operation of any facility which the
Borrower or any of its Subsidiaries currently operates and (ii) wherein an
unfavorable decision, ruling or finding could reasonably be expected to have
a Material Adverse Effect. There are no facts, circumstances, conditions or
occurrences on any owned Real Property or, to the knowledge of the Borrower,
on any property adjacent to any such owned Real Property that could reasonably
be expected (i) to form the basis of an Environmental Claim against the
Borrower, any of its Subsidiaries or any Real Property of the Borrower or any
of its Subsidiaries, or (ii) to cause such Real Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of such Real
Property under any Environmental Law, except in each such case, such
Environmental Claims or restrictions that could not reasonably be expected to
have a Material Adverse Effect.
(b) Hazardous Materials have not, to the knowledge of the Borrower, at any
time been (i) generated, used, treated or stored on, or transported to or
from, any Real Property of the Borrower or any of its Subsidiaries or (ii)
released on any Real Property, in each case where such occurrence or event could
reasonably be expected to have a Material Adverse Effect.
6.19 Properties . The Borrower and each of its Subsidiaries have good and,
with respect to Real Properties, marketable title to all properties owned by
them, including all property reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries as referred to in Section 6.10(b) and all property
acquired in connection with the Watson Merger, free and clear of all Liens,
other than as permitted by Section 8.03. Schedule 6.19 hereto contains a true
and complete list of each Real Property owned or leased by the Borrower or any
of its Subsidiaries on the Restatement Date (after giving effect to the Watson
Merger) and the type of interest therein held by the Borrower or the respective
Subsidiary.
6.20 Labor Relations . No Credit Party is engaged in any unfair labor
practice that could reasonably be expected to have a Material Adverse Effect.
There is (i) no unfair labor practice complaint pending against any Credit Party
or, to the knowledge of the Borrower, threatened against any of them, before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending
against any Credit Party or threatened against any of them, (ii) no strike,
labor dispute, slowdown or stoppage pending against any Credit Party or, to the
knowledge of the Borrower, threatened against any Credit Party and (iii) no
union representation question existing with respect to the employees of any
Credit Party and no union organizing activities are taking place, except with
respect to any matter specified in clause (i), (ii) or (iii) above such as could
not reasonably be expected to have a Material Adverse Effect.
6.21 Existing Indebtedness . Schedule 6.21 hereto sets forth a true and
complete list of all Indebtedness of the Borrower and each of its Subsidiaries
as of the Restatement Date and which is to remain outstanding after giving
effect to the Watson Merger (excluding the Loans and the Letters of Credit, the
"Existing Indebtedness"), in each case showing the aggregate principal amount
thereof and the name of the respective borrower (or issuer) and any other entity
which directly or indirectly guaranteed such debt.
6.22 Capitalization . On the Restatement Date, the authorized capital
stock of each Credit Party and the number of shares of capital stock issued and
outstanding as of the Restatement Date of each Credit Party are set forth on
Schedule 6.22 hereto. All such outstanding shares have been duly and validly
issued, are fully paid and non-assessable and have been issued free of
preemptive rights. Except as set forth on Schedule 6.22, no Credit Party has
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreement providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock, or any stock appreciation or similar rights.
6.23 Compliance with Statutes, etc. Each of the Borrower and its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls and labor laws),
except such noncompliance as could not reasonably be expected to have a Material
Adverse Effect.
6.24 Inventory and Accounts .
(a) Except as specifically disclosed on Schedule 6.24 hereto or
as otherwise disclosed to and acknowledged by the Agent in writing, with
respect to all Eligible Inventory:
(i) such Inventory is located on the premises listed on the
schedules attached to the Security Agreements or is Inventory in transit for
sale in the ordinary course of business;
(ii) no such Inventory is subject to any Lien or security interest
whatsoever, except for the Liens and security interests of the Agent and
those Liens and security interests permitted by Section 8.03; and
(iii) except as specified in the Security Agreements or otherwise
permitted by this Agreement, no such Inventory is on consignment or is
now stored or shall at any time hereafter be stored with a bailee,
warehouseman, or similar party.
(b) With respect to all Eligible Accounts:
(i) no transaction giving rise to such an Account
violated or will violate any applicable federal, state or local law, rules or
ordinances, the violation of which could reasonably be expected to have a
Material Adverse Effect;
(ii) except where required by statute, none of such
Accounts is subject to terms prohibiting assignment or requires notice of
or consent to such assignment;
(iii) the Borrower or a Subsidiary is the lawful owner of
such Accounts, free and clear of all Liens, except those in favor of the
Agent and except those permitted by Section 8.03; and
(iv) each of such Accounts represents a fully completed
bona fide transaction which requires no further act on the Borrower's or
any Subsidiary's part to make such Accounts payable by the Account
Debtors, and such Accounts are not subject to any offsets or counterclaims
and do not represent consignment sales, guaranteed sales, sale or return or
other similar understandings or an obligation of any Affiliate of Borrower.
6.25 Consummation of Watson Merger . As of the Restatement Date,
the Watson Merger shall have been consummated substantially simultaneously
with the making of the additional Term Loans in accordance with the terms and
conditions of the applicable Documents and all applicable laws. All applicable
waiting periods with respect thereto will have expired without any action being
taken by any competent authority which restrains, prevents or imposes material
adverse conditions upon the consummation of the Watson Merger. As of the
Restatement Date, there does not exist any judgment, order or injunction
prohibiting the consummation of the Watson Merger or the making of the Loans
or the performance by any Credit Party of their respective obligations under the
Documents.
SECTION 7. Affirmative Covenants. The Borrower covenants and
agrees that on the Restatement Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated, no Letters of Credit or
Notes are outstanding and the Loans and Unpaid Drawings, together with interest,
Fees and all other Obligations incurred hereunder, are paid in full:
7.01 Information Covenants . The Borrower will furnish to each Lender:
(a) Annual Financial Statements. Within 90 days after the close of
each fiscal year of the Borrower, the consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries, as at the end of such
fiscal year and the related consolidated and consolidating statements of
income and retained earnings and of cash flows for such fiscal year, in
each case setting forth comparative consolidated figures for the preceding
fiscal year, and examined by independent certified public accountants of
recognized national standing whose opinion shall not be qualified as to the
scope of audit and as to the status of the Borrower or any of its
Subsidiaries as a going concern, together with a certificate of such
accounting firm stating that in the course of its regular audit of the
business of the Borrower, which audit was conducted in accordance with
generally accepted auditing standards, such accounting firm has obtained
no knowledge of any Default or Event of Default which has occurred and
is continuing or, if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as to the
nature thereof.
(b) Quarterly Financial Statements. As soon as available and in any
event within 45 days after the close of each of the first three quarterly
accounting periods in each fiscal year, the consolidated balance sheet of
the Borrower and its Subsidiaries, as at the end of such quarterly period
and the related consolidated statements of income and retained earnings
and of cash flows for such quarterly period and for the elapsed portion of
the fiscal year ended with the last day of such quarterly period, and in each
case setting forth comparative consolidated figures for the related periods
in the prior fiscal year, all of which shall be certified by the chief financial
officer or controller of the Borrower, subject to changes resulting from
audit and normal year-end audit adjustments.
(c) Monthly Reports. As soon as practicable, and in any event within
30 days, after the end of each monthly accounting period of each fiscal
year (other than the last monthly accounting period in such fiscal year) the
consolidated balance sheet of the Borrower and its Subsidiaries, as at the
end of such period, and the related consolidated statements of income and
retained earnings for such period, setting forth comparative figures for the
corresponding period of the previous year, all of which shall be certified
by the chief financial officer or controller of the Borrower subject to
changes resulting from audit and normal year-end audit adjustments.
(d) Budget; etc. Not more than 30 days after the commencement of
each fiscal year of the Borrower, a budget of the Borrower and its
Subsidiaries in reasonable detail for each of the twelve months of such
fiscal year. Together with each delivery of consolidated financial
statements pursuant to Sections 7.01(c), a comparison of the current year
to date financial results against the budgets required to be submitted
pursuant to this clause (d) shall be presented.
(e) Compliance Certificate. At the time of the delivery of the financial
statements provided for in Sections 7.01(a) and (b), a certificate of the
chief financial officer, controller or other Authorized Officer of the
Borrower in the form of Exhibit 7.01(e) hereto (each such certificate, a
"Compliance Certificate").
(f) Notice of Default or Litigation. Promptly, and in any event within
three Business Days after the Borrower obtains knowledge thereof, notice
of (i) the occurrence of any event which constitutes a Default or Event of
Default which notice shall specify the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto and (ii) the commencement of or any significant
development in any litigation or governmental proceeding pending against
the Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect.
(g) Borrowing Base Certificates. Promptly after determining same,
and in any event within ten days following the last day of each calendar
month, a Borrowing Base Certificate executed by the chief financial
officer or controller of the Borrower setting forth the Borrowing Base
determined as of the last day of such month (together with reasonable
detail as to the computation thereof); provided, however, that at any time
the Total Unutilized Revolving Commitment is less than $10,000,000, the
Borrower shall deliver a Borrower Base Certificate as provided above on a
weekly basis by the Thursday following each week.
(h) Auditors' Reports. Promptly upon receipt thereof, a copy of each
other final report or "management letter" submitted to the Borrower by its
independent accountants in connection with any annual, interim or special
audit made by it of the books of the Borrower.
(i) Monthly Reports and Agings. Promptly, and in any event within
ten days after the end of each fiscal month, a schedule of inventory in the
form of Exhibit 7.01(i) hereto (a "Schedule of Inventory") as of the month
then ended, a completed aged schedule of Accounts and a trial balance, in
form and substance satisfactory to the Agent.
(j) Other Information. Promptly upon transmission thereof, (i) copies
of any filings and registrations with, and reports to, the Securities and
Exchange Commission or any successor thereto (the "SEC") by the
Borrower or any of its Subsidiaries and (ii) with reasonable promptness,
such other information or documents (financial or otherwise) as the Agent
on its own behalf or on behalf of the Required Lenders may reasonably
request from time to time.
7.02 Books, Records and Inspections . The Borrower will, and will cause its
Subsidiaries to, permit, upon reasonable notice to the chief financial officer,
controller or any other Authorized Officer of the Borrower (i) officers and
designated representatives of the Agent or the Required Lenders to visit and
inspect any of the properties or assets of the Borrower and any of its
Subsidiaries in whomsoever's possession, and to examine the books of account of
the Borrower and any of its Subsidiaries and discuss the affairs, finances and
accounts of the Borrower and of any of its Subsidiaries with, and be advised as
to the same by, its and their officers and independent accountants, all at such
reasonable times and intervals and to such reasonable extent as the Agent or the
Required Lenders may desire and (ii) not more than four times per year the
Agent, or a third party designated by the Agent, to conduct, at the Borrower's
expense, an audit of the accounts receivable and inventories of the Borrower and
its Subsidiaries at such times as the Agent shall reasonably require.
7.03 Maintenance of Property; Insurance . The Borrower will, and will cause
each of its Subsidiaries to, at all times maintain in full force and effect with
responsible insurance companies insurance in such amounts, covering such risks
and liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice and as is customarily maintained by
companies in similar businesses. The Borrower will, and will cause each of its
Subsidiaries to, furnish on the Initial Borrowing Date and annually thereafter
to the Agent a summary of the insurance carried together with certificates of
insurance and other evidence of such insurance, if any, naming the Agent as an
additional insured, loss payee and mortgage.
7.04 Payment of Taxes . The Borrower will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a Lien or charge
upon any properties of the Borrower or any of its Subsidiaries; provided,
however, that neither the Borrower nor any Subsidiary shall be required to pay
any such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of the Borrower) with respect thereto in
accordance with GAAP.
7.05 Consolidated Corporate Franchises . The Borrower will do, and
will cause each Subsidiary to do, or cause to be done, all things necessary to
preserve and keep in full force and effect its existence, material rights and
authority; provided, however, that any transaction permitted by Section 8.02
will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc . The Borrower will, and will cause
each Subsidiary to, comply with all applicable statutes, regulations and orders
of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property other than those the non-compliance with which could not
reasonably be expected to have a Material Adverse Effect.
7.07 ERISA . As soon as possible and, in any event, within 10 days
after the Borrower or any of its Subsidiaries knows or has reason to know of the
occurrence of any of the following, the Borrower will deliver to each of the
Lenders a certificate of the chief financial officer of the Borrower setting
forth details as to such occurrence and such action, if any, which the Borrower,
such Subsidiary or such ERISA Affiliate is required or proposes to take,
together with any notices required or proposed to be given to or filed with or
by the Borrower, the Subsidiary on the ERISA Affiliate or any notices required
or proposed to be given by the Borrower, the Subsidiary or the ERISA Affiliate
to the PBGC, a Plan participant or the Plan administrator with respect thereto:
that a Reportable Event has occurred; that an accumulated funding deficiency has
been incurred or an application is reasonably likely to be or has been made to
the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the Code with
respect to a Plan; that a Plan which has an Unfunded Current Liability has been
or may be terminated, reorganized, partitioned or declared insolvent under Title
IV of ERISA; that a Plan has an Unfunded Current Liability and there is a
failure to make a required contribution, which gives rise to a lien under
ERISA or the Code; that proceedings are reasonably likely to be or have been
instituted by the PBGC to terminate a Plan which has an Unfunded Current
Liability; that a proceeding has been instituted pursuant to Section 515 of
ERISA to collect a delinquent contribution to a Plan; that the Borrower, any
Subsidiary or any ERISA Affiliate will or is expected to incur any material
liability (including, any contingent or secondary liability) to or on account
of the termination of or withdrawal from a Plan under Section 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section 401 (a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(l) or
502(l) of ERISA or that the Borrower or any Subsidiary may incur any material
liability pursuant to any employee welfare benefit plan (as defined in Section
3(1) of ERISA) that provides benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or any employee
pension benefit plan (as defined in Section 3(2) of ERISA). Upon request of
a Lender, the Borrower will deliver to such Lender a complete copy of the
annual report (Form 5500) of each Plan required to be filed with the Internal
Revenue Service. In addition to any certificates or notices delivered to the
Lenders pursuant to the first sentence hereof, copies of any annual reports
and any other material notices received by the Borrower or any Subsidiary
with respect to a Plan shall be delivered to the Lenders no later than 10
days after the later of the date such notice has been filed with the Internal
Revenue Service or the PBGC, given to Plan participants (other than notices
relating to an individual participant's benefits) or received by the Borrower
or such Subsidiary.
7.08 Good Repair . The Borrower will, and will cause each of its
Subsidiaries to, ensure that its properties and equipment used or useful in its
business in whomsoever's possession they may be, are kept in good repair,
working order and condition, normal wear and tear excepted, and, subject to
Section 8.05, that from time to time there are made in such properties and
equipment all needful and proper repairs, renewals, replacements, extensions,
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.
7.09 End of Fiscal Years; Fiscal Quarters . The Borrower will, for
financial reporting purposes, cause each of its, and each of its Subsidiaries'
fiscal years and fiscal quarters to end on the dates set forth on Schedule 7.09
hereto.
7.10 Use of Proceeds . All proceeds of the Loans shall be used as
provided in Section 6.05.
7.11 Additional Security; Further Assurances . (a) The Borrower will,
and will cause its Subsidiaries to, at the expense of the Borrower, grant to the
Agent security interests and mortgages (each an "Additional Mortgage") in such
owned Real Property of the Borrower and its Subsidiaries acquired after the
Effective Date as may be requested in writing from time to time by the Agent.
Such Additional Mortgages shall be granted pursuant to documentation
reasonably satisfactory in form and substance to the Agent and shall constitute
valid and enforceable Liens superior to and prior to the rights of all third
Persons and subject to no other Liens except as are permitted by Section 8.03.
The Additional Mortgages or instruments related thereto shall have been duly
recorded or filed in such manner and in such places as are required by law to
establish, perfect, preserve and protect the Liens in favor of the Agent
required to be granted pursuant to the Additional Mortgages and all taxes, fees
and other charges payable in connection therewith shall have been paid in full.
(b) If at any time after the date hereof, any Person becomes a
Subsidiary of the Borrower, the Borrower will promptly notify the Agent in
writing and will, at the expense of the Borrower and at the written request of
the Agent, cause (i) such Subsidiary to guaranty the Obligations and grant to
the Agent for the benefit of the Lenders a security interest in and lien on the
property and assets of such Subsidiary to secure its obligations under such
guaranty, and (ii) the capital stock of such Subsidiary to be pledged to the
Agent for the benefit of the Lenders. All such security interests, pledges and
guaranties shall be granted or made pursuant to documentation reasonably
satisfactory in form and substance to the Agent and shall constitute valid and
enforceable Liens superior to and prior to the rights of all third Persons and
subject to no other Liens except as are permitted by Section 8.03. All
documents or instruments related thereto shall have been duly recorded or filed
in such manner and in such places as are required by law to establish, perfect,
preserve and protect the Lien's in favor of the Agent required to be granted
pursuant to this clause (b) and all taxes, fees and other charges payable in
connection therewith shall have been paid in full.
(c) The Borrower will, and will cause its Subsidiaries to, at the
expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Agent from time to time such vouchers, invoices, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, real property surveys, reports
and other assurances or instruments and take such further steps relating to the
collateral covered by any of the Security Documents as the Agent may reasonably
require. Furthermore, the Borrower shall cause to be delivered to the Agent
such opinions of counsel, title insurance and other related documents as may be
requested by the Agent to assure themselves that this Section 7.11 has been
complied with.
(d) In the event that the Agent at any time after the Restatement Date
determines in its good faith discretion that real estate appraisals
satisfying the requirements set forth in 12 C.F.R., Part 34-Subpart C, or any
successor or similar statute, rule, regulation, guideline or order (any such
appraisal a "Required Appraisal") are or were required to be obtained, or should
be obtained, in connection with any or all of the Mortgaged Properties, then,
such Required Appraisal shall be delivered, at the expense of the Borrower, to
the Agent, which Required Appraisal, and the respective appraiser, shall be
satisfactory to the Agent.
(e) The Borrower agrees that each action required above by this Section
7.11 shall be completed as soon as possible, but in no event later than
60 days after such action is requested to be taken by the Agent or the Required
Lenders; provided, however, that in no event shall the Borrower be required to
take any action, other than using its reasonable commercial efforts without any
material expenditure, to obtain consents from third parties with respect to its
compliance with this Section 7.11.
7.12 Interest Rate Agreement . The Borrower will, no later than the
date occurring 120 days after the Initial Borrowing Date, enter into an Interest
Rate Agreement with a term of at least two years in respect of amounts equal to
or greater than $40,000,000, on terms satisfactory to the Agent.
7.13 Additional Mortgages . The Borrower will, no later than 60 days
following the Restatement Date, cause to be delivered to the Agent the
following:
(i) fully executed counterparts of mortgages in form
and substance satisfactory to the Agent covering all of Watson's owned
Real Property and arrangements reasonably satisfactory to the Agent shall
be in place to provide that counterparts of such mortgages shall be
recorded within a reasonable period thereafter in all places to the extent
necessary or desirable, in the judgment of the Agent, effectively to create a
valid and enforceable first priority Lien, subject only to Permitted
Encumbrances, on each such Mortgaged Property in favor of the Agent (or
such other trustee as may be required or desired under local law) for the
benefit of the Lenders;
(ii) mortgagee title insurance policies issued by title
insurers reasonably satisfactory to the Agent in amounts reasonably
satisfactory to the Agent, not to exceed the value of such Real Properties
as reasonably determined by the Agent, and assuring the Agent that the
Mortgages in respect of Watson's owned Real Properties are valid and
enforceable first priority mortgage Liens on such Real Properties, free and
clear of all defects and encumbrances except Permitted Encumbrances.
Such mortgage policies shall be in form and substance satisfactory to the
Agent and shall include an endorsement for future advances under this
Agreement, the Notes and the mortgages, for mechanics liens and for any
other matter that the Agent in its discretion may request;
(iii) a survey, in form and substance satisfactory to the
Agent, to each such Mortgaged Property, each certified by a licensed
professional surveyor satisfactory to the Agent and revealing no facts
which would materially interfere with the use of such properties by the
Borrower and its Subsidiaries, or an update of an existing survey provided
the title company will delete the exception for existing facts which a
current survey would disclose; and
(iv) local counsel opinions, addressed to the Agent and
each of the Lenders in form and substance satisfactory to Agent, and such
other documents and instruments as the Agent may reasonably request.
7.14 Merger of Appalachian Distributing Corporation . The Borrower
will, no later than 30 days following the Restatement Date, cause Appalachian
Distributing Corporation, a Tennessee corporation, to be merged with and into
Watson, with Watson as the surviving corporation.
7.15 Repayment of Indebtedness and Release of Liens. The Borrower
will, no later than 30 days following the Restatement Date, cause all
Indebtedness owing by the Borrower or any of its Subsidiaries to First American
National Bank (or any of its successors or assigns) and Pikeville National Bank
and Trust Company (or any of its successors or assigns) to be repaid in full
and Liens securing such Indebtedness to be released, and to deliver to the
Agent such payoff letters, UCC-3 termination statements, mortgage releases and
other instruments, in form and substance satisfactory to the Agent, as shall be
necessary to terminate and satisfy all Liens securing such Indebtedness.
SECTION 8. Negative Covenants. The Borrower hereby covenants
and agrees that as of the Restatement Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Letters of
Credit or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations incurred hereunder, are paid in
full:
8.01 Changes in Business . The Borrower will not, and will not permit
any of its Subsidiaries to, materially alter the character of the business of
the Borrower and its Subsidiaries from that conducted at the Initial Borrowing
Date provided that this Section 8.01 shall not restrict the making of any
investment expressly permitted by Section 8.06.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc . The
Borrower will not, and will not permit any Subsidiary to, wind up, liquidate or
dissolve its affairs, or enter into any transaction of merger or consolidation,
sell or otherwise dispose of all or any part of its property or assets (other
than inventory or obsolete equipment or excess equipment no longer needed in the
conduct of the business in the ordinary course of business) or purchase, lease
or otherwise acquire all or any part of the property or assets of any Person
(other than purchases or other acquisitions of inventory, leases, materials and
equipment in the ordinary course of business) or agree to do any of the
foregoing at any future time, except that the following shall be permitted:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into, or be liquidated into, the Borrower or a Subsidiary Guarantor
(so long as the Borrower or such Subsidiary Guarantor is the surviving
corporation), or all or any part of its business, properties and assets may be
conveyed, leased, sold or transferred to the Borrower or any Subsidiary
Guarantor; provided, however, that neither the Borrower nor any
Subsidiary Guarantor may be a party to any merger, consolidation or
liquidation otherwise permitted by this clause (a) involving a Subsidiary
that is not a Wholly-Owned Subsidiary of the Borrower;
(b) capital expenditures permitted to be incurred by Section 8.05;
(c) investments and acquisitions of properties permitted pursuant to
Section 8.06;
(d) each of the Borrower and the Subsidiary Guarantors may lease (as
lessee) real or personal property in the ordinary course of business (so
long as such lease does not create a Capitalized Lease Obligation not
otherwise permitted by Section 8.04(c));
(e) other sales or dispositions of assets; provided, however, that (i) the
aggregate Net Cash Proceeds received from all such sales and dispositions
shall not exceed $500,000 in any fiscal year of the Borrower, (ii) each
such sale shall be in an amount at least equal to the fair market value
thereof and for proceeds consisting solely of not less than (A) 80% cash
and (B) seller indebtedness evidenced by promissory notes which notes
shall be pledged and delivered to the Agent pursuant to a pledge
agreement in form and substance satisfactory to the Agent, and (iii) the
Net Cash Proceeds of any such sale are applied to repay the Loans to the
extent required by Section 4.02(A)(c); and, provided further, that the sale
or disposition of the capital stock of (A) the Borrower or Subsidiary
Guarantor shall be prohibited and (B) any Subsidiary of the Borrower
(other than the Subsidiary Guarantor) shall be prohibited unless it is for all
of the outstanding capital stock of such Subsidiary owned by the
Borrower;
(f) other sales or dispositions of assets in each case to the extent the
Required Lenders have consented in writing thereto and subject to such
conditions as may be set forth in such consent; and
(g) any Subsidiary may be liquidated into the Borrower or a
Subsidiary Guarantor.
8.03 Liens . The Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of the Borrower or any such Subsidiary whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding r agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any other
similar notice of lien under any similar recording or notice statute, except:
(a) Liens for taxes not yet due or otherwise not yet delinquent or Liens
for taxes being contested in good faith and by appropriate proceedings for
which adequate reserves (in the good faith judgment of the management of
the Borrower) have been established;
(b) Liens in respect of property or assets of the Borrower or any of its
Subsidiaries imposed by law which were incurred in the ordinary course
of business, such as carriers', warehousemen's and mechanics' Liens,
statutory landlord's Liens, and other similar Liens arising in the ordinary
course of business, and (i) which do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any Subsidiary
or (ii) which are being contested in good faith by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of
the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement or the other Loan
Documents;
(d) Liens on assets of the Borrower and each Subsidiary existing on
the Initial Borrowing Date and listed on Schedule 8.03 hereto, without
giving effect to any subsequent extensions or renewals thereof;
(e) Leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries;
(f) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(g) Liens arising from UCC financing statements regarding leases
permitted by this Agreement;
(h) Any interest or title of a lessor under any lease permitted by this
Agreement;
(i) Liens arising pursuant to purchase money Liens relating to, or
security interests securing Indebtedness representing the purchase price of,
assets acquired by the Borrower or any Subsidiary Guarantor after the
Initial Borrowing Date, provided that any such Liens attach only to the
assets so acquired and that all Indebtedness secured by Liens created
pursuant to this clause (j) shall not exceed $500,000 at any time
outstanding;
(j) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(c);
(k) Liens arising out of judgments or awards in circumstances not
constituting an Event of Default under Section 9.09 provided that no cash
or other property is deposited or delivered to secure any respective
judgment or award (or any appeal bond in respect thereof, except as
permitted by clause (l) below);
(l) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (exclusive of obligations in respect of the
payment for borrowed money); and
(m) Liens securing Indebtedness not in excess of $100,000 at any time
outstanding.
8.04 Indebtedness . The Borrower will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Loan Documents;
(b) Indebtedness of the Borrower and any Subsidiary to each other
arising out of intercompany loans and advances;
(c) Capitalized Lease Obligations of the Borrower and each Subsidiary
Guarantor, in each case only if, after giving effect to the incurrence
thereof, the limit on Consolidated Capital Expenditures set forth in Section
8.05 would not be breached;
(d) Indebtedness under Interest Rate Agreements to the extent entered
into after the Initial Borrowing Date in compliance with Section 7.13;
(e) Indebtedness incurred pursuant to purchase money Liens permitted
by Section 8.03(i);
(f) additional Indebtedness of the Borrower and the Subsidiary
Guarantors not to exceed an aggregate outstanding principal amount of
$500,000 at any time; and
(g) Indebtedness described on Schedule 6.21 hereto as such
Indebtedness exists on the Restatement Date and without any increase
thereof.
8.05 Capital Expenditures . (a) The Borrower will not, and will not
permit any of its Subsidiaries to, incur Consolidated Capital Expenditures;
provided, however, that the Borrower and the Subsidiary Guarantors may make
Consolidated Capital Expenditures during each fiscal year set forth below
(taken as one accounting period, with each such period being adjusted to
correspond to the Borrower's actual fiscal year) so long as the aggregate amount
of such Consolidated Capital Expenditures does not exceed for any period set
forth below, the amount set forth opposite such period:
Period Amount
January 29, 1995 - February 3, 1996 $9,318,000
February 4, 1996 - January 31, 1997 $10,804,000
February 1, 1997 - January 31, 1998 $11,792,000
February 1, 1998 - January 31, 1999 $13,669,000
February 1, 1999 - January 31, 2000 $12,260,000
February 1, 2000 - January 31, 2001 $13,306,000
February 1, 2001 - January 31, 2002 $13,278,000
February 1, 2002 - January 31, 2003 $17,314,750
provided, further, in the event that Consolidated EBITDA for any
Test Period is less than Projected EBITDA for such Test Period,
the amount of such additional Consolidated Capital Expenditures
permitted to be made pursuant to this Section 8.05(a) during the
four consecutive fiscal quarters of the Borrower commencing on
the anniversary of the last day of such Test Period shall be
reduced as follows: (i) if the EBITDA Shortfall Percentage is
equal to or greater than 95%, then no reduction shall occur; (ii) if
the EBITDA Shortfall Percentage is equal to or greater than 90%
but less than 95%, then by an amount equal to $600,000; and (iii)
if the EBITDA Shortfall Percentage is less than 90%, then by an
amount equal to (x) the EBITDA Shortfall for such Test Period
multiplied by (y) 150%.
(b) In the event that the maximum amount which is permitted to be expended
in respect of Consolidated Capital Expenditures during any fiscal year pursuant
to Section 8.05(a) (without giving effect to this clause (b)) is not fully
expended during such fiscal year, the maximum amount which may be expended in
respect of Consolidated Capital Expenditures during the immediately succeeding
fiscal year pursuant to Section 8.05(a) shall be increased by such unutilized
amount provided that such increase shall not exceed $1,000,000 in any fiscal
year.
8.06 Advances, Investments and Loans . The Borrower will not, and
will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to any
Person, except:
(a) the Borrower or any Subsidiary may invest in cash and Cash
Equivalents;
(b) the Borrower and any Subsidiary may acquire and hold receivables
owing to them, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
(c) the intercompany Indebtedness described in Section 8.04(b) and
additional Investments in existing Subsidiaries and Subsidiary Guarantors
shall be permitted;
(d) the Borrower and each Subsidiary Guarantor may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement
of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(e) Interest Rate Agreements permitted by Section 8.04(d) shall be
permitted;
(f) the Borrower may make contributions to an employee stock
ownership plan provided such contributions are in the Borrower's common
stock;
(g) the Borrower may own Investments set forth on Schedule 8.06
hereto;
(h) the Borrower may acquire additional retail stores, provided that (i)
after giving effect thereto, the limit on Consolidated Capital Expenditures
set forth in Section 8.05 would not be breached and (ii) each store
acquired by the Borrower shall be engaged in one or more lines of
business substantially similar to those conducted by the Borrower on the
Closing Date;
(i) the Borrower may hold the promissory notes acquired in
accordance with Section 8.02(e); and
(j) the Borrower may acquire all of the assets or all of the issued and
outstanding shares of capital stock of a certain retailer (the "Retailer")
(such acquisition, the "Contemplated Acquisition") as disclosed in a letter
dated the date hereof from the Borrower to the Agent (the "Contemplated
Acquisition Letter"), provided that each of the following conditions shall
have been satisfied:
(i) the Purchase Price for the Contemplated Acquisition shall
not exceed $10,000,000 plus the cash held by the Contemplated
Acquisition on the closing date of that transaction;
(ii) the Contemplated Acquisition shall be consummated on or
prior to ninety (90) days from the Initial Borrowing Date (the
"Contemplated Acquisition Termination Date");
(iii) no Default or Event of Default shall exist immediately
before and after giving effect to the consummation of the Contemplated
Acquisition or result therefrom;
(iv) no Indebtedness, including, without limitation, deferred
payments to be paid by the Borrower or any Subsidiary in respect of the
Contemplated Acquisition (except for deferred payments under consulting
or non-competition agreements with current officers of such retailer, in
amounts which do not cause the Purchase Price for the Contemplated
Acquisition to exceed $13,000,000, treating all such deferred payments as
part of the Purchase Price), shall have been incurred or assumed, directly
or indirectly, by the Borrower or any Subsidiary as a result of such
acquisition, other than Indebtedness otherwise permitted under Section
8.04;
(v) the Borrower shall have promptly paid in full all of the
costs and expenses (including, without limitation, reasonable costs and
expenses of counsel to the Agent) related to the review by the Agent of the
Borrower's compliance with the terms of this Agreement with respect to
such acquisition;
(vi) neither the Retailer nor any of its Subsidiaries shall be
subject to any restrictions, whether set forth in its charter or other
organizational documents, contractually imposed or otherwise, with
respect to the payment of cash dividends and distributions on its capital
stock or with respect to payment of any Indebtedness owed to the
Borrower or any Subsidiary or the making of loans or advances to the
Borrower or any Subsidiary or the transfer of any of its property or assets
to the Borrower or any Subsidiary;
(vii) the board of directors and, if required under applicable law,
the stockholders of each of the Borrower and the Retailer shall have
approved the terms and conditions of such acquisition and such transaction
shall not be a "hostile" acquisition or other "hostile" transaction;
(viii) the Borrower shall have complied with the requirements of
Section 7.11;
(ix) the Borrower shall have delivered to the Agent, as soon as
practicable prior to the proposed date of execution of any acquisition
agreement (but in no event less than ten days prior to any such execution),
true, correct and complete copies of such draft agreement and all exhibits,
schedules, documents and other agreements related thereto (as to such
exhibits, schedules, documents and other agreements, as and when
available but prior to consummation of such acquisition with sufficient
time to allow the Agent and its counsel sufficient time for review thereof),
and thereafter until the actual consummation of the acquisition, shall
deliver to the Agent, on a contemporaneous basis with others involved in
the transaction, updated and revised information and documents and such
agreements shall not contain provisions that are not within the range of
provisions customarily found in acquisitions of a similar type for a similar
industry and the foregoing deliveries to the Agent shall include, without
limitation, customary opinions of counsel to be received by the Borrower
in connection with the acquisition (with respect to which the Agent and
the Lenders shall be included as additional addressees);
(x) the Contemplated Acquisition shall be consummated
pursuant to the material terms and conditions of the acquisition agreement
as delivered to the Agent (without waiver by the Borrower of the
fulfillment of any material condition precedent set forth therein) which
agreement shall set forth the entire agreement among the parties thereto
with respect to the subject matter thereof;
(xi) the Borrower shall have no knowledge that any of the
representations or warranties with respect to the Retailer or any of its
Subsidiaries, contained in any acquisition agreement or other documents
were false or misleading when made the breach of which individually or in
the aggregate could have a material adverse effect on the Retailer as
operated before or after giving effect to the consummation of the proposed
acquisition;
(xii) no material consent or approval of any Person, and no
consent, license, approval, authorization or declaration of any
governmental authority, bureau or agency, shall have been required in
connection with the Contemplated Acquisition, except as described in the
acquisition agreement delivered to the Agent in connection therewith, each
of which shall have been duly and validly obtained on or prior to the date
of consummation of such acquisition and shall be in full force and effect
on such date;
(xiii) neither the execution and delivery of any acquisition
agreement, nor the performance of any parties' obligations thereunder, will
violate any provision of law;
(xiv) not later than five Business Days prior to consummation of
the acquisition the Agent shall have received: (1) a Phase 1 environmental
assessment concerning any owned Real Property (and, if deemed
reasonably necessary by the Agent, any leased Real Property) of the
Retailer and any of its Subsidiaries, which assessment shall be conducted
in accordance with the appropriate ASTM standard (and if recommended
by the Phase 1 assessment, a Phase 2 environmental assessment conducted
in accordance with the appropriate ASTM standard, if any) and which
shall be reasonably satisfactory to the Agent in all respects, provided that
no environmental assessment shall be required in respect of any properties
as to which the Agent in its sole discretion determines that no such
assessment is desirable; (2) a schedule, with such detail as the Agent may
reasonably request, concerning all material litigation then pending or to
the knowledge of the Borrower threatened and all material contingent
liabilities (including all sales and other state tax and any other tax the
liability for which may attach to transferred assets) with respect to the
Retailer and any of its Subsidiaries in each case which is not otherwise
described in adequate detail in the applicable acquisition agreement and
related exhibits and schedules whether or not purported to be retained by
the seller (all of the foregoing relating to such litigation, contingent
liabilities and tax liabilities to be reasonably satisfactory in form and
substance to the Agent and its counsel); (3) to the extent available, a
consolidated and consolidating balance sheet of the Retailer and any
Subsidiaries, and a related consolidated and consolidating statement of
income and retained earnings and statements of cash flow for each of the
three (3) fiscal years and subsequent fiscal quarters ending immediately
prior to the date of the acquisition; and (4) on a pro forma basis after
giving effect to the proposed acquisition and based on reasonable
assumptions made by the Borrower in good faith, a consolidated and
consolidating balance sheet of the Borrower and its Subsidiaries
(including the Retailer and its Subsidiaries), and a related consolidated and
consolidating statement of income and retained earnings and statements of
cash flow (A) for the four fiscal quarters ending immediately prior to the
date of such acquisition (taken as one accounting period), and (B) for each
fiscal year following the date of such acquisition through the Final
Maturity Date, each such statement (x) certified by the chief financial
officer of the Borrower as fairly presenting the Borrower's and its
Subsidiaries' and the Retailer's historical and projected financial position
on a pro forma basis after giving effect to the acquisition, (y) to show all
deferred payments which the Borrower or any Subsidiary, as applicable,
directly or indirectly, would be required to make based on the projected
pro forma results of operations, and (z) to be accompanied by a certificate
of the chief financial officer of the Borrower certifying that the Borrower
(I) would have been in compliance with all covenants set forth herein
during the four fiscal quarters ending immediately prior to the date of such
acquisition had the acquisition been consummated on the first day of such
period and (II) is projected to be in compliance with all covenants set forth
herein during each fiscal year following the date of such acquisition
through the Final Maturity Date, which certificate shall be accompanied
by detailed calculations indicating compliance with the covenants set forth
in Sections 8.03, 8.04, 8.05, 8.06, 8.10, 8.11, 8.12, and 8.13; and
(xv) concurrently with the consummation of the acquisition, the
Agent shall have received, in form and substance reasonably satisfactory
to the Agent and its counsel, a Compliance Certificate dated the effective
date of such acquisition, which certificate shall also include a certification
of the chief financial officer of the Borrower (A) to the effect that, after
giving effect to the acquisition, no material adverse change shall have
occurred in the financial condition or operations of the Borrower and its
Subsidiaries taken as a whole, and (B) that the terms and conditions of
Section 8.06 have been complied with and the consummation of the
Contemplated Acquisition shall be deemed to constitute a representation
and warranty by the Borrower that the Contemplated Acquisition has been
consummated in accordance with the terms of this Agreement.
8.07 Prepayments of Indebtedness, etc . The Borrower will not, and will
not permit any of its Subsidiaries to amend, modify, or change in any manner
adverse to the interests of the Lenders the Certificate of Incorporation
(including, without limitation, by the filing of any certificate of
designation) or By-Laws of the Borrower or any Subsidiary, or any agreement
entered into by the Borrower or any Subsidiary, with respect to its capital
stock, or the Documents, or enter into any new agreement in any manner adverse
to the interests of the Lenders with respect to the capital stock of the
Borrower or any Subsidiary.
8.08 Capital Stock and Dividends, etc . The Borrower will not, and
will not permit any of its Subsidiaries to, (x) issue any preferred stock or
other capital stock (other than Common Stock) or (y) declare or pay any
dividends (other than dividends payable solely in capital stock of such Person)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or set aside any funds for any of the
foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of the
Borrower or any other Subsidiary, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) any Subsidiary of the Borrower may pay dividends to the
Borrower or to a Subsidiary Guarantor;
(ii) the Borrower may pay dividends to Holdings solely for
the purpose of allowing Holdings to redeem or repurchase Common Stock
(or options to purchase such Common Stock) from (A) officers,
employees and directors (or their estates) upon the death, permanent
disability, retirement or termination of employment of any such Person or
otherwise in accordance with any stock option plan or any employee stock
ownership plan, or (B) other stockholders of Holdings so long as the
purpose of such purchase is to acquire Common Stock for reissuance to
new officers, employees and directors (or their estates) of the Borrower to
the extent so reissued within 12 months of any such purchase; provided,
however, that in all such cases (x) no Default or Event of Default is then in
existence or would arise therefrom and (y) the aggregate amount of all
cash dividends paid as provided in this clause (ii) in any calendar year
does not exceed (1) $200,000 during calendar year 1995 plus proceeds of
key life insurance used for the purposes set forth in this clause, (2)
$300,000 during calendar year 1996 plus proceeds of key life insurance
used for the purposes set forth in this clause, (3) $500,000 during calendar
year 1997 plus proceeds of key life insurance used for the purposes set
forth in this clause and (4) $700,000 during calendar year 1998 and during
each calendar year thereafter plus proceeds of key life insurance used for
the purposes set forth in this clause; provided, further, that the foregoing
permitted amounts in subclauses (1) through (4) above shall be doubled in
amount if the minimum availability under the Revolving Commitments
equals or exceeds $15,000,000 for the six-month period immediately prior
to the date of any such dividend, but in no event shall the maximum
amount of any such dividends exceed $750,000 in any calendar year plus
proceeds of key life insurance used for the purposes set forth in this
clause; and provided, further, that in the event that Holdings subsequently
resells to any member of the Borrower's or any Subsidiary's management
or other employees any shares redeemed or repurchased with dividends
paid to Holdings pursuant to this clause (ii), the amount of dividends the
Borrower may make to Holdings for this purpose shall be increased by an
amount equal to any cash received by the Borrower from Holdings upon
the resale of such shares, but in no event in excess of the amounts
permitted above in this clause (ii) after giving effect to this proviso; and
(iii) the Borrower may pay dividends to Holdings in amounts
sufficient to allow Holdings to pay taxes, fees and other expenses
necessary and incurred solely with respect to the ownership by Holdings
of the Borrower and its Subsidiaries.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, create or otherwise cause or suffer to exist any encumbrance or restriction
which prohibits or otherwise restricts (i) the ability of any Subsidiary to (A)
pay dividends or make other distributions or pay any Indebtedness owed to the
Borrower or any Subsidiary, (B) make loans or advances to the Borrower or any
Subsidiary, (C) transfer any of its properties or assets to the Borrower or any
Subsidiary or (ii) the ability of the Borrower or any other Subsidiary of the
Borrower to create, incur, assume or suffer to exist any Lien upon its property
or assets to secure the Obligations, other than prohibitions or restrictions
existing under or by reason of:
(i) this Agreement and the other Loan Documents;
(ii) applicable law;
(iii) customary non-assignment provisions entered into in the
ordinary course of business and consistent with past practices;
(iv) any restriction or encumbrance with respect to a
Subsidiary of the Borrower imposed pursuant to an agreement which has
been entered into for the sale or disposition of all or substantially all of the
capital stock or assets of such Subsidiary, so long as such sale or
disposition is permitted under this Agreement; and
(v) Liens permitted under Section 8.03 and any documents or
instruments governing the terms of any Indebtedness or other obligations
secured by any such Liens; provided, however, that such prohibitions or
restrictions apply only to the assets subject to such Liens.
8.09 Transactions with Affiliates . The Borrower will not, and will not
permit any Subsidiary to, enter into any transaction or series of transactions
after the Initial Borrowing Date whether or not in the ordinary course of
business, with any Affiliate other than on terms and conditions substantially as
favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an Affiliate; provided, however, that
the foregoing restrictions shall not apply to (i) transactions with its
Affiliates set forth in Schedule 8.09 hereto, (ii) employment arrangements
entered into in the ordinary course of business with officers of the Borrower
and its Subsidiaries, (iv) customary and reasonable fees paid to members of
the Board of Directors of the Borrower and of its Subsidiaries and (v) the
payment of consulting, advisory and other fees, reimbursements and other
charges payable to Kelso pursuant to the terms of that certain letter
agreement dated as of the Closing Date (the "Kelso Letter Agreement") among
Kelso, Holdings and the Borrower as in effect on the Closing Date, but in no
event shall the aggregate amounts paid by the Borrower pursuant to this clause
(v) exceed $250,000 in any fiscal year of the Borrower plus any reasonable
out-of-pocket expenses and indemnities.
8.10 Fixed Charge Coverage Ratio . The Borrower will not
permit the ratio (the "Fixed Charge Coverage Ratio") of (a) the sum of (i)
Consolidated EBITDA plus (ii) the aggregate payments (including, without
limitation, any property taxes paid as additional rent or lease payments) by the
Borrower and its Subsidiaries under agreements to rent or lease any real or
personal property (exclusive of Capitalized Lease Obligations) minus (iii)
Consolidated Capital Expenditures to (b) Consolidated Fixed Charges for (A) any
Test Period ending on or about October 31, 1998, January 31, 1999, April 30,
1999, July 31, 1999 and October 31, 1999 (with each such date being adjusted to
correspond to the Borrower's actual fiscal quarter end) to be less than 0.93 to
1.00 and (B) any Test Period ending at the end of any fiscal quarter of the
Borrower (other than a fiscal quarter specified in clause (A) above) to be
less than 1.00 to 1.00.
8.11 Minimum Consolidated EBITDA . The Borrower will not permit Consolidated
EBITDA for any Test Period ending at the end of any fiscal quarter of the
Borrower on or about the dates set forth below (with each such date being
adjusted to correspond to the Borrower's actual fiscal quarter end) to be less
than the amount set forth opposite such fiscal quarter:
Fiscal Quarter Amount
Fiscal quarter ended July 31, 1995 $19,855,000
Fiscal quarter ended October 31, 1995 $20,478,000
Fiscal quarter ended January 31, 1996 $20,849,000
Fiscal quarter ended April 30, 1996 $21,301,000
Fiscal quarter ended July 31, 1996 $21,913,000
Fiscal quarter ended October 31, 1996 $22,539,000
Fiscal quarter ended January 31, 1997 $23,634,000
Fiscal quarter ended April 30, 1997 $22,200,000
Fiscal quarter ended July 31, 1997 $23,175,000
Fiscal quarter ended October 31, 1997 $25,125,000
Fiscal quarter ended January 31, 1998 $24,500,000
Fiscal quarter ended April 30, 1998 $23,525,000
Fiscal quarter ended July 31, 1998 $24,100,000
Fiscal quarter ended October 31, 1998 $24,625,000
Fiscal quarter ended January 31, 1999 $24,502,000
Fiscal quarter ended April 30, 1999 $25,831,000
Fiscal quarter ended July 31, 1999 $27,131,000
Fiscal quarter ended October 31, 1999 $28,881,000
Fiscal quarter ended January 31, 2000 $30,149,000
Fiscal quarter ended April 30, 2000 $30,818,000
Fiscal quarter ended July 31, 2000 $32,255,000
Fiscal quarter ended October 31, 2000 $33,657,000
Fiscal quarter ended January 31, 2001 $34,609,000
Fiscal quarter ended April 30, 2001 $35,338,000
Fiscal quarter ended July 31, 2001 $36,902,000
Fiscal quarter ended October 31, 2001 $38,429,000
Fiscal quarter ended January 31, 2002 $39,466,000
Fiscal quarter ended April 30, 2002 $39,792,000
Fiscal quarter ended July 31, 2002 $40,491,000
Fiscal quarter ended October 31, 2002 $41,174,000
Fiscal quarter ended January 31, 2003 $41,638,000
Fiscal quarter ended April 30, 2003 $42,000,000
8.12 Total Leverage Ratio . The Borrower will not permit the Total
Leverage Ratio as of the end of any fiscal quarter of the Borrower on or about
the dates set forth below (with each such date being adjusted to correspond to
the Borrower's actual fiscal quarter end) to be more than the ratio set forth
opposite such fiscal quarter:
Fiscal Quarter Ratio
Fiscal quarter ended July 31, 1995 4.21 to 1.00
Fiscal quarter ended October 31, 1995 4.46 to 1.00
Fiscal quarter ended January 31, 1996 4.05 to 1.00
Fiscal quarter ended April 30, 1996 4.18 to 1.00
Fiscal quarter ended July 31, 1996 4.01 to 1.00
Fiscal quarter ended October 31, 1996 4.28 to 1.00
Fiscal quarter ended January 31, 1997 3.72 to 1.00
Fiscal quarter ended April 30, 1997 4.03 to 1.00
Fiscal quarter ended July 31, 1997 3.74 to 1.00
Fiscal quarter ended October 31, 1997 3.82 to 1.00
Fiscal quarter ended January 31, 1998 3.34 to 1.00
Fiscal quarter ended April 30, 1998 3.67 to 1.00
Fiscal quarter ended July 31, 1998 4.50 to 1.00
Fiscal quarter ended October 31, 1998 4.95 to 1.00
Fiscal quarter ended January 31, 1999 4.70 to 1.00
Fiscal quarter ended April 30, 1999 4.84 to 1.00
Fiscal quarter ended July 31, 1999 4.51 to 1.00
Fiscal quarter ended October 31, 1999 4.80 to 1.00
Fiscal quarter ended January 31, 2000 3.69 to 1.00
Fiscal quarter ended April 30, 2000 3.80 to 1.00
Fiscal quarter ended July 31, 2000 3.54 to 1.00
Fiscal quarter ended October 31, 2000 3.77 to 1.00
Fiscal quarter ended January 31, 2001 3.06 to 1.00
Fiscal quarter ended April 30, 2001 3.15 to 1.00
Fiscal quarter ended July 31, 2001 2.94 to 1.00
Fiscal quarter ended October 31, 2001 3.12 to 1.00
Fiscal quarter ended January 31, 2002 2.48 to 1.00
Fiscal quarter ended April 30, 2002 2.55 to 1.00
Fiscal quarter ended July 31, 2002 2.38 to 1.00
Fiscal quarter ended October 31, 2002 2.53 to 1.00
Fiscal quarter ended January 31, 2003 2.17 to 1.00
Fiscal quarter ended April 30, 2003 2.00 to 1.00
8.13 Interest Coverage Ratio . The Borrower will not permit the
Interest Coverage Ratio as of the end of any fiscal quarter of the Borrower on
or about the dates set forth below (with each such date being adjusted to
correspond to the Borrower's actual fiscal quarter end) to be less than the
ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ratio
Fiscal quarter ended July 31, 1995 3.57 to 1.00
Fiscal quarter ended October 31, 1995 2.95 to 1.00
Fiscal quarter ended January 31, 1996 2.56 to 1.00
Fiscal quarter ended April 30, 1996 2.22 to 1.00
Fiscal quarter ended July 31, 1996 2.26 to 1.00
Fiscal quarter ended October 31, 1996 2.29 to 1.00
Fiscal quarter ended January 31, 1997 2.38 to 1.00
Fiscal quarter ended April 30, 1997 2.60 to 1.00
Fiscal quarter ended July 31, 1997 2.70 to 1.00
Fiscal quarter ended October 31, 1997 2.80 to 1.00
Fiscal quarter ended January 31, 1998 2.80 to 1.00
Fiscal quarter ended April 30, 1998 2.80 to 1.00
Fiscal quarter ended July 31, 1998 2.82 to 1.00
Fiscal quarter ended October 31, 1998 2.68 to 1.00
Fiscal quarter ended January 31, 1999 2.52 to 1.00
Fiscal quarter ended April 30, 1999 2.40 to 1.00
Fiscal quarter ended July 31, 1999 2.57 to 1.00
Fiscal quarter ended October 31, 1999 2.74 to 1.00
Fiscal quarter ended January 31, 2000 2.87 to 1.00
Fiscal quarter ended April 30, 2000 2.92 to 1.00
Fiscal quarter ended July 31, 2000 3.06 to 1.00
Fiscal quarter ended October 31, 2000 3.19 to 1.00
Fiscal quarter ended January 31, 2001 3.42 to 1.00
Fiscal quarter ended April 30, 2001 3.49 to 1.00
Fiscal quarter ended July 31, 2001 3.64 to 1.00
Fiscal quarter ended October 31, 2001 3.79 to 1.00
Fiscal quarter ended January 31, 2002 4.05 to 1.00
Fiscal quarter ended April 30, 2002 4.10 to 1.00
Fiscal quarter ended July 31, 2002 4.17 to 1.00
Fiscal quarter ended October 31, 2002 4.22 to 1.00
Fiscal quarter ended January 31, 2003 4.62 to 1.00
Fiscal quarter ended April 30, 2003 4.75 to 1.00
8.14 Subsidiary Stock . The Borrower will not permit any of its
Subsidiaries directly or indirectly to issue, sell, assign, pledge or otherwise
encumber or dispose of any shares of its capital stock or other securities (or
warrants, rights or options to acquire shares or other equity securities) of
such Subsidiary, except, to the extent permitted by Section 8.06, to the
Borrower or to qualify directors if required by applicable law.
SECTION 9. Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
9.01 Payments . The Borrower shall (i) default in the payment when
due of any principal of the Loans or (ii) default, and such default shall
continue for two or more days, in the payment when due of any Unpaid Drawing,
any interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Loan Document; or
9.02 Representations, etc. Any representation, warranty or statement
made by any Credit Party herein or in any other Loan Document or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made; or
9.03 Covenants . Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Sections 7.11 or 8, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 9.01,
9.02 or clause (a) of this Section 9.03) contained in this Agreement and such
default shall continue unremedied for a period of at least 30 days after notice
to the defaulting party by the Agent or the Required Lenders; or
9.04 Default Under Other Agreements . (a) The Borrower or any of its
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, applicable
thereto or (ii) default in the observance or performance of any agreement or
condition relating to any such Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause any such
Indebtedness to become due prior to its stated maturity; or (b) any such
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required repayment or prepayment, prior to the stated maturity thereof;
provided, however, that it shall not constitute an Event of Default pursuant
to this Section 9.04 unless the aggregate amount of all Indebtedness referred
to in clauses (a) and (b) above exceeds $250,000 at any one time; or
9.05 Bankruptcy, etc. Holdings, the Borrower or any of its Subsidiaries
shall commence a voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy", as now or hereafter in effect, or any
successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against Holdings, the Borrower or any of its Subsidiaries and the petition is
not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
Holdings, the Borrower or any of its Subsidiaries; or Holdings, the Borrower or
any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Holdings, the Borrower or any of its
Subsidiaries; or there is commenced against Holdings, the Borrower or any of its
Subsidiaries any such proceeding which remains undismissed for a period of 60
days; or Holdings, the Borrower or any of its Subsidiaries is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or Holdings, the Borrower or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or Holdings, the Borrower or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or any corporate action is
taken by Holdings, the Borrower or any of its Subsidiaries for the purpose of
effecting any of the foregoing; or
9.06 ERISA . (a) A single-employer plan (as defined in Section 4001 of
ERISA) established by the Borrower, any of its Subsidiaries or any ERISA
Affiliate shall fail to maintain the minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code or shall provide security to induce the issuance of such waiver or
extension, (b) any Plan is or shall have been or is likely to be terminated or
the subject of termination proceedings under ERISA or an event has occurred
entitling the PBGC to terminate a Plan under Section 4042(a) of ERISA, (c) any
Plan shall have an Unfunded Current Liability or (d) the Borrower or a
Subsidiary or any ERISA Affiliate has incurred or is likely to incur a material
liability to or on account of a termination of or a withdrawal from a Plan under
Section 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; and there shall result
from any such event or events described in the preceding clauses of this Section
9.06 the imposition of a Lien upon the assets of the Borrower or any Subsidiary,
the granting of a security interest, or a liability or a material risk of
incurring a liability to the PBGC or a Plan or a trustee appointed under ERISA
or a penalty under Section 4971 of the Code, in each case which would have, in
the opinion of the Required Lenders, a Material Adverse Effect; or
9.07 Liens . Any of the Liens created and granted to the Agent for the
ratable benefit of the Lenders under the Security Documents shall cease to be
valid and perfected Liens, subject to no other Liens except as permitted by
Section 8.03; or
9.08 Guaranties . Any Guaranty or any provision thereof shall cease to
be in full force or effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under such Guaranty or any Guarantor shall default in the due performance or
observance of any material term, covenant or agreement on its part to be
performed or observed pursuant to its Guaranty; or
9.09 Judgments . One or more judgments or decrees shall be entered
against the Borrower or any of its Subsidiaries involving a liability of
$250,000 or more (not paid or to the extent not covered by insurance) and any
such judgments or decrees shall not have been vacated, discharged or stayed or
bonded pending appeal within 60 days from the entry thereof; or
9.10 Change of Control . A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall, upon the written request of
the Required Lenders, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Borrower, except as otherwise specifically
provided for in this Agreement (provided that, if an Event of Default specified
in Section 9.05 shall occur with respect to the Borrower, the result which would
occur upon the giving of written notice by the Agent as specified in clauses (i)
and (ii) below shall occur immediately and automatically without the giving of
any such notice): (i) declare the Total Commitment terminated, whereupon the
Commitment of each Lender shall forthwith terminate immediately and any
Commitment Fee shall forthwith become due and payable without any other
notice of any kind; (ii) declare the principal of and any accrued interest in
respect of all Loans and all Obligations owing hereunder (including Unpaid
Drawings) and under any other Loan Document to be, whereupon the same shall
become, forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; (iii)
enforce any or all of the Liens and security interests created pursuant to
the Security Documents; (iv) terminate any Letter of Credit which may be
terminated in accordance with its terms; and (v) direct the Borrower to pay
(and the Borrower hereby agrees upon receipt of such notice, or upon the
occurrence of any Event of Default specified in Section 9.05 in respect of the
Borrower, it will pay) to the Agent at the Payment Office such additional
amounts of cash, to be held as security for the Borrower's reimbursement
obligations in respect of Letters of Credit then outstanding equal to the
aggregate Stated Amount of all Letters of Credit then outstanding.
SECTION 10. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"A Term Commitment" shall mean, with respect to each Lender,
the amount, if any, set forth opposite such Lender's name on Schedule 1.01
hereto directly below the column entitled "A Term Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
"A Term Facility" shall mean the Facility evidenced by the Total A
Term Commitment.
"A Term Loan" shall have the meaning provided in
Section 1.01(a).
"A Term Loan Maturity Date" shall mean April 30, 2003.
"A Term Loan Percentage" shall mean, at any time of
determination thereof, a fraction (expressed as a percentage) the numerator of
which is equal to the Total A Term Commitment at such time (or, if such
commitment shall have been terminated, the aggregate principal amount of A
Term Loans outstanding at such time) and the denominator of which is equal to
the Total Term Commitment at such time (or if such commitment shall have been
terminated, the sum of the aggregate principal amount of A Term Loans and B
Term Loans, in each case, outstanding at such time).
"A Term Note" shall have the meaning provided in
Section 1.05(a)(i).
"Account" or "account" shall mean any account, as such term is
defined in the Uniform Commercial Code - Secured Transactions of New York as
it may be amended from time to time. For purposes of this Agreement, the term
Account shall also include chattel paper, instruments, notes, notes receivable,
rental receivables, amounts due or owing to the Borrower or any Subsidiary
Guarantor pursuant to clearing agreements relating to the payment or collection
of Visa, MasterCard, Discover and other bank credit card receivables,
conditional sale contracts, acceptances, drafts, documents, and other
obligations for the payment of money, books and records, general intangibles,
monies, choses in action, credits, claims and demands, credit insurance and
guarantees or security for the payment of all of the foregoing, rights of
stoppage in transit, reclamation, or replevin with respect to Inventory,
returned merchandise, and all products and proceeds (whether cash proceeds or
otherwise) of the foregoing, whether now owned, held, or hereafter acquired
by the Borrower or any Subsidiary Guarantor.
"Account Debtor" shall mean with respect to any Account, the
Person or Persons obligated to make payments with respect to such Account.
"Acquisition Corp." shall have the meaning provided in the
Recitals to this Agreement.
"Additional Mortgage" shall have the meaning provided in
Section 7.11 and shall include any mortgages or deeds of trust executed pursuant
to Section 7.13.
"Adjusted Cash Flow" for any fiscal year shall mean Consolidated
Net Income for such fiscal year (after provision for taxes) plus the amount of
all net non-cash charges (including, without limitation, depreciation, deferred
tax expense, non-cash interest expense, write-downs of inventory and other
non-cash charges) that were deducted in arriving at Consolidated Net Income for
such fiscal year, minus the amount of all non-cash gains and gains from sales
of assets (other than sales of inventory and equipment in the normal course of
business) that were added in arriving at Consolidated Net Income for such fiscal
year, plus the amount of all non-cash losses and losses from sales of assets
(other than sales of inventory and equipment in the normal course of business)
that were deducted in arriving at Consolidated Net Income for such fiscal year.
"Adjusted Revolving Commitment" for each Non-Defaulting
Lender shall mean at any time the product of such Lender's Adjusted Revolving
Commitment Percentage and the Adjusted Total Revolving Commitment.
"Adjusted Revolving Commitment Percentage" shall mean (a) at a
time when no Lender Default exists, for each Lender such Lender's Revolving
Percentage and (b) at a time when a Lender Default exists (i) for each Lender
that is a Defaulting Lender, zero and (ii) for each Lender that is a
Non-Defaulting Lender, the percentage determined by dividing such Lender's
Revolving Commitment at such time by the Adjusted Total Revolving Commitment
at such time, it being understood that all references herein to Revolving
Commitments and the Adjusted Total Revolving Commitment at a time when the
Total Revolving Commitment or Adjusted Total Revolving Commitment, as the case
may be, has been terminated shall be references to the Revolving Loan
Commitments or Adjusted Total Revolving Commitment, as the case may be, in
effect immediately prior to such termination; provided, however, that (A) no
Lender's Adjusted Revolving Commitment Percentage shall change upon the
occurrence of a Lender Default from that in effect immediately prior to such
Lender Default if, after giving effect to such Lender Default and any
repayment of Revolving Loans and Swingline Loans at such time pursuant to
Section 4.02(A)(a) or otherwise, the sum of (1) the aggregate outstanding
principal amount of Revolving Loans of all Non-Defaulting Lenders plus (2) the
aggregate outstanding principal amount of Swingline Loans plus (3) the Letter
of Credit Outstandings, exceeds the Adjusted Total Revolving Loan Commitment;
(B) the changes to the Adjusted Revolving Commitment Percentage that would
have become effective upon the occurrence of a Lender Default but that did not
become effective as a result of the preceding clause (A) shall become effective
on the first date after the occurrence of the relevant Lender Default on which
the sum of (1) the aggregate outstanding principal amount of the Revolving Loans
of all Non-Defaulting Lenders plus (2) the aggregate outstanding principal
amount of the Swingline Loans plus (3) the Letter of Credit Outstandings is
equal to or less than the Adjusted Total Revolving Commitment; and (C) if (1) a
Non-Defaulting Lender's Adjusted Revolving Commitment Percentage is changed
pursuant to the preceding clause (B) and (2) any repayment of such Lender's
Revolving Loans, or of Unpaid Drawings with respect to Letters of Credit or of
Swingline Loans, that were made during the period commencing after the date of
the relevant Lender Default and ending on the date of such change to its
Adjusted Revolving Commitment Percentage must be returned to the Borrower as a
preferential or similar payment in any bankruptcy or similar proceeding of the
Borrower, then the change to such Non-Defaulting Lender's Adjusted Revolving
Commitment Percentage effected pursuant to said clause (B) shall be reduced
to that positive change, if any, as would have been made to its Adjusted
Revolving Commitment Percentage if (x) such repayments had not been made and (y)
the maximum change to its Adjusted Revolving Commitment Percentage would have
resulted in the sum of the outstanding principal of Revolving Loans made by such
Lender plus such Lender's new Adjusted Revolving Commitment Percentage of the
outstanding principal amount of Swingline Loans and of Letter of Credit
Outstandings equaling such Lender's Revolving Commitment at such time.
"Adjusted Total Revolving Commitment" shall mean at any time
the Total Revolving Commitment less the aggregate Revolving Commitments of
all Defaulting Lenders.
"Adjustment Date" shall mean (a) the second Business Day
following receipt by the Agent of both (i) the financial statements required to
be delivered pursuant to Section 7.1(b) after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower and pursuant to Section
7.1(a) after the end of each fiscal year of the Borrower, as the case may be,
for the most recently completed fiscal period and (ii) the compliance
certificate required pursuant to Section 7.01(e) with respect to such financial
statements or (b) if such compliance certificate and financial statements have
not been delivered in a timely manner, the date upon which such compliance
certificate and financial statements were due; provided, however, that in the
event that the Adjustment Date is determined in accordance with the provisions
of clause (b) of this definition, then the date which is two (2) Business Days
following the date of receipt of the financial statements and compliance
certificate referenced in clause (a) of this definition also shall be deemed
to constitute an Adjustment Date; and provided further, that the first
Adjustment Date shall not occur until the deliveries referenced in clause (a)
of this definition are made for the fiscal quarter ended April 30, 1998.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of
this Agreement and shall include any successor to the Agent appointed pursuant
to Section 11.09.
"Agreement" shall mean this Credit Agreement, as amended,
restated, supplemented or otherwise modified from time to time.
"Anticipated Reinvestment Amount" shall mean, with respect to
any Reinvestment Election, the amount specified in the Reinvestment Notice
delivered by the Borrower in connection therewith as the amount of the Net Cash
Proceeds from the related Asset Sale that the Borrower intends to use to
purchase, construct or otherwise acquire Reinvestment Assets.
"Applicable Base Rate Margin" shall mean the rates per annum set
forth below under the relevant column heading opposite the Level of Total
Leverage Ratio determined on the most recent Adjustment Date:
Level Applicable Base Applicable
Rate Base Rate
Margin for Margin for B
Revolving Term Loans
Loans and A
Term Loans
Level I: Total
Leverage Ratio less
than 2.00 to 1.00 .50% 1.25%
Level II: Total
Leverage Ratio equal to
or greater than 2.00 to
1.00 but less than 2.75
to 1.00 .75% 1.50%
Level III: Total
Leverage Ratio equal to
or greater than 2.75 to
1.00 but less than 3.50
to 1.00 1.00% 1.75%
Level IV: Total
Leverage Ratio equal to
or greater than 3.50 to
1.00 but less than 4.00
to 1.00 1.25% 2.00%
Level V: Total
Leverage Ratio equal to
or greater than 4.00 to
1.00 1.50% 2.25%
; provided, however, that for purposes of this definition, (a) the Applicable
Base Rate Margin commencing on the Fifth Amendment Effective Date shall be that
set forth opposite Level III above until the first Adjustment Date for which the
Total Leverage Ratio falls within a different Level, (b) the Applicable Base
Rate Margin determined for any Adjustment Date shall remain in effect until a
subsequent Adjustment Date for which the Total Leverage Ratio falls within a
different Level, (c) if the financial statements and related compliance
certificate for any fiscal period are not delivered by the date due pursuant to
Sections 7.01(a), (b) and (e), the Applicable Base Rate Margin shall be that set
forth above opposite Level III until the subsequent Adjustment Date, and (d) the
Applicable Base Rate Margin shall be that set forth above opposite Level III at
all times when there shall exist a Default or Event of Default under Section
9.01 or any other Event of Default.
"Applicable Commitment Fee" shall mean the rates per annum set forth
below under the column heading opposite the Level of Total Leverage Ratio
determined on the most recent Adjustment Date:
Level Applicable
Commitment
Fee
Level I: Total
Leverage Ratio less
than 2.00 to 1.00 .25%
Level II: Total
Leverage Ratio equal to
or greater than 2.00 to
1.00 but less than 2.75
to 1.00 .375%
Level III: Total
Leverage Ratio equal to
or greater than 2.75 to
1.00 .50%
; provided, however, that for purposes of this definition, (a) the Applicable
Commitment Fee commencing on the Fifth Amendment Effective Date shall be
that set forth opposite Level III above until the first Adjustment Date for
which the Total Leverage Ratio falls within a different Level, (b) the
Applicable Commitment Fee determined for any Adjustment Date shall remain in
effect until a subsequent Adjustment Date for which the Total Leverage Ratio
falls within a different Level, (c) if the financial statements and related
compliance certificate for any fiscal period are not delivered by the date due
pursuant to Sections 7.01(a), (b) and (e), the Applicable Commitment Fee shall
be that set forth above opposite Level III until the subsequent Adjustment Date,
and (d) the Applicable Commitment Fee shall be that set forth above opposite
Level III at all times when there shall exist a Default or Event of Default
under Section 9.01 or any other Event of Default.
"Applicable Eurodollar Margin" shall mean the rates per annum set forth
below under the relevant column heading opposite the Level of Total Leverage
Ratio determined on the most recent Adjustment Date:
Level Applicable Applicable
Eurodollar Eurodollar
Margin for Margin for B
Revolving Loans Term Loans
and A Term
Loans
Level I: Total Leverage
Ratio less than 2.00 to
1.00 1.75% 2.25%
Level II: Total Leverage
Ratio equal to or greater
than 2.00 to 1.00 but less
than 2.75 to 1.00 2.00% 2.50%
Level III: Total Leverage
Ratio equal to or greater
than 2.75 to 1.00 but less
than 3.50 to 1.00 2.25% 2.75%
Level IV: Total Leverage
Ratio equal to or greater
than 3.50 to 1.00 but less
than 4.00 to 1.00 2.50% 3.00%
Level V: Total Leverage
Ratio equal to or greater
than 4.00 to 1.00 2.75% 3.25%
; provided, however, that for purposes of this definition, (a) the Applicable
Eurodollar Margin commencing on the Fifth Amendment Effective Date shall be
that set forth opposite Level III above until the first Adjustment Date for
which the Total Leverage Ratio falls within a different Level, (b) the
Applicable Eurodollar Margin determined for any Adjustment Date shall remain in
effect until a subsequent Adjustment Date for which the Total Leverage Ratio
falls within a different Level, (c) if the financial statements and related
compliance certificate for any fiscal period are not delivered by the date due
pursuant to Sections 7.01(a), (b) and (e), the Applicable Eurodollar Margin
shall be that set forth above opposite Level III until the subsequent Adjustment
Date, and (d) the Applicable Eurodollar Margin shall be that set forth above
opposite Level III at all times when there shall exist a Default or Event of
Default under Section 9.01 or any other Event of Default.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Borrower or any Subsidiary to any Person other than the Borrower or any
Subsidiary Guarantor of any asset of the Borrower or such Subsidiary (other than
sales, transfers or other dispositions in the ordinary course of business of
inventory and/or obsolete or excess equipment).
"Assignment Agreement" shall have the meaning provided in Section
12.04(b).
"Authorized Officer" shall mean any senior officer of the Borrower
designated as such in writing to the Agent by the Borrower in each case to the
extent acceptable to the Agent.
"B Term Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Schedule 1.01 hereto
directly below the column entitled "B Term Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
"B Term Facility" shall mean the Facility evidenced by the Total B Term
Commitment.
"B Term Loan" shall have the meaning provided in Section 1.01(b).
"B Term Loan Percentage" shall mean, at any time of determination
thereof, a percentage equal to 100% minus the A Term Loan Percentage at such
time.
"B Term Note" shall have the meaning provided in Section 1.05(a).
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (i) the rate which is 1/2 of
1% in excess of the Federal Funds Effective Rate and (ii) the Prime Lending
Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
"Blocked Accounts" shall have the meaning provided in Section 4.05.
"Blocked Account Proceeds" shall have the meaning provided in Section
4.01.
"Borrower" shall have the meaning provided in the first paragraph of this
Agreement.
"Borrower Pledge Agreements" shall mean, collectively, (i) that certain
Pledge Agreement dated as of May 20, 1996 between the Borrower and the
Agent, and (ii) that certain Pledge Agreement dated as of the Restatement Date
between the Borrower and the Agent, in each case as amended, restated,
supplemented or otherwise modified from time to time.
"Borrower Security Agreement" shall mean that certain Security
Agreement dated as of the Closing Date between the Borrower and the Agent, as
amended, restated, supplemented or otherwise modified from time to time.
"Borrowing" shall mean the incurrence of (i) Swingline Loans by the
Borrower from Fleet Bank on a given date or (ii) one Type of Loan pursuant to a
single Facility by the Borrower from all of the Lenders having Commitments with
respect to such Facility on a pro rata basis on a given date (or resulting from
conversions on a given date), having in the case of Eurodollar Loans the same
Interest Period; provided; however, that Base Rate Loans incurred pursuant to
Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar
Loans.
"Borrowing Base"shall mean, as of any date of determination, the sum of
(i) 85% of the book value of all Eligible Accounts of the Borrower and the
Subsidiary Guarantors plus (ii) the lesser of (A) 60% of the value (determined
at the lower of cost (calculated on a first-in, first-out basis) or market) of
all Eligible Inventory of the Borrower and the Subsidiary Guarantors or (B) 40%
of all
Eligible Inventory of the Borrower and the Subsidiary Guarantors valued at the
retail price of such Eligible Inventory as then being offered to the Borrower's
customers (net of any applicable discounts) in the ordinary course of business.
The Borrowing Base shall be determined on a consolidated basis in accordance
with GAAP and as set forth in the last Borrowing Base Certificate delivered by
the Borrower pursuant to Section 5.22 or 7.01(g) as the case may be, provided
that the Borrowing Base shall be zero at any time when a Default (to the extent
arising from a failure to deliver a Borrowing Base Certificate under Section
7.01(g)) has occurred and is continuing.
"Borrowing Base Certificate" shall have the meaning provided in
Section 5.21.
"Bridge Commitment" shall mean, with respect to each Lender, the
amount, if any, set forth opposite such Lender's name on Schedule 1.01 hereto
directly below the column entitled "Bridge Commitment" as the same may be
reduced or terminated pursuant to Section 3.03.
"Bridge Facility" shall mean the Facility evidenced by the Total Bridge
Commitment.
"Bridge Loan" shall have the meaning provided in Section 1.01 (c).
"Bridge Maturity Date" shall mean June 30, 1995.
"Bridge Note" shall have the meaning provided in Section 1.05(a).
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the City of New York a legal holiday or a day on which banking institutions
are authorized by law or other governmental actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
in Dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalization Documents" shall mean, collectively, (i) all stock
certificates representing shares of capital stock of Holdings and the Borrower,
(ii) all documents, agreements and instruments pursuant to which such shares
were issued or sold, (iii) all documents, agreements and instruments governing
the issuance of, or setting forth the terms of, such shares and (iv) any
stockholders or similar agreement among or between the holders of any such
shares.
"Capitalized Lease Obligations" shall mean all obligations under Capital
Leases of the Borrower or any of its Subsidiaries in each case taken at the
amount thereof accounted for as liabilities in accordance with GAAP.
"Carlisle" shall mean Carlisle Retailers, Inc., an Ohio corporation and a
Wholly-Owned Subsidiary of the Borrower.
"Carlisle Guaranty" shall mean that certain Guaranty dated as of May 20,
1996 and executed by Carlisle in favor of the Lenders, as amended, restated,
supplemented or otherwise modified from time to time.
"Carlisle Security Agreement" shall mean that certain Security Agreement
dated as of May 20, 1996 between Carlisle and the Agent, as amended, restated,
supplemented or otherwise modified from time to time.
"Cash Equivalents" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (ii) Dollar denominated time
deposits, certificates of deposit and bankers' acceptances of (A) any Lender,
(B) any domestic commercial bank of recognized standing having capital and
surplus in excess of $500,000,000 or (C) any bank (or the parent company of such
bank) whose short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at
least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each
case with maturities of not more than six months from the date of acquisition,
(iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (ii) above, (iv)
commercial paper issued by any Lender or Approved Bank or by the parent company
of any Lender or Approved Bank and commercial paper issued by, or guaranteed by,
any industrial or financial company with a short-term commercial paper rating of
at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (any such company, an "Approved Company"), or guaranteed by
any industrial company with a long term unsecured debt rating of at least A or
A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition and
(v) investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, but only as and when so
received) received by the Borrower and/or any Subsidiary from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. S 9601 et seq.
"Change of Control" shall mean (a) prior to the initial public offering of
the Borrower's common stock, the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of at least 66-2/3% in the aggregate of the total voting power of
the Voting Stock of the Borrower on a fully-diluted basis and which entitles the
Permitted Holders to elect a majority of the directors of the Borrower, whether
as a result of the issuance of securities of the Borrower, any merger,
consolidation, liquidation or dissolution of the Borrower, any direct or
indirect transfer of securities or otherwise (for purposes of this clause (a)
and clause (b) below, the Permitted Holders shall be deemed to beneficially
own any Voting Stock of a corporation (the "specified corporation") held by
any other corporation (the "parent corporation") so long as the Permitted
Holders beneficially own (as so defined), directly or indirectly, in the
aggregate a majority of the voting power of the Voting Stock of the parent
corporation on a fully-diluted basis and which entitles the Permitted Holders
to elect a majority of the directors of the parent corporation); (b) after the
initial public offering of the Borrower's common stock, (i) any "person" (as
such term is used in Section 13(d) and 14(d) of the Exchange Act), other than
one or more Permitted Holders, is or becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 30% of the total
voting power of the Voting Stock of the Borrower or (ii) the Permitted Holders
cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act), directly or indirectly, of at least 30% in the aggregate of
the total voting power of the Voting Stock of the Borrower on a fully-diluted
basis, whether as a result of the issuance of securities of the Borrower, any
merger, consolidation, liquidation or dissolution of the Borrower, any direct
or indirect transfer of securities or otherwise, provided that for purposes of
this clause (ii), the Permitted Holders may become the "beneficial owner,"
directly or indirectly, of less than 30% in the aggregate of the total voting
power of the Voting Stock of the Borrower on a fully-diluted basis so long as
(x) no other "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Permitted Holders, is or becomes the beneficial
owner (as defined in clause (a) above, except that a person shall be deemed to
have "beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, in the aggregate of a greater percentage of
the total voting power of the Voting Stock of the Borrower than the Permitted
Holders and (y) the B Term Loan has been repaid in full; or (c) during any
period of two consecutive years individuals who at the beginning of such
period constituted the Board of Directors of the Borrower (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Borrower was approved by a
vote of a majority of the directors of the Borrower then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Borrower then in office.
"Closing Date" shall mean June 9, 1995.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated and the rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the Effective
Date and any subsequent provisions of the Code, amendatory thereof, supplemental
thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of the
Security Documents.
"Commitment" shall mean, with respect to each Lender, such Lender's
Term Commitment, Bridge Commitment and Revolving Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Common Stock" shall mean the common stock of the Borrower.
"Compliance Certificate" shall have the meaning provided in Section
7.01(e).
"Consolidated Capital Expenditures" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as liabilities
and including in all events all amounts expended or capitalized under Capital
Leases but excluding any amount representing capitalized interest) by the
Borrower and its Subsidiaries during that period that, in conformity with
GAAP, are or are required to be included in the property, plant or equipment
reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries; provided, however, that Consolidated Capital Expenditures shall
in any event include the purchase price paid in connection with the
acquisition of any Person (including through the purchase of all of the capital
stock or other ownership interests of such Person or through merger or
consolidation) to the extent allocable to property, plant and equipment but
shall only include the amount thereof actually paid in cash during such period;
provided further, that Consolidated Capital Expenditures shall not in any event
include (a) the purchase price paid or other obligations assumed in connection
with the acquisition by the Borrower of Carlisle Retailers, Inc., an Ohio
corporation ("Carlisle"), through the merger of Peebles Acquisition Subsidiary
Inc., an Ohio corporation and a Wholly-Owned Subsidiary of the Borrower ("PAS"),
into Carlisle pursuant to that certain Merger Agreement, dated as of February
14, 1996, by and among Carlisle, the Borrower and PAS and (b) costs incurred
during the fiscal year ending January 31, 1997 for the improvement of certain
assets of Carlisle, including, without limitation, the replacement of cash
registers and signs, in an aggregate amount not to exceed $1,000,000.
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense, but excluding, however, interest expense not
payable in cash and amortization of discount and deferred issuance and financing
costs.
"Consolidated Current Assets" shall mean, as to any Person at any time,
the current assets (other than cash and Cash Equivalents) of such Person and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, as to any Person at any time,
the current liabilities of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, but excluding all short-term
Indebtedness for borrowed money and the current portion of any long-term
Indebtedness of such Person or its Subsidiaries, in each case to the extent
otherwise included therein.
"Consolidated EBIT" shall mean, for any period, (a) the sum of the amounts
for such period of (i) Consolidated Net Income, (ii) provisions for taxes
based on income, (iii) Consolidated Interest Expense, (iv) amortization or
write-off of deferred financing costs to the extent deducted in determining
Consolidated Net Income and (v) losses on sales of assets (excluding sales in
the ordinary course of business) and other extraordinary losses less (b) the
amount for such period of gains on sales of assets (excluding sales in the
ordinary course of business) and other extraordinary gains, all as determined
on a consolidated basis in accordance with GAAP. For purposes of computing
Consolidated Net Income in clause (i) above with respect to the Borrower's
fiscal quarter ended July 29, 1995, there shall be excluded from the
computation thereof, without duplication and to the extent not otherwise
excluded from the computation thereof, payments to certain management employees
of the Borrower and related tax payments recognized by the Borrower as an
expense in such fiscal quarter in an aggregate amount of $3,089,294,
representing (i) an aggregate payment of $1,372,994 to management consisting
of a payment of $6.25 per option for 219,679 options to purchase common stock
at an exercise price of $23.75 per share, granted in
connection with the Borrower's 1993 Stock Option Plan, (ii) an aggregate cash
payment to management of $1,649,250 for the exchange of 213,020 stock options
granted under the Borrower's 1993 Stock Option Plan and (iii) the payment by the
Borrower of FICA and Medicare taxes in the aggregate amount of $67,050 with
respect to the compensation payments described in clauses (i) and (ii) of this
sentence.
"Consolidated EBITDA" shall mean, for any period, the sum of the amounts for
such period of (i) Consolidated EBIT, (ii) depreciation expense, (iii)
amortization expense and (iv) all non-cash charges that were deducted in
arriving at Consolidated Net Income for such period, all as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges" shall mean, for any period, the sum,
without duplication, of the amounts for such period of (i) Consolidated Cash
Interest Expense, (ii) the aggregate payments (including, without limitation,
any property taxes paid as additional rent or lease payments) under agreements
to rent tor lease any real or personal property (exclusive of Capitalized Lease
Obligations), (iii) taxes paid in cash and (iv) scheduled payments on the Term
Loan, all as determined on a consolidated basis for the Borrower and its
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, total interest
expense (including that attributable to Capital Leases in accordance with GAAP)
of the Borrower and its Subsidiaries on a consolidated basis with respect to all
outstanding Indebtedness of the Borrower and its Subsidiaries, including,
without limitation, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing and net
costs under Interest Rate Agreements.
"Consolidated Net Income" shall mean for any period, the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with GAAP,
provided that there shall be excluded (i) the income (or loss) of any Person
(other than Subsidiaries of the Borrower) in which any other Person (other than
the Borrower or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of the Borrower or is merged into or consolidated with the Borrower or any of
its Subsidiaries or that Person's assets are acquired by the Borrower or any of
its Subsidiaries, (iii) the
income of any Subsidiary of the Borrower to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) Transaction Expenses and (v)
compensation expense resulting from the issuance of capital stock, stock options
or stock appreciation rights issued to employees, including officers, of the
Borrower or any Subsidiary, or the exercise of such options or rights, in each
case to the extent the obligation (if any) associated therewith is not expected
to be settled by the payment of cash by the Borrower or any Affiliate of the
Borrower and compensation expense resulting from the repurchase of any such
capital stock, options and rights.
"Contemplated Acquisition" shall have the meaning provided in Section
8.06(j).
"Contemplated Acquisition Letter" shall have the meaning provided in
Section 8.06(j).
"Contemplated Acquisition Termination Date" shall have the meaning
provided in Section 8.06(j).
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,(a)
to purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; provided however, that the term
Contingent Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Conversion Date" shall mean July 30, 1997.
"Credit Card Agreement" shall mean with respect to each Account which
arises from a consumer revolving credit account arrangement, and collectively
with respect to all such Accounts, the agreements between the Borrower and each
Account Debtor, governing the terms and conditions of the Account, as such
agreements may be amended, modified or otherwise changed from time to time
and as distributed (including any amendments and revisions thereto) to holders
of such consumer revolving credit card accounts.
"Credit Event" shall mean and include the making of a Loan or the
issuance of a Letter of Credit, and shall include the effectiveness of this
Agreement on the Restatement Date pursuant to the terms and conditions hereof.
"Credit Party" shall mean Holdings, the Borrower and the Guarantors.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" shall mean any Lender with respect to which a
Lender Default is in effect.
"Dividends" shall have the meaning provided in Section 8.09.
"Documents" shall mean, collectively, (a) the Loan Documents, (b) the
Merger Documents, (c) the Capitalization Documents and (d) the Watson Merger
Documents.
"Dollar" and "$" shall mean lawful currency of the United States of
America.
"EBITDA Ratio" shall mean, at any date of determination, the ratio of (i)
Consolidated EBITDA of the Borrower and its Subsidiaries for the Test Period
most recently ended (taken as one accounting period) and ending on such date to
(ii) the aggregate outstanding principal amount of the Term Loans on the last
day of such Test Period.
"EBITDA Shortfall" shall mean, for any period, the positive difference, if
any, between Projected EBITDA for such period minus Consolidated EBITDA
for such period.
"EBITDA Shortfall Percentage" shall mean the quotient (expressed as a
percentage) of Consolidated EBITDA for any period divided by Projected
EBITDA for such period.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Accounts" shall mean an Account which is created by the
Borrower or any Subsidiary Guarantor, is genuine and is in all respects what it
purports to be, and:
(a) for which a Credit Card Agreement is in full force and effect and
in the custody of the Borrower;
(b) which is payable in Dollars;
(c) the Account Debtor on which has provided, as its most recent
billing address, an address located in the United States of America;
(d) no portion of which that was invoiced as a required minimum
payment shall have remained outstanding for more than sixty (60) days past the
original due date or shall have been charged off in whole or in part;
(e) the Account Debtor on which shall not have been identified by the
Borrower or a Subsidiary in its computer files as of such date as having (i)
commenced, or had commenced in respect of such Account Debtor, a case, action
or proceeding under any law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking relief with respect to
such Account Debtor's debts, or seeking to have such Account Debtor adjudicated
bankrupt or insolvent, or to have a receiver, trustee, custodian or other
similar official appointed for such Account Debtor or for all or any substantial
part of such Account Debtor's assets or (ii) made a general assignment of such
Account Debtor's assets for the benefit of such Account Debtor's creditors,
which assignment is then in full force and effect;
(f) the card or cards for the Account Debtor on which have not been
reported lost or stolen;
(g) is not evidenced by chattel paper or an instrument of any kind, or if
the Account is evidenced by chattel paper or an instrument, the Borrower has
delivered and properly endorsed such chattel paper or instrument to the Agent;
and
(h) as to which the representations and warranties in Section 6.24 are
true and correct.
(i) "Eligible Inventory" shall mean, as at the date of determination
thereof, all finished goods Inventory held by the Borrower or any Subsidiary
Guarantor for sale in which the Agent has a valid, perfected, first priority
security interest, subject only to the Liens permitted by Section 8.03 (and with
respect to such Liens only to the extent such Liens secure Indebtedness (other
than the Obligations) not exceeding $100,000 in the aggregate at any one time
outstanding), and which (i) are in good and readily saleable condition in the
ordinary course of business and not obsolete or unmerchantable, (ii) conform to
all standards imposed by any governmental authority or other regulatory body
having jurisdiction over such goods or the sale thereof, and (iii) as to which
the representations in Section 6.24 are true and correct. In determining
eligibility, the Agent may, but need not, rely on reports and schedules
furnished by the Borrower, but reliance by the Agent thereon from time to time
shall not be deemed to limit the right of the Agent to review eligibility of
Inventory at any time as to both present and future Inventory of the Borrower.
The aggregate value of Eligible Inventory may in the Agent's sole reasonable
discretion be reduced by appropriate reserves determined by the Agent to cover
landlord liens unless such liens shall be waived by an agreement reasonably
satisfactory to the Agent.
"Employment Agreements" shall have the meaning provided in
Section 5.06(v).
"Environmental Claims" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigations (other than internal
reports prepared by the Borrower or any of its Subsidiaries solely in the
ordinary course of such Person's business and not in response to any third party
action or request of any kind) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under any such
Environmental Law (hereafter, "Claims"), including, without limitation, (a) any
and all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to
any applicable Environmental Law, and (b) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials arising from alleged injury
or threat of injury to health, safety or the environment.
"Environmental Law" means any applicable Federal, state, foreign
or local statute, law, rule, regulation, ordinance, code, guide, policy and rule
of common law now or hereafter in effect and in each case as amended, and any
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, CERCLA;
RCRA; the Federal Water Pollution Control Act, as amended, 33 U.S.C. S 1251 et
seq.; the Toxic Substances Control Act, 15 U.S.C. S 7401 et seq.; the Clean Air
Act, 42 U.S.C. S 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. S 3808 et
seq.; the Oil Pollution Act of 1990, 33 U.S.C. S 2701 et seq. and any applicable
state and local or foreign counterparts or equivalents.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to ERISA are to ERISA, as in
effect at the Initial Borrowing Date and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower, a Subsidiary or a
Credit Party would be deemed to be a "single employer" within the meaning of
Sections 414(b), (c), (m) and (o) of the Code; provided, however, that neither
Kelso, any Kelso Affiliate nor any other portfolio company in which Kelso or
any Affiliate of Kelso invests (in each case, other that Holdings, the Borrower
and its Subsidiaries) shall be included in the definition of ERISA Affiliate.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period
for a Eurodollar Loan, (i) the offered quotation to first-class banks in the
interbank Eurodollar market by the Agent for dollar deposits of amounts in same
day funds comparable to the outstanding principal amount of the Eurodollar Loan
of the Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated maximum rate of all reserve requirements (including
without limitation any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System in respect
of Eurocurrency liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any fiscal year, the remainder
of (i) Adjusted Cash Flow for such fiscal year, plus (ii) to the extent not
included in (i) above, any amounts received by the Borrower and its Subsidiaries
in settlement of, or in payment of any judgments resulting from, actions, suits
or proceedings with respect to the Borrower and/or its Subsidiaries from the
first day to the last day of such fiscal year, plus (iii) to the extent not
included in (i) above, any amounts received by the Borrower and/or its
Subsidiaries in connection with the repayment or redemption of any long-term
promissory notes and/or preferred stock of other Persons held by them, minus
(iv) the sum of (1) the amount of Consolidated Capital Expenditures (except
to the extent financed through the incurrence of Indebtedness) made during
such fiscal year and (2) any repayments or prepayments of the principal
amount of Term Loans, except prepayments of the principal amount of Term Loans
made pursuant to Sections 4.02(A)(c), (d), (e), (f), (g) and/or (i).
"Existing Credit Agreement" shall have the meaning provided in
the Recitals to this Agreement.
"Existing Indebtedness" shall have the meaning provided in
Section 6.21.
"Existing Indebtedness Agreements" shall have the meaning
provided in Section 5.07(ii).
"Expiration Date" shall mean June 30, 1995.
"Expiry Date" shall mean April 30, 2003.
"Facility" shall mean any of the credit facilities established under
this Agreement, i.e., the A Term Facility, B Term Facility, Bridge Facility or
the Revolving Facility.
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period 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 Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fee Letters" shall have the meaning provided in Section 3.01(e).
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
"Fifth Amendment Effective Date" shall mean April 9, 1998.
"Final Maturity Date" shall mean April 30, 2004.
"Fixed Charge Coverage Ratio" shall have the meaning provided
in Section 8.10.
"Fleet Bank" shall mean Fleet Bank, N.A. (formerly known as
NatWest Bank N.A.), in its individual capacity, and its successors.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date of this Agreement
consistently applied; it being understood and agreed that determinations in
accordance with GAAP for purposes of Section 8, including defined terms as used
therein, are subject (to the extent provided therein) to Section 12.07(a).
"Guaranties" shall have the meanings provided in Section 5.14 and
shall include the Carlisle Guaranty, the Holdings Guaranty and any additional
Subsidiary Guaranties executed after the Restatement Date.
"Guarantors" shall mean the Subsidiary Guarantors and Holdings.
"Hazardous Materials" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contained, electric fluid containing levels of polychlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous waste," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," "toxic
substances," "toxic pollutants," "contaminants," or "pollutants," or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
"Holdings" shall have the meaning provided in the Recitals to this
Agreement.
"Holdings Guaranty" shall mean that certain Guaranty dated as of
the Closing Date and executed by Holdings in favor of the Lenders, as amended,
restated, supplemented or otherwise modified from time to time.
"Holdings Pledge Agreement" shall mean that certain Pledge
Agreement dated as of the Closing Date between Holdings and the Agent, as
amended, restated, supplemented or otherwise modified from time to time.
"Increased A Term Commitment" shall mean, with respect to any
Lender, the amount, if any, set forth opposite such Lender's name on Schedule
1.01 hereto directly below the column entitled "Increased A Term Commitment".
"Increased B Term Commitment" shall mean, with respect to any
Lender, the amount, if any, set forth opposite such Lender's name on Schedule
1.01 hereto directly below the column entitled "Increased B Term Commitment".
"Indebtedness" of any Person shall mean without duplication (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease Obligations
of such Person, (vi) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e., take-or-
pay and similar obligations, (vii) all net obligations of such Person under
Interest Rate Agreements and (viii) all Contingent Obligations of such Person
(other than Contingent Obligations arising from the guaranty by such Person of
the obligations of the Borrower and/or its Subsidiaries to the extent such
guaranteed obligations do not constitute Indebtedness or are otherwise permitted
hereunder), provided that Indebtedness shall not include trade payables and
accrued expenses, in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs (i.e., June 9, 1995).
"Interest Coverage Ratio" shall mean, at any date of determination,
the ratio of (i) Consolidated EBITDA of the Borrower and its Subsidiaries for
the Test Period most recently ended (taken as one accounting period) and ending
on such date to (ii) Consolidated Cash Interest Expense of the Borrower and its
Subsidiaries for the Test Period most recently ended (taken as one accounting
period) and ending on such date.
"Interest Period" with respect to any Loan shall mean the interest
period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate
swap agreement, any interest rate cap agreement, any interest rate collar
agreement or other similar agreement or arrangement designed to protect the
Borrower or any Subsidiary against fluctuations in interest rates.
"Inventory" shall mean inventory, as such term is defined in the
Uniform Commercial Code - Secured Transactions of New York, as it may be
amended from time to time.
"Investors" shall mean Kelso and the Management Investors.
"Kelso" shall mean Kelso & Company, L.P., a Delaware limited
partnership.
"Kelso Designee" shall mean any of the following individuals or
entities: Richard Cyert, Michel Rapaport, Louis and Patricia Kelso Trust,
William A. Marquard, John F. McGillicuddy, David M. Roderick, John Rutledge
IRA and George L. Shinn.
"Kelso Letter Agreement" shall have the meaning provided in
Section 8.09.
"Leasehold" of any Person means all of the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Lender" shall have the meaning provided in the first paragraph of
this Agreement.
"Lender Default" shall mean (i) the refusal (which has not
been retracted) of a Lender to make available its portion of any incurrence of
Loans or to fund its portion of any unreimbursed payment under Section 2.05(c)
or (ii) a Lender having notified the Agent and/or the Borrower that it does not
intend to comply with the obligations under Section 1.01 or under Section 2.05
(c), in the case of either (i) or (ii) as a result of the appointment of a
receiver or conservator with respect to such Lender at the direction or request
of any regulatory agency or authority.
"Letter of Credit" shall have the meaning provided in
Section 2.01(a).
"Letter of Credit Fee" shall have the meaning provided in
Section 3.01(b).
"Letter of Credit Issuer" shall mean Fleet Bank or any
Lender which at the request of the Borrower and with the consent of the Agent
agrees, in such Lender's sole discretion, to become a Letter of Credit Issuer
for purposes of issuing Letters of Credit pursuant to Section 2.
"Letter of Credit Outstandings" shall mean, at any time, the sum
of, without duplication, (i) the aggregate Stated Amount of all outstanding
Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in
respect of all Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.03(a).
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Loan Documents" shall mean this Agreement, the Notes, the
Security Documents and the Guaranties and any documents, instruments and
agreements executed and/or delivered in connection herewith or therewith, all as
amended, restated, supplemented or otherwise modified from time to time.
"Management Agreements" shall have the meaning provided in
Section 5.07 (iv).
"Management Investors" shall mean, collectively, the
executive officers of the Borrower who, immediately following the Merger, own
capital stock of Holdings, and any persons who thereafter become executive
officers of the Borrower and acquire capital stock of Holdings.
"Mandatory Borrowing" shall have the meaning provided
in Section 1.01(f).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean (a) a material adverse
effect on the business, property, assets, liabilities, operations, condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole
or (b) the impairment of the ability of any Credit Party to perform its
obligations under any Loan Document to which it is a party or of the rights of
the Agent or any Lender to enforce or collect any of the Obligations, including
the obligations of any Credit Party to perform or of the rights of the Agent or
any Lender to enforce any Guaranty. In determining whether any individual
event would result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall be deemed
to have occurred if the cumulative effect of such event and all other then
existing events would result in a Material Adverse Effect.
"Maximum Swingline Amount" shall mean $5,000,000.
"Merger" shall mean the merger of Acquisition Corp. with and into
the Borrower, with the Borrower as the surviving corporation, pursuant to the
terms and conditions of the Merger Agreement.
"Merger Agreement" shall have the meaning provided in
the Recitals to this Agreement.
"Merger Documents" shall mean the Merger Agreement, and all
the documents entered into in connection with the Merger Agreement or the
consummation of the Merger.
"Minimum Borrowing Amount" shall mean (i) for A Term Loans,
B Term Loans and Revolving Loans maintained as Base Rate Loans, $1,000,000
and (ii) for A Term Loans, B Term Loans and Revolving Loans maintained as
Eurodollar Loans, $1,000,000.
"Mortgages" shall have the meaning provided in
Section 5.15(c)(i).
"Mortgage Policies" shall have the meaning provided in
Section 5.15(c)(ii).
"Mortgaged Properties" shall mean, collectively, all of the
properties of the Borrower and the Subsidiaries of the Borrower defined as
"Mortgaged Property" in each of the respective Mortgages and Additional
Mortgages.
"MRD Ratio" shall mean at any time the ratio that is correctly
specified in the then latest officer's certificate delivered to the Lenders
pursuant to Section 7.01(e) as the EBITDA Ratio, as at the end of the Test
Period ended as of the last day of the fiscal quarter or year with respect to
which such officer's certificate has been delivered.
"Net Cash Proceeds" shall mean, with respect to any Asset
Sale, the Cash Proceeds resulting therefrom net of expenses of sale (including
payment of principal, premium and interest of Indebtedness secured by the assets
the subject of the Asset Sale and required to be, and which is, repaid under the
terms thereof as a result of such Asset Sale), and incremental taxes paid or
payable as a result thereof.
"Non-Defaulting Lender" shall mean each Lender other
than a Defaulting Lender.
"Note" shall mean and include each A Term Note, each B
Term Note, each Bridge Note, each Revolving Note and the Swingline Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Agent at 175 Water
Street, New York, New York 10038 or such other office as the Agent may
designate to the Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Agent or any Lender pursuant to the terms of this Agreement or any
other Loan Document.
"Participant" shall have the meaning provided in Section 2.05(a).
"PAS" shall have the meaning provided in the Recitals to this
Agreement.
"PAS/Watson Merger" shall have the meaning provided in
the Recitals to this Agreement.
"Payment Office" shall mean the office of the Agent at 175
Water Street, New York, New York 10038 or such other office as the Agent may
designate to the Borrower from time to time.
"PBGC" shall meean the Pension Benefit Guaranty Corporation established
pursuant ot Section 4002 of ERISA, or any successor thereto.
"Permitted Encumbrances" shall mean, with respect to the
Mortgaged Properties, such exceptions to title as are set forth in the title
insurance policies or title commitments delivered with respect thereto, all of
which exceptions must be reasonably acceptable to the Agent.
"Permitted Holders" means, collectively, (i) Kelso and its
Affiliates, (ii) any Kelso Designee, (iii) any Permitted Transferee of Kelso and
its Affiliates (other than Kelso or an Affiliate of Kelso), (iv) the Management
Investors and (v) any employee stock ownership plan established by Holdings or
the Borrower for the benefit of the employees of Holdings, the Borrower or any
Subsidiary, provided that any Persons described in clauses (ii) through (v)
above shall only constitute Permitted Holders to the extent that the total
aggregate voting power of the Voting Stock of the Borrower owned by such Persons
does not exceed 10% of the total aggregate voting power of the Voting Stock of
the Borrower owned by Kelso and its Affiliates.
"Permitted Liens" shall mean Liens described in clauses (a)
through (l) of Section 8.03.
"Permitted Transferees" shall mean (i) any Affiliate of
Kelso (other than any corporation or other Person controlled or managed by
Kelso), (ii) any managing director, general partner, limited partner, director,
officer or employee of Kelso or any Affiliate thereof (collectively, "Kelso
Associates"), (iii) the heirs, executors, administrators, testamentary trustees,
legatees of beneficiaries of any Kelso Associate and (iv) any trust, the
beneficiaries of which, or a corporation or partnership, the stockholders or
partners of which, include only a Kelso Associate, his/her spouse, parents,
siblings, or direct lineal descendants.
"Person" shall mean any individual, partnership, limited
liability company, joint venture, firm, corporation, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Plan" shall mean any multi-employer or single-employer
plan as defined in Section 4001 of ERISA, which is maintained or contributed to
by (or to which there is an obligation to contribute of) the Borrower, a
Subsidiary or an ERISA Affiliate, and each such plan for the five year period
immediately following the latest date on which the Borrower, a Subsidiary, or an
ERISA Affiliate maintained, contributed to or had an obligation to contribute to
such plan.
"Pledge Agreements" shall have the meaning provided in
Section 5.15 and shall include the Holdings Pledge Agreement, the Borrower
Pledge Agreements and any pledge agreement executed and delivered by the
Borrower or any Subsidiary of the Borrower at any time after the Restatement
Date pursuant to Section 7.11.
"Pledged Securities" shall mean all the Pledged Securities
as defined in the relevant Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Fleet Bank
announces from time to time as its prime lending rate, the Prime Lending Rate to
change when and as such prime lending rate changes. The Prime Lending Rate is
a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Fleet Bank may make commercial loans or other
loans at rates of interest at, above or below the Prime Lending Rate.
"Prior Credit Agreement" shall mean that certain Second Amended
and Restated Credit Agreement by and between the Borrower and Fleet Bank
USA Credit Corp., as amended, supplemented or otherwise modified from time to
time.
"Prior Indebtedness" shall mean the Indebtedness of
Watson identified on Schedule 5.24 hereto, which is to be paid in full on the
Restatement Date.
"Projected EBITDA" shall mean, for any period,
Consolidated EBITDA for such period as set forth on the Projections.
"Projections" shall have the meaning provided in Section
5.22(i) for the period from the Initial Borrowing Date to and including the
fiscal year ended January 31, 1997, and shall mean (i) the projected financial
statements for the Borrower and its Subsidiaries dated April 14, 1997 for the
period from the fiscal year commenced February 1, 1997 to and including the
fiscal year ending January 31, 1998 and (ii) the projected financial statements
for the Borrower and its Subsidiaries dated February 5, 1998 for the period from
the fiscal year commenced February 1, 1998 to and including the fiscal year
ending January 31, 2002.
"Purchase Price" means, with respect to the Contemplated
Acquisition, collectively, (i) all Cash paid by the Borrower or any of its
Subsidiaries in connection with such acquisition, including in respect of
transaction costs, fees and other expenses incurred by the Borrower or any of
its Subsidiaries in connection with such acquisition, (ii) all direct or
indirect liabilities assumed by the Borrower or any of its Subsidiaries in
connection with such acquisition, (iii) the value of all capital stock issued
by the Borrower or any of its Subsidiaries in connection with such acquisition
and (iv) any deferred portion of the purchase price or any other costs paid by
the Borrower or any of its Subsidiaries in connection with such acquisition.
"RCRA" shall mean the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. S 6901 et seq.
"Real Property" of any Person shall mean all of the right,
title and interest of such Person in and to land, improvements and fixtures,
including Leaseholds.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Reinvestment Assets" shall mean any assets to be
employed in the business of the Borrower and its Subsidiaries as described in
Section 8.01.
"Reinvestment Election" shall have the meaning provided
in Section 4.02(A)(c).
"Reinvestment Notice" shall mean a written notice signed
by an Authorized Officer of the Borrower stating that the Borrower, in good
faith, intends and expects to use all or a specified portion of the Net Cash
Proceeds of an Asset Sale to purchase, construct or otherwise acquire
Reinvestment Assets.
"Reinvestment Prepayment Amount" shall mean, with
respect to any Reinvestment Election, the amount, if any, on the Reinvestment
Prepayment Date relating thereto by which (i) the Anticipated Reinvestment
Amount in respect of such Reinvestment Election exceeds (ii) the aggregate
amount thereof expended by the Borrower and its Subsidiaries to acquire
Reinvestment Assets.
"Reinvestment Prepayment Date" shall mean, with respect
to any Reinvestment Election, the earliest of (i) the date, if any, upon which
the Agent, on behalf of the Required Lenders, shall have delivered a written
termination notice to the Borrower, provided that such notice may only be given
while an Event of Default exists, (ii) the date occurring one year after such
Reinvestment Election and (iii) the date on which the Borrower shall have
determined not to, or shall have otherwise ceased to, proceed with the purchase,
construction or other acquisition of Reinvestment Assets with the related
Anticipated Reinvestment Amount.
"Relevant Test Period" shall mean, at any time, the Test
Period ending on the last day of the then most recently ended fiscal quarter of
the Borrower with respect to which an officer's certificate has been delivered
to the Lenders pursuant to Section 7.01(e).
"Reportable Event" shall mean an event described in
Section 4043(b) of ERISA with respect to a Plan as to which the 30-day notice
requirement has not been waived by the PBGC.
"Required Lenders" shall mean Non-Defaulting Lenders
whose outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term
Commitments), outstanding Bridge Loans (or, if prior to the Initial Borrowing
Date, Bridge Commitments) and Revolving Commitments (or, if after the Total
Revolving Commitment has been terminated, outstanding Revolving Loans and
Adjusted Revolving Commitment Percentage of outstanding Swingline Loans and
Letter of Credit Outstandings) constitute greater than 50% of the sum of (i) the
total outstanding Term Loans of Non-Defaulting Lenders (or, if prior to the
Initial Borrowing Date, the Total Term Commitment), (ii) the total outstanding
Bridge Loans of Non-Defaulting Lenders (or, if prior to the Initial Borrowing
Date, the Total Bridge Commitments) and (iii) the Adjusted Total Revolving
Commitment (or, if after the Total Revolving Commitment has been terminated,
the total outstanding Revolving Loans of Non-Defaulting Lenders and the
aggregate Adjusted Revolving Commitment Percentages of all Non-Defaulting
Lenders of the total outstanding Swingline Loans and Letter of Credit
Outstandings at such time).
"Restatement Date" shall have the meaning provided in the
Recitals to this Agreement.
"Retailer" shall have the meaning provided in Section
8.06(j).
"Revolving Commitment" shall mean, with respect to each
Lender, the amount set forth opposite such Lender's name on Schedule 1.01
hereto directly below the column entitled "Revolving Commitment," as the same
may be reduced from time to time pursuant to Section 3.02, 3.03 and/or 9 or
adjusted from time to time as a result of assignments to or from such Lender
pursuant to Section 12.04.
"Revolving Facility" shall mean the Facility evidenced by
the Total Revolving Commitment.
"Revolving Lenders" shall mean each Lender with
Revolving Commitment.
"Revolving Loan" shall have the meaning provided in
Section 1.01(d).
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"Revolving Percentage" shall mean at any time for each
Lender with a Revolving Commitment, the percentage obtained by dividing such
Lender's Revolving Commitment by the Total Revolving Commitment; provided;
however, that if the Total Revolving Commitment has been terminated, the
Revolving Percentage of each Lender shall be determined by dividing such
Lender's Revolving Commitment immediately prior to such termination by the
Total Revolving Commitment immediately prior to such termination.
"S&P" shall mean Standard & Poor's Rating Services, a
division of McGraw-Hill, Inc. or any successor to the rating agency business
thereof.
"Scheduled Repayment" shall have the meaning provided
in Section 4.02(A)(b).
"SEC" shall have the meaning provided in Section 7.01(i).
"SEC Regulation D" shall mean Regulation D as
promulgated under the Securities Act of 1933, as amended, as the same may be in
effect from time to time.
"Security Agreement Collateral" shall mean all "Collateral"
as defined in the relevant Security Agreement.
"Security Agreements" shall have the meaning provided in
Section 5.15 and shall include the Borrower Security Agreement, the Carlisle
Security Agreement, the Watson Security Agreement, the Trademark Security
Agreements and any security agreement executed and delivered by any Subsidiary
of the Borrower at any time after the Restatement Date pursuant to Section 7.11.
"Security Documents" shall mean the Pledge Agreements,
the Guaranties, the Security Agreements, the Mortgages and the Additional
Mortgages, if any.
"Shareholders' Agreements" shall have the meaning
provided in Section 5.07(iii).
"Stated Amount" of each Letter of Credit shall mean the
maximum available to be drawn thereunder (regardless of whether any conditions
for drawing could then be met).
"Stock Issuances" shall have the meaning provided in
Section 5.11.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, limited liability
company, association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries, has more than a 50% equity
interest at the time. Unless otherwise expressly provided, all references
herein to "Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Guarantors" shall mean any Subsidiary of the
Borrower that executes and delivers a Subsidiary Guaranty at any time after the
date hereof.
"Subsidiary Guaranty" shall mean any guaranty
executed and delivered by any Subsidiary of the Borrower at any time after the
date hereof pursuant to Section 7.11.
"Swingline Expiry Date" shall mean the date which is five
Business Days prior to the Expiry Date.
"Swingline Loan" shall have the meaning provided
in Section 1.01(e).
"Swingline Note" shall have the meaning
provided in Section 1.05(a).
"Syndication Date" shall mean the earlier of (x) the
date which is 90 days after the Closing Date and (y) the date upon which the
Agent determines in its sole discretion (and notifies the Borrower) that the
primary syndication (and the resulting addition of institutions as Lenders
pursuant to Section 12.04) has been completed.
"Taxes" shall have the meaning provided in
Section 4.04(a).
"Term Commitment" shall mean for any Lender the sum of
its A Term Commmitment and its B Term Commitment.
"Term Loans" shall mean, collectively the A Term
Loans and B Term Loans.
"Test Period" shall mean for any determination the
four consecutive fiscal quarters of the Borrower then last ended (taken as one
accounting period).
"Total A Term Commitment" shall mean the sum of
the A Term Commitments of each of the Lenders.
"Total B Term Commitment" shall mean the sum of the B
Term Commitments of each of the Lenders.
"Total Commitment" shall mean the sum of the
Total Term Commitment and the Total Revolving Commitment.
"Total Leverage Ratio" shall mean, at any date of
determination, the ratio of (i) the aggregate amount of all Indebtedness of the
Borrower and its Subsidiaries on such date, determined on a consolidated basis
as determined in accordance with GAAP, to (ii) Consolidated EBITDA of the
Borrower and its Subsidiaries for the Test Period most recently ended (taken as
one accounting period).
"Total Revolving Commitment" shall mean the sum of the
Revolving Commitments of each of the Lenders.
"Total Term Commitment" shall mean the sum of
the Total A Term Commitment and the Total B Term Commitment.
"Total Unutilized Revolving Commitment" shall mean, at
any time, (i) the Total Revolving Commitment at such time less (ii) the sum of
the aggregate principal amount of all Revolving Loans and Swingline Loans at
such time plus the Letter of Credit Outstandings at such time.
"Trademark Security Agreements" shall have the meaning
provided in Section 5.15(b).
"Transaction Expenses" shall mean all fees and
expenses incurred in connection with, and payable prior to or substantially
concurrently with the closing of, the Merger and the Stock Issuances and the
transactions contemplated in connection with the Documents including the
financing of the Merger, and including all fees paid to any of the Lenders and
the Agent hereunder, fees paid to Kelso & Company, Inc. or its Affiliates
permitted hereunder; attorney's fees, accountants' fees, placement agents' fees,
discounts and commissions and brokerage, and consultant fees. Transaction
Expenses shall include the amortization of any such fees and expenses that are
capitalized and not classified as an expense on the date incurred.
"Type" shall mean any type of Loan determined
with respect to the interest option applicable thereto, i.e., a Base Rate Loan
or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year determined
in accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by the Plan's actuary in the most recent
annual valuation of the Plan, exceeds the fair market value of the assets
thereof, determined in accordance with Section 412 of the Code.
"Unpaid Drawing" shall have the meaning provided
in Section 2.04(a).
"Unutilized Revolving Commitment" for
any Lender with a Revolving Commitment at any time shall mean the sum of (i)
the Revolving Commitment of such Lender minus (ii) the sum of (A) the
aggregate outstanding principal amount of Revolving Loans made by such Lender
plus (B) an amount equal to such Lender's Revolving Percentage of the Letter of
Credit Outstandings at such time.
"Utilized Revolving Commitment" for any Lender
with a Revolving Commitment at any time shall mean the sum of (i) the aggregate
outstanding principal amount of Revolving Loans made by such Lender plus (ii)
an amount equal to such Lender's Revolving Percentage of the Letter of Credit
Outstandings at such time.
"Voting Stock" shall mean, with respect to any
corporation, the outstanding stock of all classes (or equivalent interests)
which ordinarily, in the absence of contingencies, entitles holders thereof
to vote for the election of directors (or Persons performing similar functions)
of such corporation, even though the right so to vote has been suspended by the
happening of such a contingency.
"Watson" shall have the meaning provided in the
Recitals to this Agreement.
"Watson Merger" shall mean, collectively, (i) the
PAS/Watson Merger and (ii) the transactions consummated pursuant to the
Watson Purchase Agreement.
"Watson Merger Agreement" shall have the
meaning provided in the Recitals to this Agreement.
"Watson Merger Documents" shall mean the Watson
Merger Agreement, the Watson Purchase Agreement and all documents,
instruments and agreements entered into in connection with the Watson Merger
Agreement, the Watson Purchase Agreement or the consummation of the Watson
Merger.
"Watson Purchase Agreement" shall mean that
certain Stock Purchase Agreement dated as of May 21, 1998 among Ira A.
Watson Stock Bonus (ESOP) Retirement Plan, The Katherine Ayres Watson
Testamentary Trust, Constance Hewitt, certain other persons signatory thereto
and the Borrower.
"Watson Security Agreement" shall mean
that certain Security Agreement dated as of the Restatement Date between
Watson and the Agent, as amended, restated, supplemented or otherwise modified
from time to time.
"Wholly-Owned Subsidiary" of any Person shall
mean any Subsidiary of such Person to the extent all of the capital stock or
other ownership interests in such Subsidiary, other than directors' qualifying
shares, is owned directly or indirectly by such Person.
"Working Capital" shall mean the excess of
Consolidated Current Assets over Consolidated Current Liabilities.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms. The words "herein",
"hereof" and words of similar import as used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision in this Agreement.
Unless specifically stated to the contrary, all references to "Sections,"
"subsections," "paragraphs," "Exhibits" and "Schedules" in this Agreement shall
refer to Sections, subsections, paragraphs, Exhibits and Schedules of this
Agreement unless otherwise expressly provided; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
persons; and all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
SECTION 11. The Agent.
11.01 Appointment . The Lenders hereby designate Fleet Bank, N.A. as
Agent (for purposes of this Section 11, the term "Agent" shall include Fleet
Bank in its capacity as Agent pursuant to the Security Documents) to act as
specified herein and in the other Loan Documents. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, the Agent to take such action on
its behalf under the provisions of this Agreement, the other Loan Documents and
any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as
are specifically delegated to or required of the Agent by the terms hereof
and thereof and such other powers as are reasonably incidental thereto. The
Agent may perform any of its duties hereunder by or through its respective
officers, directors, agents, employees or affiliates.
11.02 Nature of Duties . The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. Neither the Agent nor any of its respective officers,
directors, agents, employees or affiliates shall be liable for any action taken
or omitted by it or them hereunder or under any other Loan Document or in
connection herewith or therewith, unless caused by its or their gross negligence
or willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender or
the holder of any Note; and nothing in this Agreement or any other Loan
Document, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein.
11.03 Lack of Reliance on the Agent . Independently and without
reliance upon the Agent, each Lender and the holder of each Note, to the extent
it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Borrower
and its Subsidiaries in connection with the making and the continuance of the
Loans and the taking or not taking of any action in connection herewith and (ii)
its own appraisal of the creditworthiness of the Borrower and its Subsidiaries
and, except as expressly provided in this Agreement, the Agent shall not have
any duty, or responsibility, either initially or on a continuing basis, to
provide any Lender or the holder of any Note with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter. The Agent shall not be
responsible to any Lender or the holder of any Note for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of this Agreement or any other
Loan Document or the financial condition of the Borrower and its Subsidiaries or
be required to make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement or any other
Loan Document, or the financial condition of the Borrower and its Subsidiaries
or the existence or possible existence of any Default or Event of Default.
11.04 Certain Rights of the Agent . If the Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, the Agent shall be entitled to refrain from such act or taking such
action unless and until the Agent shall have received instructions from the
Required Lenders; and the Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, neither any Lender nor
the holder of any Note shall have any right of action whatsoever against the
Agent as a result of the Agent acting or refraining from acting hereunder or
under any other Loan Document in accordance with the instructions of the
Required Lenders.
11.05 Reliance . The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, radiogram, order
or other document or telephone message signed, sent or made by any Person that
the Agent believed to be the proper Person, and, with respect to all legal
matters pertaining to this Agreement and any other Loan Document and its duties
hereunder and thereunder, upon advice of counsel selected by the Agent.
11.06 Indemnification . To the extent the Agent is not reimbursed and
indemnified by the Borrower, the Lenders will reimburse and indemnify the
Agent, in proportion to their respective "percentages" as used in determining
the Required Lenders, for and against any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on, asserted
against or incurred by the Agent in performing its respective duties hereunder
or under any other Loan Document, in any way relating to or arising out of this
Agreement or any other Loan Document; provided; however, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
11.07 The Agent in Its Individual Capacity . With respect to its
obligation to make Loans under this Agreement, the Agent shall have the rights
and powers specified herein for a "Lender" and may exercise the same rights and
powers as though it were not performing the duties specified herein; and the
term "Lenders," "Required Lenders," "holders of Notes" or any similar terms
shall, unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with any Credit
Party or any Affiliate of any Credit Party as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower or any other Credit Party for services in connection with this
Agreement and otherwise without having to account for the same to the Lenders.
11.08 Holders . The Agent may deem and treat the payee of any Note
as the owner thereof for all purposes hereof unless and until a written notice
of the
assignment, transfer or endorsement thereof, as the case may be, shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee, assignee or indorsee, as the case may be, of such Note or of any
Note or Notes issued in exchange therefor.
11.09 Resignation by the Agent . (a) The Agent may resign from the
performance of all its functions and duties hereunder and/or under the other
Loan Documents at any time by giving 15 Business Days' prior written notice to
the Borrower and the Lenders. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Lenders shall appoint a
successor Agent hereunder or thereunder who shall be a commercial Bank or trust
company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within such
15 Business Day period, the Agent, with the consent of the Borrower, shall then
appoint a successor Agent who shall serve as Agent hereunder or thereunder until
such time, if any, as the Lenders appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b) or
(c) above by the 20th Business Day after the date such notice of resignation was
given by the Agent, the Agent's resignation shall become effective and the
Required Lenders shall thereafter perform all the duties of the Agent hereunder
and/or under any other Loan Document until such time, if any, as the Lenders
appoint a successor Agent as provided above.
SECTION 12 Miscellaneous.
12.01 Payment of Expenses, etc . The Borrower agrees to: (i) whether
or not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Agent in connection with the
negotiation, preparation, execution and delivery of the Loan Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of Winston & Strawn) and of the Agent and each of the Lenders in
connection with the enforcement of the Loan Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Agent and for each of the Lenders);
(ii) pay and hold each of the Lenders harmless from and against any and all
present and future stamp and other similar taxes with respect to the foregoing
matters and save each of the Lenders harmless from and against any and all
liabilities with respect to or resulting from any delay or omission (other than
to the extent attributable to such Lender) to pay such taxes; and (iii)
indemnity each Lender (including in its capacity as the Agent or a Letter of
Credit Issuer), its officers, directors, employees, representatives and agents
from and hold each of them harmless against any and all losses, liabilities,
claims, damages or expenses incurred by any of them as a result of, or arising
out of, or in any way related to, or by reason of, any investigation, litigation
or other proceeding (whether or not any Lender is a party thereto) related to
the entering into and/or performance of any Document or the use of the proceeds
of any Loans hereunder or the Merger or the consummation of any transactions
contemplated in any Loan Document, including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
12.02 Right of Setoff . In addition to any rights now or hereafter
granted under applicable law, or otherwise, and not by way of limitation of any
such rights, if an Event of Default then exists, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to any Credit Party or to any other Person
any such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Lender (including without limitation by branches
and agencies of such Lender wherever located) to or for the credit or the
account of any Credit Party against and on account of the Obligations and
liabilities of such Credit Party to such Lender under this Agreement or under
any of the other Loan Documents, including, without limitation, all interests
in Obligations of such Credit Party purchased by such Lender pursuant to Section
12.06(b), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Loan Document, irrespective of
whether or not such Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
12.03 Notices . Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to a Credit Party, at
the address specified on Schedule 12.03 hereto or in the other relevant Loan
Documents, as the case may be; if to any Lender, at its address specified on
Schedule 12.03 hereto or, at such other address as shall be designated by any
party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied, or cabled or
sent by overnight courier, and shall be effective when received.
12.04 Benefit of Agreement . This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Lenders. Each Lender may at any time grant participations in any
of its rights hereunder or under any of the Notes to another financial
institution, provided that in the case of any such participation, (i) the
participant shall not have any rights under this Agreement or any of the
other Loan Documents (the participant's rights against such Lender in respect
of such participation to be those set forth in the agreement executed by such
Lender in favor of the participant
relating thereto) and all amounts payable by the Borrower hereunder shall be
determined as if such Lender had not sold such participation, except that the
participant shall be entitled to the benefits of Sections 1.10 and 4.04 of this
Agreement to the extent that such Lender would be entitled to such benefits if
the participation had not been entered into or sold, (ii) the Borrower and the
Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents, and (iii) such Lender shall be solely responsible for any
withholding taxes, and, provided further that no Lender shall transfer, grant
or assign any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Loan Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan or Note in which such participant is participating (it
being understood that any waiver of the application of any prepayment or the
method of any application of any prepayment to, the amortization of the Term
Loans shall not constitute an extension of the final maturity date), or reduce
the rate or extend the time of payment of interest or Fees thereon (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof, or increase such
participant's participating interest in any Commitment over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment, or a
mandatory prepayment, shall not constitute a change in the terms of any
Commitment), (ii) release any Guarantor from its obligations
under its Guaranty except in accordance with the terms thereof, (iii) release
all or substantially all of the Collateral or (iv) consent to the assignment or
transfer by any Credit Party of any of its rights and obligations under this
Agreement or any other Loan Document.
(b) Notwithstanding the foregoing, (i) any Lender may assign all or a
portion of its outstanding A Term Loans and/or B Term Loans and/or Revolving
Commitment (or, if prior to the Initial Borrowing Date, its A Term Commitment
and/or B Term Commitment) and its rights and obligations hereunder to another
Lender, and (ii) with the consent of the Agent and the Borrower (which consents
shall not be unreasonably withheld), any Lender may assign all or a portion of
its
outstanding A Term Loans and/or B Term Loans and/or Revolving Commitment
and its rights and obligations hereunder to one or more commercial banks or
other
financial institutions (including one or more Lenders). No assignment pursuant
to the immediately preceding sentence shall to the extent such assignment
represents an assignment to an institution other than one or more Lenders
hereunder, be in an aggregate amount less than $5,000,000 unless the entire
Commitment of the assigning Lender is so assigned. If any Lender so sells or
assigns all or a part of its rights hereunder or under the Notes, any reference
in this Agreement or the Notes to such assigning Lender shall thereafter refer
to such Lender and to the respective assignee to the extent of their respective
interests and the respective
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights and benefits as it would if it were such assigning
Lender. Each assignment pursuant to this Section 12.04(b) shall be effected
by the execution and delivery of an assignment agreement substantially in the
form of Exhibit 12.04 hereto (an "Assignment Agreement"). In the event of
any such assignment (A) to a commercial bank or other financial institution
not previously a Lender hereunder, either the assigning or the assignee Lender
shall pay to the Agent a nonrefundable assignment fee of $3,500 and (B) to a
Lender, either the assigning or assignee Lender shall pay to Agent a
nonrefundable assignment fee of $1,500, and at the time of any assignment
pursuant to this Section 12.04(b), (1) Schedule 1.01 shall be deemed to be
amended to reflect the Commitment of the respective assignee (which shall
result in a direct reduction to the Commitment of the assigning Lender) and
of the other Lenders, (2) such assignee shall become a
party to this Agreement as a Lender and such assignee shall have, to the extent
of such assignment, the rights, benefits and obligations of a Lender hereunder
and under the other Loan Documents, and (3) if any such assignment occurs after
the Initial Borrowing Date, the Borrower will issue new Notes to the respective
assignee and to the assigning Lender in conformity with the requirements of
Section 1.05. Each Lender and the Borrower agree to execute such documents
(including without limitation amendments to this Agreement and the other Loan
Documents) as shall be necessary to effect the foregoing. Nothing in this
clause (b) shall prevent or prohibit any Lender from pledging its Notes or
Loans to a Federal Reserve Bank in support of borrowings made by such Lender
from such Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section 12.04, no
transfer or assignment of the interests or obligations of any Lender hereunder
or any grant of participation therein shall be permitted if such transfer,
assignment or grant would require the Borrower to file a registration statement
with the SEC or to qualify the Loans under the "Blue Sky" laws of any State.
(d) Each Lender initially party to this Agreement hereby represents,
and each Person that became a Lender pursuant to an assignment permitted by
this Section 12 will, upon its becoming party to this Agreement, represent that
it is a commercial lender, other financial institution or other "accredited"
investor (as defined in SEC Regulation D) which makes loans in the ordinary
course of its business and that it will make or acquire Loans for its own
account in the ordinary course of such business, provided that subject to the
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Lender shall at all
times be within its exclusive control.
12.05 No Waiver; Remedies Cumulative . No failure or delay on the
part of the Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Loan Document and no course of dealing between
any Credit Party and the Agent or any Lender shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided
are cumulative and not exclusive of any rights or remedies which the Agent
or any Lender would otherwise have. No notice to or demand on any Credit
Party in any case shall entitle any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver
of the rights of the Agent or the Lenders to any other or further action in
any circumstances without notice or demand.
12.06 Payments Pro Rata . (a) The Agent agrees that promptly after its
receipt of each payment from or on behalf of any Credit Party in respect of any
Obligations of such Credit Party hereunder, it shall distribute such payment to
the Lenders (other than any Lender that has expressly waived its right to
receive its pro rata share thereof) pro rata based upon their respective
shares, if any, of the Obligations with respect to which such payment was
received.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Loan Documents, or
otherwise) which is applicable to the payment of the principal of, or
interest on, the Loans or Fees, of a sum which with respect to the related
sum or sums received by other Lenders is in a greater proportion than the
total of such Obligation then owed and due to such Lender bears to the total
of such Obligation then owed and due to all of the Lenders immediately prior
to such receipt, then such Lender receiving such excess payment shall purchase
for cash without recourse or warranty from the other Lenders an interest in the
Obligations of the respective Credit Party to such Lenders in such amount as
shall result in a proportional participation by all of the Lenders in such
amount, provided that if all or any portion of such excess amount
is thereafter recovered from such Lender, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
(c) Notwithstanding anything to the contrary contained herein, the
provisions of the preceding Sections 12.06(a) and (b) shall be subject to the
express provisions of this Agreement which require, or permit, differing
payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.
12.07 Calculations; Computations . The financial statements to be
furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders); provided, however, that (i) except as otherwise
specifically provided herein, all computations determining compliance with
Section 8, including definitions used therein, shall utilize accounting
principles and policies in effect at the time of the preparation of, and in
conformity with those used to prepare, the January 28, 1995 historical financial
statements of the Borrower delivered to the Lenders pursuant to Section 6.10(b),
and (ii) that if at any time the computations determining compliance with
Section 8 utilize accounting principles different from those utilized in the
financial statements furnished to the Lenders, such financial statements shall
be accompanied by reconciliation work-sheets.
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial . This Agreement and the other Loan Documents and the rights and
obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the State of New York. Any legal
action or proceeding with respect to this Agreement or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each Credit Party hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Each Credit Party further irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified mail
, postage prepaid, to each Credit Party located outside New York City and by
hand delivery to each Credit Party located within New York City, at its address
for notices pursuant to Section 12.03, such service to become effective 30 days
after such mailing. Each Credit Party hereby irrevocably designates appoints
and empowers CT Corporation System as its agent for service of process in
respect of any such action or proceeding. Nothing herein shall affect the right
of the Agent, any Lender to serve process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against any Credit Party
in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Loan Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) Each of the parties to this agreement hereby irrevocably waives all
right to a trial by jury in any action, proceeding or counterclaim arising out
of or relating to this agreement, the other credit documents or the transactions
contemplated hereby or thereby.
12.09 Counterparts . This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
12.10 Effectiveness . This Agreement shall become effective on the
date (the "Effective Date") on which (i) the Borrower and each of the Lenders
shall have signed a copy hereof (whether the same or different copies) and shall
have delivered the same to the Agent at the Payment Office of the Agent or, in
the case of the Lenders, shall have given to the Agent telephonic (confirmed in
writing), written telex or facsimile transmission notice (actually received) at
such office that the same has been signal and mailed to it and (ii) the Borrower
has satisfied all of the conditions precedent set forth in Section 5.
12.11 Headings Descriptive . The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver . Neither this Agreement nor any other
Loan Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrower and the Required Lenders; provided, however,
that no such change, waiver, discharge or termination shall, without the consent
of each Lender (other than a Defaulting Lender) affected thereby, (i) extend the
Final Maturity Date, the A Term Loan Maturity Date or Expiry Date, as the case
may be, (it being understood that any waiver of the application of any
prepayment of or the method of application of any prepayment to the amortization
of, the Loans shall not constitute any such extension), or reduce the rate or
extend the time of payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates) or Fees thereon,
or reduce the principal amount thereof, or increase the Commitment of any Lender
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment
shall not constitute a change in the terms of any Commitment of any Lender),
(ii) release or permit the release of all or substantially all of the Collateral
or release any Guarantor from its Guaranty (in each case except as expressly
provided in the Loan Documents), (iii) amend, modify or waive any provision of
this Section, (iv) reduce the percentage specified in, or otherwise modify, the
definition of Required Lenders or (v) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Agreement; provided
further, that no such change, waiver, discharge or termination shall: (A) reduce
the amount or extend the payment date for the mandatory prepayments of A Term
Loans required under Section 4.02 without the consent of each Lender (other than
a Defaulting Lender) which has an A Term Loan then outstanding; (B) reduce the
amount or extend the payment date for the mandatory prepayments of B Term
Loans required under Section 4.02 without the consent of each Lender (other
than a Defaulting Lender) which has a B Term Loan then outstanding; (C) reduce
the amount or extend the payment date for the mandatory prepayments of Bridge
Loans required under Section 4.02 without the consent of each Lender (other than
a Defaulting Lender) which has a Bridge Loan then outstanding; or (D) reduce
the amount of, or extend the date for, any mandatory reduction in the Revolving
Commitments required under Section 3.03(d), or reduce the amount or extend the
payment date for the mandatory prepayments of Revolving Loans required under
Section 4.02, without the consent of each Lender (other than a Defaulting
Lender) which has a Revolving Commitment at such time (or, if after the Total
Revolving Commitment has been terminated, each Lender (other than a Defaulting
Lender) which has any Revolving Loans then outstanding); and provided further,
that the Agent and the Borrower may amend this Agreement without the consent of
any Lender solely for the purpose of designating any Person that becomes a
Lender as a co-agent hereunder. No provision of Section 2 or 11 may be amended
without the consent of the Letter of Credit Issuer or the Agent, respectively.
12.13 Survival . All indemnities set forth herein including, without
limitation, in Sections 1.10, 1.11, 4.04, 11.07 and 12.01 shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans . Each Lender may transfer and carry its
Loans at, to or for the account of any branch office, subsidiary or affiliate of
such Lender, provided that the Borrower shall not be responsible for costs
arising under Section 1.10 or 4.04 resulting from any such transfer (other
than a transfer pursuant to Section 1.12) to the extent not otherwise applicable
to such Lender prior to such transfer.
12.15 Confidentiality . Subject to Section 12.04, the Lenders shall hold
all non-public information obtained pursuant to the requirements of this
Agreement which has been identified as such by the Borrower in accordance with
its customary procedure for handling confidential information of this nature and
in accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loans or participation therein
(so long as such transferee or participant agrees in writing to be bound by the
provisions of this Section 12.15) or as required or requested by any
governmental agency or representative thereof or pursuant to legal process,
provided that, unless specifically prohibited by applicable law or court order,
each Lender shall notify the Borrower of any request by any governmental agency
or representative thereof (other than any such request in connection with an
examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure
of such information, and provided further that in no event shall any Lender be
obligated or required to return any materials furnished by the Borrower or any
Subsidiary.
12.16 Consent of Carlisle and Holdings . Each of Holdings and Carlisle
hereby acknowledge and consent to this Agreement and the terms and provisions
hereof and hereby confirm that the Carlisle Guaranty, Carlisle Security
Agreement, Holdings Guaranty, Holdings Pledge Agreement and each other Loan
Document to which either Holdings and/or Carlisle is a party is and shall
continue to be in full force and effect and is hereby ratified and confirmed
in all respects except that, upon the occurrence of the Effective Date, all
references in the Carlisle Guaranty, Carlisle Security Agreement, Holdings
Guaranty, Holdings Pledge Agreement and all other Loan Documents to which
either Holdings or Carlisle is a party to the "Credit Agreement", "thereunder",
or words or similar import shall mean this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective officers thereunto duly authorized as of
the date above first written.
