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EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of April 25, 2000, among (1)
QUIKSILVER, INC., a Delaware corporation (the "Borrower"), (2) the several banks
and other financial institutions from time to time parties to this Agreement
(the "Lenders"), (3) THE CHASE MANHATTAN BANK, as syndication agent and co-lead
arranger (in such capacity, the "Syndication Agent"), and UNION BANK OF
CALIFORNIA, N.A., as administrative agent for the Lenders hereunder (in such
capacity, the "Agent") and co-lead arranger.
RECITALS
The Borrower has requested that the Lenders extend to it a loan and
letter of credit facility for the purpose of providing funds for working
capital, capital expenditures, permitted acquisitions and general corporate
purposes of the Borrower and its Domestic Subsidiaries, in each case upon the
terms and conditions set forth below:
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1 Defined Terms.
As used in this Agreement, the following terms shall have the following
meanings:
"Accountants": Deloitte & Touche, LLP, or such other firm of
independent certified public accountants of recognized national standing as
shall be selected by the Borrower and satisfactory to the Agent and the Majority
Lenders.
"Accounts": the unpaid portion of obligations owing to the Borrower,
payable in Dollars, arising out of the sale of Inventory by the Borrower.
"Acquisitions": any transaction, or any series of transactions,
consummated after the Closing Date, in which the Borrower or any Subsidiary (in
one transaction or in a series of transactions) (a) acquires any business or all
or substantially all of the assets of any Person or any division or business
unit thereof, whether through purchase of assets, merger or otherwise, (b)
directly or indirectly acquires control of at least a majority (in number of
votes) of the securities of a corporation which have ordinary voting power for
the election of directors or (c) directly or indirectly acquires control of a
majority ownership in any partnership or joint venture.
"Affiliate": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (a)
vote securities having 5% or more of the ordinary voting power for the election
of directors (or the equivalent) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
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"Agent": as defined in the preamble hereto.
"Aggregate Revolving Loan Commitment": the sum of the Revolving Loan
Commitments set forth on the signature pages hereto, or in the Assignment and
Acceptance pursuant to which a Lender becomes a party hereto, as the same may be
adjusted from time to time pursuant to the provisions hereof.
"Agreement": this Revolving Credit Agreement, as amended, waived,
supplemented or otherwise modified from time to time.
"Applicable Lending Office": for any Lender, its offices for LIBOR
Loans, Base Rate Loans and participations in Letters of Credit, specified below
its signature on the signature pages hereof or in the Assignment and Acceptance
pursuant to which it became a party hereto, any of which offices may, upon 10
days' prior written notice to the Agent and the Borrower, be changed by such
Lender.
"Applicable Revolving Loan Margin": for each LIBOR Loan and for each
Base Rate Loan as set forth below:
<TABLE>
<CAPTION>
Revolving Loan
Leverage Level LIBOR Margin Base Rate Margin
--------------- ------------ ----------------
<S> <C> <C>
1(less than or equal to 0.75) 1.00 0
2(greater than 0.75 less than or equal to 1.00) 1.25 0
3(greater than 1.00 less than or equal to 1.50) 1.50 0
4(greater than 1.50) 1.75 0
</TABLE>
"Asset Disposition": the sale, sale and leaseback, transfer,
conveyance, exchange, long-term lease accorded sales treatment under GAAP or
similar disposition (including by means of a merger, consolidation,
amalgamation, joint venture or other substantive combination) of any of the
Properties, business or assets (other than marketable securities, including
"margin stock" within the meaning of Regulation U, liquid investments and other
financial instruments but, including the assignment of any lease, license or
permit relating to the Properties) of the Borrower or any of its Subsidiaries to
any Person or Persons other than to the Borrower or any of its Subsidiaries;
provided that Asset Dispositions shall not include the sale of Inventory in the
ordinary course of business.
"Assignment and Acceptance": an Assignment and Acceptance substantially
in the form of Exhibit C to this Agreement.
"Available Revolving Loan Commitment": with respect to each Lender on
the date of determination thereof, the amount by which (a) the Revolving Loan
Commitment of such Lender on such date exceeds (b) the principal sum of such
Lender's (i) Revolving Loans outstanding, (ii) Revolving Loan Commitment
Percentage of the aggregate Letter of Credit Amount of all Letters of Credit
outstanding and (iii) Revolving Loan Commitment Percentage of the aggregate
amount of unreimbursed drawings under all Letters of Credit on such date.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Reference
Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. "Reference Rate" shall mean
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the rate of interest per annum publicly announced from time to time by Union
Bank of California, N.A. as its "reference rate" in effect at its office in Los
Angeles, California. "Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Agent from three federal funds brokers of recognized standing selected by it.
If, for any reason, the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Agent to obtain sufficient quotations in accordance with the terms hereof, the
Base Rate shall be determined without regard to clause (b) of the first sentence
of this definition until the circumstances giving rise to such inability no
longer exist. Any change in the Base Rate due to a change in the Reference Rate
or the Federal Funds Effective Rate shall be effective on the effective date of
such change in the Reference Rate or the Federal Funds Effective Rate,
respectively.
"Base Rate Loans": Loans the rate of interest applicable to which is
based upon the Base Rate.
"Borrower": as defined in the preamble hereto.
"Borrowing Base": as at any date, an amount determined by the Agent by
reference to the most recent Borrowing Base Certificate, which is equal to the
sum of the following, without duplication:
(a) 80% of Eligible Accounts Receivable; plus
(b) 40% of Eligible Inventory (provided that such percentage
shall be increased to 50% with respect to any calculation of the
Borrowing Base during the months of January through April); plus
(c) 40% of outstanding and undrawn commercial Letters of
Credit issued hereunder for the account of the Borrower (provided that
such percentage shall be increased to 50% with respect to any
calculation of the Borrowing Base during the months of January through
April).
"Borrowing Base Certificate": a certificate executed by a Responsible
Officer of the Borrower substantially in the form of Exhibit J hereto.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in the State of California are authorized or required by
law to close and which, in the case of a LIBOR Loan, is a Eurodollar Business
Day.
"Capital Expenditures": for any period, collectively, for any Person,
the aggregate of all expenditures which are made during such period (whether
paid in cash or accrued as liabilities), and all contractual commitments for
such expenditures which are entered into during such period (provided that if
any such commitment is included in one fiscal year, the actual payment in a
later fiscal year shall not be included in such later fiscal year), by such
Person, for property, plant
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or equipment and which would be reflected as additions to property, plant or
equipment on a balance sheet of such Person prepared in accordance with GAAP
(including all Capitalized Lease Obligations).
"Capitalized Lease Obligations": obligations for the payment of rent
for any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), any and
all warrants, options or rights to purchase, or any other securities convertible
into, any of the foregoing.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 have been satisfied.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all of the property (tangible or intangible, but
excluding trademarks, trade names and other intellectual property rights)
purported to be subject to the lien or security interest purported to be created
by any security agreement, pledge agreement, assignment, mortgage, deed of
trust, or other security document heretofore or hereafter executed by the
Borrower as security for all or part of the Obligations.
"Collateral Documents": the Security Agreement, the Na Pali Security
Agreement, all notices of security interests in deposit accounts requested by
the Agent pursuant to the Security Agreement, Form UCC-1 Financing Statements,
amendments thereto, and any other document encumbering the Collateral or
evidencing or perfecting a security interest therein for the benefit of the
Lenders executed by the Borrower.
"Commonly Controlled Entity": as to any Person, an entity, whether or
not incorporated, which is under common control with such Person within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Person and which is treated as a single employer under Section 414 of the Code.
"Consideration": with respect to any Acquisition, the aggregate
consideration, in whatever form (including cash payments, the principal amount
of promissory notes and Indebtedness assumed, and the fair market value of other
property delivered) paid, delivered or assumed by the Borrower or any Subsidiary
for such Acquisition and the expenses associated therewith, including all
brokerage commissions, legal fees and similar expenses.
"Continuation Notice": a request for continuation or conversion of a
Loan as set forth in Section 2.6, substantially in the form of Exhibit F.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
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"Covenant Compliance Certificate": a certificate of the Chief Financial
Officer of the Borrower substantially in the form of Exhibit E hereto.
"Default": any of the events specified in Article 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Domestic Subsidiary": each Subsidiary organized under the laws of the
United States or any state thereof.
"Dollars" and "$": dollars in lawful currency of the United States.
"Drawing Lender": as defined in Section 2.3(c).
"EBITDA": for any period, for the fiscal quarter most recently ended
and the immediately preceding three fiscal quarters, Net Income after
eliminating extraordinary gains and losses, plus (i) provisions for income
taxes, (ii) depreciation and amortization and (iii) Interest Expense.
"Eligible Accounts": those Accounts, (net of (x) finance charges and
(y) the "allowance for doubtful accounts" figure set forth on a consolidated
basis as disclosed on the Borrowing Base Certificate), for which invoices have
been issued and which are due and payable to the Borrower, have been validly
assigned to the Agent for the benefit of the Lenders and strictly comply with
all of the Borrower's warranties and representations to the Agent and the
Lenders; provided that Eligible Accounts shall not include the following: (i)
any Account with respect to which the account debtor is not a legal entity
formed under the laws of, and having its principal place of business in, the
United States or Canada, provided that up to an aggregate of $6,000,000 of such
Accounts at any time shall be included as Eligible Accounts; (ii) any Account
with respect to which the Agent does not hold a perfected first priority Lien;
and (iii) any Account with respect to which the account debtor is a Subsidiary
or an Affiliate of the Borrower.
"Eligible Inventory": the net book value of Inventory owned by the
Borrower (and not by any Subsidiary), such value (a) to be determined on a
first-in first-out basis and at the lower of cost or market in conformity with
GAAP and (B) not to exceed $66,000,000 in the aggregate at any time, provided
that such Inventory (i) is held for sale by the Borrower and is normally and
currently saleable in the ordinary course of the Borrower's business, (ii) is of
good and merchantable quality, free from defects, (iii) is located in the United
States or Canada at locations of which the Agent has been notified in writing or
is in transit to the Borrower (including by ship), and (iv) is subject to a
perfected first-priority Lien in favor of the Agent, except in the case of
Inventory located on a ship and in transit to the Borrower, to the extent, if
any, that such Inventory may not be so subject.
"Environmental Control Statutes": as defined in Section 3.12.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate": as to any Person, each trade or business including
such Person, whether or not incorporated, which together with such Person would
be treated as a single employer under Section 4001(a)(14) of ERISA.
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"Eurodollar Business Day": shall mean any day on which banks are open
for dealings in Dollar deposits in the London Inter-bank Market.
"Event of Default": any of the events specified in Article 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Excluded Taxes": all taxes imposed on or by reference to the net
income of the Agent or any Lender or its Applicable Lending Office by any
Governmental Authority and all franchise taxes, taxes on doing business or taxes
measured by capital or net worth imposed on the Agent or on any Lender or its
Applicable Lending Office by any Governmental Authority.
"Existing Line": the revolving line of credit in the amount of
$68,000,000 made available to the Borrower by Union Bank of California, N.A., in
its individual capacity.
"Federal Funds Effective Rate": as defined in the definition of "Base
Rate" contained in this Section 1.1.
"Fixed Charge Coverage Ratio": for the Borrower and its Subsidiaries on
a consolidated basis for the fiscal quarter most recently ended and the
immediately preceding three fiscal quarters, the ratio of (a) EBITDA minus (i)
income taxes paid, minus (ii) Capital Expenditures not financed through
long-term debt or long-term Capitalized Lease Obligations to (b) Fixed Charges
for such period.
"Fixed Charges": for the Borrower and its Subsidiaries on a
consolidated basis, the sum of (i) Interest Expense and (ii) regularly scheduled
principal payments due within twelve months on Funded Debt (excluding optional
and mandatory prepayments due under Sections 2.4 and 2.5), including the
principal component of Capitalized Lease Obligations.
"Foreign Subsidiary": each Subsidiary other than a Domestic Subsidiary.
"Funded Debt": the sum of the outstanding principal balance of all
Indebtedness of the Borrower and its Subsidiaries described in clauses (i),
(ii), (iii) and (iv) of the definition of "Indebtedness" set forth herein.
Notwithstanding the foregoing, Funded Debt shall not include trade payables and
accrued expenses incurred by the Borrower and its Subsidiaries in accordance
with customary practices and in the ordinary course of business of the Borrower
and its Subsidiaries.
"GAAP": generally accepted accounting principles in the United States
in effect from time to time. If, at any time, GAAP changes in a manner which
will materially affect the calculations determining compliance by the Borrower
with any of the covenants in Section 6.1, such covenants shall continue to be
calculated in accordance with GAAP in effect prior to such changes in GAAP.
"Governmental Authority": any nation or government, any federal, state
or other political subdivision thereof and any federal, state or local entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
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"Guarantee Obligation": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counter-indemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds for the purchase or payment of any such primary obligation or to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) 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 (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lesser of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantees": each guarantee made by a Guarantor in favor of the Agent
for the benefit of the Lenders, in form and substance satisfactory to the Agent,
as the same may be amended, modified or restated from time to time in accordance
with the terms hereof.
"Guarantor Collateral": all of the property (tangible or intangible)
purported to be subject to the lien or security interest purported to be created
by any security agreement, pledge agreement, assignment, mortgage, deed of trust
or other security document heretofore or hereafter executed by any Guarantor as
security for all or part of the Obligations or the Guarantees.
"Guarantor Collateral Documents": the Guarantor Security Agreements,
all notices of security interests in deposit accounts requested by the Agent
pursuant to the Guarantor Security Agreements, Form UCC-1 Financing Statements
and amendments thereto and any other document encumbering the Guarantor
Collateral or evidencing or perfecting a security interest therein in favor of
the Agent for the benefit of the Lenders executed by any Guarantor.
"Guarantor Security Agreements": each security agreement made by a
Subsidiary in favor of the Agent for the benefit of the Lenders in form and
substance satisfactory to the Agent, as the same may be amended, modified or
restated from time to time in accordance with the terms hereof.
"Guarantors": each Subsidiary which executes a Guarantee in favor of
the Agent.
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"Hedging Agreements": as defined in the definition of "Hedging
Obligations" in this Section 1.1.
"Hedging Obligations": of any Person, any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, commodity prices,
exchange rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including dollar-denominated or cross-currency
interest rate exchange agreements, forward currency exchange agreements,
interest rate cap or collar protection agreements, forward rate currency or
interest rate options, puts and warrants or any similar derivative transactions
("Hedging Agreements"), and (ii) any and all cancellations, buy-backs,
reversals, terminations or assignments of any of the foregoing.
"Indebtedness": of any Person, (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services, (ii)
all obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (iii) all indebtedness created or arising under any
conditional-sale or other title-retention agreement with respect to property
acquired by such Person, (iv) all Capitalized Lease Obligations of such Person,
(v) all Hedging Obligations of such Person, (vi) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit, airway release,
steamship guaranty or similar facilities, (vii) all Guarantee Obligations of
such Person in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to secure a credit against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clause
(i), (ii), (iii), (iv), (v) or (vi) above and (viii) all liabilities in respect
of unfunded vested benefits under plans covered by Title IV of ERISA.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intercreditor Agreement": an intercreditor agreement, in form and
substance satisfactory to the Agent, between the Agent, on behalf of the
Lenders, on the one hand, and the Term Loan Lender, on the other hand, as it may
be amended, modified or restated from time to time.
"Interest Expense": as of any date, for the fiscal quarter most
recently ended and the immediately preceding three fiscal quarters, the sum of
(i) the amount of all interest on Funded Debt which was paid, payable and/or
accrued for such period and (ii) all commitment, standby letter of credit,
commercial letter of credit or line of credit fees paid, payable and/or accrued
for such period to any lender in exchange for such lender's commitment to lend.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day of
each January, April, July and October to occur while the Loans are outstanding,
(b) as to any LIBOR Loan having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any LIBOR Loan having an Interest
Period longer than three months, each day which is at the end of each three
month-period within such Interest Period after the first day of such Interest
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Period and the last day of such Interest Period and (d) for each of (a), (b) and
(c) above, on the day on which the Loans become due and payable in full or are
paid or prepaid in full.
"Interest Period": with respect to any LIBOR Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such LIBOR Loan and ending one, two,
three or six months thereafter, as selected by the Borrower in its notice of
borrowing or Continuation Notice, as the case may be, given with respect
thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one, two,
three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Agent not less than three Eurodollar Business Days prior to the
last day of the then current Interest Period with respect thereto; provided
that, all of the foregoing provisions relating to Interest Periods are subject
to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business Day unless the result
of such extension would be to carry such Interest Period into another
calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond
the date final payment is due on the Revolving Loans shall end on the
date of such final payment; and
(iii) any Interest Period pertaining to a LIBOR Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month.
"Inventory": that portion of the Borrower's inventory which is finished
goods, raw materials and work in process.
"Lease Expense": for any period, the aggregate minimum rental
obligations payable in respect of such period under leases of real and/or
personal property (net of income from subleases thereof), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet or in the notes thereto.
"Lender" or "Lenders": as defined in the preamble hereto and Section
8.8 hereof.
"Letter of Credit": as defined in Section 2.1.
"Letter of Credit Amount": the stated maximum amount available to be
drawn under a particular Letter of Credit, airway release or steamship guaranty,
as such amount may be reduced or reinstated from time to time in accordance with
the terms of such Letter of Credit.
"Letter of Credit Request": a request by the Borrower for the issuance
of a Letter of Credit, on the Agent's standard form of standby or commercial
letter of credit application and
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agreement, as applicable, the current forms of which are attached hereto as
Exhibit G, and containing terms and conditions satisfactory to the Agent in its
sole discretion.
"LIBOR": with respect to each day during each Interest Period
pertaining to a LIBOR Loan, the rate of interest determined by the Agent to be
the rate per annum at which deposits in dollars would be offered to the Agent by
leading banks in the London Interbank Market at or about 9:00 a.m., Los Angeles
time, two Eurodollar Business Days prior to the beginning of such Interest
Period, for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount comparable to the amount of its LIBOR
Loan to be outstanding during such Interest Period.
"LIBOR Adjusted Rate": with respect to each day during each Interest
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
---------------------------------
1.00 - LIBOR Reserve Requirements
"LIBOR Loans": Loans the rate of interest applicable to which is based
upon LIBOR.
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan,
the aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a member bank of such
Federal Reserve System.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
any Capitalized Lease Obligation having substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction in respect of any
of the foregoing).
"Loan": a Revolving Loan or a Swing Line Loan.
"Loan Documents": this Agreement, the Notes, any Letter of Credit
Requests that are executed by the Borrower, the Letters of Credit, the
Collateral Documents, the Guarantor Collateral Documents, the Guarantees, the
Intercreditor Agreement, any Hedging Agreements and any other agreement executed
by an Obligor in connection herewith or therewith, including UCC-1 Financing
Statements and any fee letters, as such agreements and documents may be amended,
supplemented and otherwise modified from time to time in accordance with the
terms hereof.
"Majority Lenders": Lenders having Revolving Loan Commitments equal to
or more than 66-2/3% of the Aggregate Revolving Loan Commitment, or, if any
Revolving Loan
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Commitment has terminated, with respect to such Revolving Loan Commitment,
Lenders with outstanding Loans and/or participations in Letters of Credit (if
applicable) having an unpaid principal balance equal to or more than 66-2/3%
of the sum of (i) the unpaid principal balance of all Loans outstanding and (ii)
the aggregate Letter of Credit Amount (if applicable), excluding from such
calculation Lenders which have failed or refused to fund a Loan (and as to which
such failure or refusal is continuing) when required to do so.
"Margin Stock": as defined in Regulation U.
"Material Adverse Effect": a material adverse effect on (a) the
business, operations, property, condition or prospects (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower, any Material Domestic Subsidiary or any Material Foreign Subsidiary to
perform its respective obligations under the Loan Documents or (c) the validity
or enforceability of the Loan Documents or the rights or remedies of the Agent
and the Lenders hereunder or thereunder.
"Material Domestic Subsidiary": as of any date, a Domestic Subsidiary
that (a) has a net worth (excluding in the determination thereof any
Indebtedness of such Domestic Subsidiary to the Borrower or another Subsidiary)
of at least 5% of the Borrower's consolidated net worth as of the last day of
the most recently ended fiscal quarter of the Borrower, (b) has annual revenue
(or annualized revenue in the case of any Person that has not been a Subsidiary
for a full year) of at least 5% of the Borrower's consolidated revenue for the
12-month period ended as of the most recently ended fiscal quarter of the
Borrower or (c) has annual net income (or annualized net income in the case of
any Person that has not been a Subsidiary for a full year) of at least 5% of the
Borrower's consolidated net income for the 12-month period ended as of the most
recently ended fiscal quarter of the Borrower.
"Material Foreign Subsidiary": a Foreign Subsidiary having at any time
a net worth equal to 10% or more of the Borrower's consolidated net worth.
"Maximum Leverage Ratio": for the Borrower and its Subsidiaries on a
consolidated basis, the ratio of Funded Debt to EBITDA.
"Multiemployer Plan": a plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Na Pali": Na Pali, S.A.S. (Europe), a French corporation and a
Subsidiary of the Borrower.
"Na Pali Security Agreement": means that certain security agreement
made by the Borrower and Na Pali in favor of Agent for the benefit of the
Lenders, in form and substance satisfactory to the Agent, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
"Net Income": for the Borrower and its Subsidiaries on a consolidated
basis, net income as determined in accordance with GAAP.
"Note": a Revolving Note or a Swing Line Note, as the case may be, and
"Notes" shall mean the Revolving Notes and/or the Swing Line Notes, as the case
may be.
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"Obligations": the unpaid principal of and interest on (including
interest accruing after the maturity of the Swing Line Loans and the Revolving
Loans and interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding and whether or not at a
default rate) the Notes, the obligation to reimburse drawings under Letters of
Credit (including the contingent obligation to reimburse any drawings under
outstanding Letters of Credit), and all other obligations and liabilities of the
Borrower to the Agent and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement, the Notes, the
Letters of Credit, any other Loan Document and any other document made,
delivered or given in connection herewith or therewith, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including all reasonable fees and disbursements of counsel, and the
allocated reasonable cost of internal counsel, to the Agent or the Lenders that
are required to be paid by the Borrower pursuant to the terms of this Agreement)
or otherwise.
"Obligor": the Borrower, each Subsidiary, each Guarantor and any other
Person (other than a Lender) obligated under any Loan Document.
"Organic Documents": relative to any entity, its certificate of
incorporation, articles of incorporation, certificate of formation, certificate
of organization or partnership agreement, and its by-laws, operating agreement
or limited liability company agreement, or the equivalent documents of any
entity.
"Participant": as defined in Section 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor thereto.
"Person": any individual, firm, partnership, joint venture,
corporation, association, limited liability company, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan": as to any Person, any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA maintained for employees of such Person or any
ERISA Affiliate of such Person (and any such plan no longer maintained by such
Person or any of such Person's ERISA Affiliates to which such Person or any of
such Person's ERISA Affiliates has made or was required to make any
contributions within any of the five preceding years).
"Prohibited Transaction": with respect to any Plan, a prohibited
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"Properties": the collective reference to the real and personal
property owned, leased, used, occupied or operated by the Borrower and its
Subsidiaries.
"Purchasing Lenders": as defined in Section 9.6(c).
"Register": as defined in Section 9.6(d).
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"Regulation D": Regulation D of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Regulation U": Regulation U of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Reorganization": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"Requirement of Law": as to any Person, the Organic Documents of such
Person, and any law, treaty, rule or regulation, determination or policy
statement or interpretation of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the chief executive
officer, the president, the managing member or members (as applicable, with
respect to any limited liability company), any executive vice president, any
senior vice president or any vice president or, with respect to financial
matters, the chief financial officer, the vice president of finance, treasurer
or controller.
"Restricted Payments": as defined in Section 6.6.
"Revolving Borrowing Notice": a notice from the Borrower to the Agent
requesting a borrowing of Revolving Loans, substantially in the form of Exhibit
I hereto.
"Revolving Loan": as defined in Section 2.1.
"Revolving Loan Commitment": with respect to each Lender, its
commitment listed as its "Revolving Loan Commitment" on the signature pages
hereto, or in the Assignment and Acceptance pursuant to which a Lender becomes a
party hereto, to make Revolving Loans and participate in Letters of Credit
hereunder through its Applicable Lending Office, as the same shall be adjusted
from time to time pursuant to this Agreement.
"Revolving Loan Commitment Expiration Date": April 27, 2001 or such
earlier date as the Aggregate Revolving Loan Commitment shall expire (whether by
acceleration, reduction to zero or otherwise).
"Revolving Loan Commitment Percentage": with respect to each Lender,
the percentage equivalent of the ratio which such Lender's Revolving Loan
Commitment bears to the Aggregate Revolving Loan Commitment, as such Lender's
Revolving Loan Commitment and the Aggregate Revolving Loan Commitment may be
adjusted from time to time pursuant to the terms hereof.
"Revolving Loan Leverage Level": if the Maximum Leverage Ratio shall be
less than or equal to 0.75:1, the Revolving Loan Leverage Level shall be 1; if
the Maximum Leverage Ratio
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shall be greater than 0.75:1 and less than or equal to 1.00:1, the Revolving
Loan Leverage Level shall be 2; if the Maximum Leverage Ratio shall be greater
than 1.00:1 and less than or equal to 1.50:1, the Revolving Loan Leverage shall
be 3; and if the Maximum Leverage Ratio shall be greater than 1.50:1, the
Revolving Loan Leverage Level shall be 4.
"Revolving Note" and "Revolving Notes": as defined in Section 2.1(c).
"Security Agreement": the Security Agreement, in form and substance
satisfactory to the Agent, made by the Borrower in favor of the Agent, for the
benefit of the Lenders, in respect of the tangible and intangible personal
property of the Borrower described therein, as the same may be amended from time
to time in accordance with the terms hereof.
"Single Employer Plan": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, that:
(i) the present fair salable value of such Person's assets is
in excess of the total amount of the probable liability on such
Person's liabilities;
(ii) such Person is able to pay its debts as they become due;
and
(iii) such Person does not have unreasonably small capital to
carry on such Person's business as theretofore operated and all
businesses in which such Person is about to engage.
"Subsidiary": as to any Person at any time of determination, a
corporation, partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries or Subsidiaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"Swing Line Borrowing Notice": a notice from the Borrower to the Agent
requesting a borrowing of Swing Line Loans, substantially in the form of Exhibit
K hereto.
"Swing Line Commitment": as defined in Section 2.2(a).
"Swing Line Lender": means Union Bank of California, N.A.
"Swing Line Loan Participation Certificate": a certificate executed by
the Swing Line Lender substantially in the form of Exhibit H.
"Swing Line Loans": has the meaning assigned to that term in Section
2.2(a).
"Swing Line Note": has the meaning assigned to that term in Section
2.2(b)
"Taxes": as defined in Section 2.14(a).
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"Termination Event": (i) a Reportable Event, (ii) the institution of
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (iii) the appointment by the PBGC of a trustee to administer any
Single Employer Plan or (iv) the existence of any other event or condition that
would reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment by the PBGC of a trustee to
administer, any Single Employer Plan.
"Term Loan": that certain term loan in the principal amount of
$12,300,000 made by the Term Loan Lender to the Borrower and referred to in the
Intercreditor Agreement.
"Term Loan Lender": Union Bank of California, N.A., in its individual
capacity, as lender of the Term Loan, and any successor or assigns thereof.
"Tranche": the collective reference to LIBOR Loans the Interest Periods
with respect to all of which begin on the same date and end on the same later
date (whether or not such LIBOR Loans shall originally have been made on the
same day).
"Transferee": as defined in Section 9.6(f).
"Type": as to any Revolving Loan, its nature as a Base Rate Loan or a
LIBOR Loan.
1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes, any other Loan
Document or any certificate or other document made or delivered pursuant hereto
or thereto.
(b) As used herein, in the Notes, in any other Loan Document, and in
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms not defined in Section 1.1 and accounting terms partly defined
in Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified. The words "include," "includes" and "including" shall be deemed to be
followed by the phrase "without limitation".
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
ARTICLE 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT; COMMITMENT
AMOUNTS
2.1 Revolving Loans and Letters of Credit; Revolving Loan Commitment
Amounts.
(a) Subject to the terms and conditions hereof, each Lender severally
agrees to (i) make loans on a revolving credit basis through its Applicable
Lending Office to the Borrower from time to time from and including the Closing
Date to but excluding the Revolving Loan Commitment Expiration Date (each a
"Revolving Loan" and, collectively, the "Revolving
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Loans") in accordance with the provisions of this Agreement and subject to
Section 2.3(c), and (ii) participate through its Applicable Lending Office in
letters of credit, airway releases and steamship guarantees issued for the
account of the Borrower pursuant to Section 2.3 from time to time from and
including the Closing Date to but excluding the Revolving Loan Commitment
Expiration Date (each a "Letter of Credit" and, collectively, the "Letters of
Credit"); provided, however, that the sum of (A) the aggregate principal amount
of all Revolving Loans outstanding, (B) the aggregate principal amount of all
Swing Line Loans outstanding, (C) the aggregate Letter of Credit Amount of all
Letters of Credit outstanding and (D) the aggregate amount of unreimbursed
drawings under all Letters of Credit shall not exceed either the Aggregate
Revolving Loan Commitment or the Borrowing Base at any time; and provided,
further, that the sum of (x) the aggregate Letter of Credit Amount of all
Letters of Credit outstanding and (y) the aggregate amount of unreimbursed
drawings under all Letters of Credit shall not exceed $42,000,000 at any time.
Within the limits of each Lender's Revolving Loan Commitment, the Borrower may
borrow, have Letters of Credit issued for the Borrower's account, prepay
Revolving Loans, reborrow Revolving Loans, and have additional Letters of Credit
issued for the Borrower's account after the expiration of previously issued
Letters of Credit. Revolving Loan advances requested by the Borrower shall be in
the minimum amount of $500,000 for Base Rate Loans and $2,000,000 for LIBOR
Loans.
The principal amount of each Lender's (A) Revolving Loan and (B)
participation in a Letter of Credit shall be in an amount equal to the product
of (i) such Lender's Revolving Loan Commitment Percentage (expressed as a
fraction) and (ii) the total amount of the Revolving Loan or Revolving Loans, or
the Letter of Credit or Letters of Credit, requested; provided that, in no event
shall any Lender be obligated to make a Revolving Loan or participate in a
Letter of Credit if after giving effect to such Revolving Loan or such
participation the sum of such Lender's (x) Revolving Loans outstanding, (y)
Revolving Loan Commitment Percentage of the aggregate Letter of Credit Amount of
all Letters of Credit outstanding and (z) Revolving Loan Commitment Percentage
of the aggregate amount of unreimbursed drawings under all Letters of Credit
would exceed its Revolving Loan Commitment or if the amount of such requested
Revolving Loan or such Lender's Revolving Loan Commitment Percentage of such
Letter of Credit is in excess of such Lender's Available Revolving Loan
Commitment.
(b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from
time to time be (i) LIBOR Loans, (ii) Base Rate Loans or (iii) a combination
thereof, as determined by the Borrower and notified to the Agent in accordance
with either Section 2.1(d) or 2.6. Each Lender may make or maintain its
Revolving Loans or participate in Letters of Credit to or for the account of the
Borrower by or through any Applicable Lending Office.
(c) The Revolving Loans made by each Lender to the Borrower shall be
evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A (a "Revolving Note"), with appropriate insertions therein as to payee,
date and principal amount, payable to the order of such Lender and representing
the obligation of the Borrower to pay the aggregate unpaid principal amount of
all Revolving Loans made by such Lender to the Borrower pursuant to Section
2.1(a) or 2.3(c), with interest thereon as prescribed in Sections 2.8 and 2.9.
Each Lender is hereby authorized (but not required) to record the date and
amount of each payment or prepayment of principal of its Revolving Loans made to
the Borrower, each continuation thereof, each conversion of all or a portion
thereof to another Type and, in the case of LIBOR Loans, the length of each
Interest Period with respect thereto, in the books and records of such Lender,
and
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any such recordation shall constitute prima facie evidence of the accuracy
of the information so recorded. The failure of any Lender to make any such
recordation or notation in the books and records of the Lender (or any error in
such recordation or notation) shall not affect the obligations of the Borrower
hereunder or under the Revolving Notes. Each Revolving Note shall (i) be dated
the Closing Date, (ii) provide for the payment of interest in accordance with
Sections 2.8 and 2.9 and (iii) be stated to be payable on the Revolving Loan
Commitment Expiration Date.
(d) The Borrower shall give the Agent irrevocable written notice (which
notice must be received by the Agent prior to 10:00 A.M., Los Angeles time, one
Business Day prior to each proposed borrowing date or, if all or any part of the
Revolving Loans are requested to be made as LIBOR Loans, three Eurodollar
Business Days prior to each proposed borrowing date) requesting that the Lenders
make the Revolving Loans on the proposed borrowing date and specifying (i) the
aggregate amount of Revolving Loans requested to be made, (ii) subject to
Section 2.1(b), whether the Revolving Loans are to be LIBOR Loans, Base Rate
Loans or a combination thereof and (iii) if the Revolving Loans are to be
entirely or partly LIBOR Loans, the respective amounts of each such Type of
Revolving Loan and the respective lengths of the initial Interest Periods
therefor. On receipt of such notice, the Agent shall promptly notify each Lender
thereof. On the proposed borrowing date, not later than 12:00 noon, Los Angeles
time, each Lender shall make available to the Agent at its office specified in
Section 9.2 the amount of such Lender's pro rata share of the aggregate
borrowing amount (as determined in accordance with the second paragraph of
Section 2.1(a) in immediately available funds. The Agent may, in the absence of
notification from any Lender that such Lender has not made its pro rata share
available to the Agent, on such date, credit the account of the Borrower on the
books of such office of the Agent with the aggregate amount of Revolving Loans.
If any Lender does not make available to the Agent the amount required pursuant
to this Section 2.1(d), the Agent shall be entitled to recover such amount on
demand from the Lender, together with interest thereon for each day from the
date of non-payment until such amount is paid in full at the Federal Funds
Effective Rate for the first two Business Days and at the Base Rate thereafter.
(e) Neither the Agent nor any Lender shall be responsible for the
obligation or Available Revolving Loan Commitment of any other Lender hereunder,
nor will the failure of any Lender to comply with the terms of this Agreement
relieve any other Lender or the Borrower of its obligations under this Agreement
and the Revolving Notes.
(f) Subject to Section 2.3(c), the Revolving Loan Commitment of each
Lender and the Aggregate Revolving Loan Commitment shall terminate on the
Revolving Loan Commitment Expiration Date. All outstanding Revolving Loans shall
be due and payable, to the extent not previously paid in accordance with the
terms hereof, on the Revolving Loan Commitment Expiration Date.
2.2 Swing Line Loans; Swing Line Commitment.
(a) Subject to the terms and conditions hereof, the Swing Line Lender
agrees to make loans through its Applicable Lending Office to the Borrower from
time to time from and including the Closing Date to but excluding the date which
is five Business Days prior to the Revolving Loan Commitment Expiration Date
(each a "Swing Line Loan" and collectively, the "Swing Line Loans") in an
aggregate principal amount not to exceed at any time outstanding the lesser of
(i) $5,000,000 and (ii) the unused portion of the Revolving Loan Commitment of
the
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Swing Line Lender (the "Swing Line Commitment"). Within the limits of the Swing
Line Commitment, the Borrower may borrow Swing Line Loans, prepay Swing Line
Loans and reborrow Swing Line Loans. All outstanding Swing Line Loans shall be
due and payable, to the extent not previously paid in accordance with the terms
hereof, on the Revolving Loan Commitment Expiration Date.
(b) The Swing Line Loans shall be evidenced by a promissory note of the
Borrower substantially in the form of Exhibit B (the "Swing Line Note"), with
appropriate insertions therein as to payee, date and principal amount, payable
to the order of the Swing Line Lender and representing the obligation of the
Borrower to pay the aggregate unpaid principal amount of the Swing Line Loans,
with interest thereon as prescribed in Sections 2.8 and 2.9. The Swing Line
Lender is hereby authorized (but not required) to record the borrowing date, the
amount of each Swing Line Loan and the date and amount of each payment or
prepayment of principal thereof, in the books and records of the Swing Line
Lender and any such recordation shall constitute prima facie evidence of the
accuracy of the information so recorded. The failure of the Swing Line Lender to
make any such recordation or notation (or any error in such recordation or
notation) shall not affect the obligations of the Borrower hereunder or under
the Swing Line Note. The Swing Line Note shall (x) be dated the Closing Date,
(y) be stated to mature on the Revolving Loan Commitment Expiration Date and (z)
provide for the payment of interest in accordance with Sections 2.8 and 2.9.
(c) The Borrower shall give the Agent irrevocable notice (which notice
may be telephonic, to be confirmed promptly in writing), which notice must be
received by the Agent prior to 10:00 A.M., Los Angeles time, on the requested
borrowing date (which shall be a Business Day) specifying the amount of the
requested Swing Line Loan, which shall be in a minimum amount of $100,000.
Written notice of borrowing shall be in the form of Exhibit K attached hereto.
On receipt of such notice, the Agent shall promptly notify the Swing Line Lender
thereof. The proceeds of each Swing Line Loan will then be made available to the
Borrower by the Swing Line Lender by crediting the account of the Borrower on
the books of the Agent at its office specified in Section 9.2.
(d) The Swing Line Lender, at any time in its sole and absolute
discretion, may on behalf of the Borrower (which hereby irrevocably directs the
Swing Line Lender to so act on its behalf) request each Lender to make a
Revolving Loan in an amount equal to such Lender's Revolving Loan Commitment
Percentage of the principal amount of the Swing Line Loans (the "Refunded Swing
Line Loans") outstanding on the date such notice is given. Unless any of the
events described in Section 7(g) shall have occurred (in which event the
procedures of Section 2.2(e) shall apply) and regardless of whether the
conditions precedent set forth in this Agreement to the making of a Revolving
Loan are then satisfied, each Lender shall make the proceeds of its Revolving
Loan available to the Swing Line Lender at its office specified in Section 9.2,
not later than 12:00 noon, Los Angeles time. The proceeds of such Revolving
Loans shall be immediately applied to repay the Refunded Swing Line Loans.
(e) If, prior to refunding a Swing Line Loan with a Revolving Loan
pursuant to Section 2.2(d), one of the events described in Section 7(g) shall
have occurred, then, subject to the provisions of Section 2.2(f) below, each
Lender will, on the date such Revolving Loan was to have been made, purchase
from the Swing Line Lender an undivided participation interest in the Swing Line
Loan in an amount equal to its Revolving Loan Commitment Percentage of such
Swing Line Loan. Upon request, each Lender will promptly transfer to the Swing
Line Lender,
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in immediately available funds, the amount of its participation and upon receipt
thereof the Swing Line Lender will deliver to such Lender a Swing Line Loan
Participation Certificate dated the date of receipt of such funds and in such
amount.
(f) Each Lender's obligation to make Revolving Loans in accordance with
Section 2.2(d) and to purchase participating interests in accordance with
Section 2.2(e) above shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Lender, the Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Event of Default; (C) any adverse change in the
condition (financial or otherwise) of the Borrower or any other Person; (D) any
breach of this Agreement by the Borrower or any other Person; (E) any inability
of the Borrower to satisfy the conditions precedent to borrowing set forth in
this Agreement on the date upon which such participating interest is to be
purchased or (F) any other circumstance, happening or event whatsoever, whether
or not similar to any of the foregoing. If any Lender does not make available to
the Swing Line Lender the amount required pursuant to Section 2.2(d) or (e)
above, as the case may be, the Swing Line Lender shall be entitled to recover
such amount on demand from such Lender, together with interest thereon for each
day from the date of non-payment until such amount is paid in full at the
Federal Funds Effective Rate for the first two Business Days and at the Base
Rate thereafter. Notwithstanding the foregoing provisions of this Section
2.2(f), no Lender shall be required to make a Revolving Loan to the Borrower for
the purpose of refunding a Swing Line Loan pursuant to Section 2.2(d) above or
to purchase a participating interest in a Swing Line Loan pursuant to Section
2.2(e) if an Event of Default has occurred and is continuing and, prior to the
making by the Swing Line Lender of such Swing Line Loan, the Swing Line Lender
has received written notice from such Lender specifying that such Event of
Default has occurred and is continuing, describing the nature thereof and
stating that, as a result thereof, such Lender shall cease to make such Refunded
Swing Line Loans and purchase such participating interests, as the case may be;
provided, however, that the obligation of such Lender to make such Refunded
Swing Line Loans and to purchase such participating interests shall be
reinstated upon the earlier to occur of (y) the date upon which such Lender
notifies the Swing Line Lender that its prior notice has been withdrawn and (z)
the date upon which the Event of Default specified in such notice no longer is
continuing.
(g) The Swing Line Commitment of the Swing Line Lender shall terminate
on the Revolving Loan Commitment Expiration Date.
(h) Notwithstanding anything in this Section 2.2 to the contrary, the
Swing Line Lender may, in its sole discretion and in lieu of the Swing Line Loan
procedures set forth in this Section 2.2, make available to the Borrower its
"Credit Sweep" program (or another program having comparable features and
procedures) pursuant to which, at the close of business on each Business Day, if
there then would be a debit balance in the Borrower's principal demand deposit
account (No. 450-8801013) maintained with the Swing Line Lender, the Swing Line
Lender will credit such demand deposit account in an amount such that, giving
effect thereto, such demand deposit account reflects a credit balance of $0;
provided that no such credit shall be in a minimum amount of less than $1. Each
such credit shall constitute a Swing Line Loan for all purposes of this
Agreement, but the minimum borrowing requirements, notice of borrowing
requirements and funding procedures of Section 2.2(c) shall not apply thereto.
The Swing Line Lender may, in its sole discretion, terminate availability of
such program to the Borrower,
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effective (if no Default then exists) upon 30 days' prior written notice to the
Borrower or (if a Default exists) upon notice to the Borrower. Upon such a
termination, the procedures otherwise applicable to Swing Line Loans in this
Section 2.2 shall again apply.
2.3 Issuance of Letters of Credit.
(a) Subject to the limitations on Letters of Credit set forth in
Section 2.1(a) and to the further limitation that the aggregate amount of
unreimbursed drawings under all standby Letters of Credit shall not exceed
$5,000,000 at any time, the Borrower shall be entitled to request the issuance
of standby Letters of Credit and/or commercial Letters of Credit from time to
time from and including the Closing Date to but excluding the date which is two
Business Days prior to the Revolving Loan Commitment Expiration Date, by giving
the Agent a Letter of Credit Request at least three Business Days before the
requested date of issuance of such Letter of Credit (which shall be a Business
Day). Any Letter of Credit Request received by the Agent later than 12:00 p.m.,
Los Angeles time, shall be deemed to have been received on the next Business
Day. Each Letter of Credit Request shall be made in writing or in an electronic
format approved by the Agent, shall be signed by a Responsible Officer or such
other employee designee as is reflected on the certificate delivered to the
Agent pursuant to Section 4.1, shall be irrevocable and shall be effective upon
receipt by the Agent. Provided that a valid Letter of Credit Request has been
received by the Agent and upon fulfillment of the other applicable conditions
set forth in Section 4.2, the Agent will issue the requested Letter of Credit
from its office specified in Section 9.2. No Letter of Credit shall in any event
have an expiration date later than 120 Business Days after the Revolving Loan
Commitment Expiration Date.
Commercial Letters of Credit shall be used only for the purpose of
supporting purchases of inventory by the Borrower and its Domestic Subsidiaries.
Standby Letters of Credit shall be used only to provide support for direct
business activities of the Borrower as agreed to by the Agent.
(b) Immediately upon the issuance of each Letter of Credit, the Agent
shall be deemed to have sold and transferred to each Lender, and each Lender
shall be deemed to have purchased and received from the Agent, in each case
irrevocably and without any further action by any party, an undivided interest
and participation in such Letter of Credit, each drawing thereunder and the
obligations of the Borrower under this Agreement in respect thereof in an amount
equal to the product of (i) such Lender's Revolving Loan Commitment Percentage
and (ii) the maximum amount available to be drawn under such Letter of Credit
(assuming compliance with all conditions to drawing). The Agent shall prepare a
monthly (or, if reasonably requested by any Lender, more frequent) report
advising each Lender of the issuance of each Letter of Credit, the Letter of
Credit Amount of such Letter of Credit, any change in the face amount or
expiration date of such Letter of Credit, the cancellation or other termination
of such Letter of Credit and any drawing under such Letter of Credit.
(c) The payment by the Agent of a draft drawn under any Letter of
Credit shall constitute for all purposes of this Agreement the making by the
Agent in its individual capacity as a Lender hereunder (in such capacity, the
"Drawing Lender") of a Base Rate Loan in the amount of such payment (but without
any requirement of compliance with the conditions set forth in Section 4.2). In
the event that any such Loan by the Drawing Lender resulting from a drawing
under any Letter of Credit is not repaid by the Borrower by 11:00 a.m., Los
Angeles time, on the day of payment of such drawing, the Agent shall promptly
notify each other Lender.
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Each Lender shall, on the day of such notification (or if such notification is
not given by 12:00 noon, Los Angeles time, on such day, then on the next
succeeding Business Day), make a Base Rate Loan, which shall be used to repay
the applicable portion of the Base Rate Loan of the Drawing Lender with respect
to such Letter of Credit drawing, in an amount equal to the amount of such
Lender's participation in such drawing for application to repay the Drawing
Lender (but without any requirement of compliance with the applicable conditions
set forth in Section 4.2) and shall deliver to the Agent for the account of the
Drawing Lender, on the day of such notification (or if such notification is not
given by 12:00 noon, Los Angeles time, on such day, then on the next succeeding
Business Day) and in immediately available funds, the amount of such Base Rate
Loan. In the event that any Lender fails to make available to the Agent for the
account of the Drawing Lender the amount of such Base Rate Loan, the Drawing
Lender shall be entitled to recover such amount on demand from such Lender,
together with interest thereon at the Federal Funds Effective Rate for the first
two Business Days and at the Base Rate thereafter.
With respect to any Letter of Credit issued in accordance with the
terms hereof under which a drawing occurs on or after the Revolving Loan
Commitment Expiration Date, (i) the Drawing Lender shall be obligated to make a
Base Rate Loan in the amount of such drawing and (ii) each Lender shall be
obligated to make a Revolving Loan in an amount equal to such Lender's
participation in such drawing for application to repay the Drawing Lender (each
such Loan, a "Post-Maturity Loan"), in each case in accordance with this Section
2.3(c) and notwithstanding the occurrence of the Revolving Loan Commitment
Expiration Date or any other provision of this Agreement to the contrary. Each
Post-Maturity Loan shall be, for all intents and purposes a Revolving Loan
hereunder, provided that such Post-Maturity Loan shall be due and payable on the
day which is two Business Days after such Loan is made.
(d) The obligations of the Borrower with respect to any Letter of
Credit, any Letter of Credit Request and any other agreement or instrument
relating to any Letter of Credit and any Base Rate Loan made under Section
2.3(c) shall be absolute, unconditional and irrevocable and shall be paid
strictly in accordance with the terms of the aforementioned documents under all
circumstances, including the following:
(i) any lack of validity or enforceability of any Letter of
Credit, this Agreement or any other Loan Document;
(ii) the existence of any claim, setoff, defense or other
right that the Borrower may have at any time against any beneficiary or
transferee of any Letter of Credit (or any Person for whom any such
beneficiary or transferee may be acting), the Agent, any Lender (other
than the defense of payment to a Lender in accordance with the terms of
this Agreement) or any other Person, whether in connection with this
Agreement, any other Loan Document, the transactions contemplated
hereby or thereby or any unrelated transaction;
(iii) any statement or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being untrue or
inaccurate in any respect whatsoever; and
(iv) any exchange, release or non-perfection of any
Collateral, Guarantor Collateral or other collateral, or any release,
amendment or waiver of or consent to
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departure from any Guarantee, other Loan Document or other guaranty,
for any of the Obligations of the Borrower in respect of the Letters of
Credit.
(e) The Borrower shall pay to the Agent with respect to each Letter of
Credit issued hereunder, the following fees:
(i) for each commercial Letter of Credit, for the account of
the Agent, the issuance and amendment fees set forth on Schedule 2.3;
(ii) for each commercial Letter of Credit, for the account of
the Lenders, the negotiation fees set forth on Schedule 2.3;
(iii) for each standby Letter of Credit, for the account of
the Lenders with respect to each Letter of Credit issued hereunder, for
the period from and including the day such Letter of Credit is issued
to but excluding the day such Letter of Credit expires, a letter of
credit fee equal to the product of (x) the Applicable Revolving Loan
Margin for LIBOR Loans per annum and (y) the Letter of Credit Amount of
such Letter of Credit from time to time, such letter of credit fee to
be payable quarterly in arrears on the last day of each January, April,
July and October and on the expiration date of such Letter of Credit;
and
(iv) with respect to each Letter of Credit issued hereunder,
for the account of Agent, from time to time such additional fees and
charges (including cable charges) as are generally associated with
letters of credit, in accordance with the Agent's standard internal
charge guidelines (as such guidelines may change from time to time) and
the related Letter of Credit Request.
(f) The Borrower agrees to the provisions in the Letter of Credit
Request forms; provided, however, that the terms of the Loan Documents shall
take precedence if there is any inconsistency between the terms of the Loan
Documents and the terms of said forms.
(g) The Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of any Letter of Credit with respect to its use of
such Letter of Credit. Neither the Agent nor any Lender nor any of their
respective officers or directors shall be liable or responsible for (i) the use
that may be made of any Letter of Credit or any acts or omissions of any
beneficiary or transferee in connection therewith; or (ii) the validity,
sufficiency or genuineness of documents, or of any endorsement thereof, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged. In furtherance and not in limitation of the foregoing, the
Agent may accept any document that appears on its face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
2.4 Optional Prepayments; Optional Commitment Reductions. The Borrower
may on the last day of any Interest Period with respect thereto, in the case of
LIBOR Loans, or at any time and from time to time, in the case of Base Rate
Loans, prepay the Loans and/or permanently reduce the Aggregate Revolving Loan
Commitment, in whole or in part, without premium or penalty, upon at least three
Business Days' irrevocable written notice, in the case of LIBOR Loans, and upon
at least one Business Day's irrevocable written notice, in the case of Base Rate
Loans, from the Borrower to the Agent, specifying the date and amount of
prepayment and/or
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commitment reduction and whether, if a prepayment, the prepayment is of LIBOR
Loans, Base Rate Loans or a combination thereof, and, if of a combination
thereof, the amount allocable to each. All prepayments of Loans under this
Section 2.4 shall be applied first to outstanding Swing Line Loans, then to
outstanding Revolving Loans. Upon receipt of any such notice from the Borrower,
the Agent shall promptly notify each Lender thereof. If any such notice is
given, the amount specified in such notice shall be due and payable by the
Borrower on the date specified therein, together with accrued interest to such
date on the amount prepaid. Partial prepayments of Loans shall be in an
aggregate principal amount of $500,000 and integral multiples of $300,000 in
excess thereof.
2.5 Mandatory Prepayments.
(a) If at any time the sum of (A) the aggregate principal amount of all
Revolving Loans outstanding, (B) the aggregate principal amount of all Swing
Line Loans outstanding, (C) the aggregate principal amount of all Letters of
Credit outstanding and (D) the aggregate amount of unreimbursed drawings under
all Letters of Credit, exceeds the Aggregate Revolving Loan Commitment and/or
the Borrowing Base, then, in either case, the Borrower shall immediately,
without notice or request by the Agent, prepay the Loans (together with accrued
interest to the date of prepayment on the principal amount prepaid) in an
aggregate amount equal to such excess.
(b) Each prepayment of the Loans pursuant to this Section 2.5 shall be
applied first, to outstanding Swing Line Loans and thereafter, to outstanding
Revolving Loans. Each prepayment shall be accompanied by payment in full of all
accrued interest and accrued commitment fees thereon to and including the date
of such prepayment, together with any additional amounts owing pursuant to
Section 2.15.
2.6 Conversion and Continuation Options.
(a) The Borrower may elect from time to time to convert LIBOR Loans to
Base Rate Loans, by the Borrower giving the Agent at least two Business Days'
prior irrevocable written notice of such election pursuant to a Continuation
Notice, provided that any such conversion of LIBOR Loans may only be made on the
last day of an Interest Period with respect thereto. The Borrower may elect from
time to time to convert Base Rate Loans (other than Swing Line Loans) to LIBOR
Loans by the Borrower giving the Agent at least three Eurodollar Business Days'
prior irrevocable written notice of such election pursuant to a Continuation
Notice. Any such notice of conversion to LIBOR Loans shall specify the length of
the initial Interest Period or Interest Periods therefor. Upon receipt of any
such notice the Agent shall promptly notify each Lender thereof. All or any part
of outstanding LIBOR Loans and Base Rate Loans may be converted as provided
herein, provided that (i) any such conversion may only be made if, after giving
effect thereto, Section 2.7 shall not have been contravened, (ii) no Revolving
Loan may be converted into a LIBOR Loan after the date that is one month prior
to the Revolving Loan Commitment Expiration Date and (iii) the Borrower shall
not have the right to elect to continue at the end of the applicable Interest
Period, or to convert to, a LIBOR Loan if a Default shall have occurred and be
continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving notice
to the Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in Section 1.1,
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of the length of the next Interest Period to be applicable to such LIBOR Loan,
provided that no LIBOR Loan may be continued as such (i) if, after giving effect
thereto, Section 2.7 would be contravened, (ii) after the date that is one month
prior to the Revolving Loan Commitment Expiration Date or (iii) if a Default
shall have occurred and be continuing and provided, further, that if the
Borrower shall fail to give any required notice as described above in this
Section or if such continuation is not permitted pursuant to the preceding
proviso, such Loans shall be automatically converted to Base Rate Loans on the
last day of such then-expiring Interest Period.
2.7 Minimum Amounts of Tranches. All borrowings, conversions and
continuations of LIBOR Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the LIBOR
Loans comprising each Tranche shall be equal to $2,000,000 or a whole multiple
of $100,000 in excess thereof and, in any case, there shall not be more than 8
Tranches.
2.8 Interest Rates and Payment Dates.
(a) Each LIBOR Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the LIBOR
Adjusted Rate plus the Applicable Revolving Loan Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate plus the Applicable Revolving Loan Margin.
(c) Each Swing Line Loan shall be made and maintained as a Base Rate
Loan, and shall not be converted into any other type of loan.
(d) If any Event of Default shall have occurred and be continuing, all
amounts outstanding shall bear interest at a rate per annum which is the rate
described in paragraph (b) of this Section plus 2% from the date of the
occurrence of such Event of Default until such Event of Default is no longer
continuing (after as well as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (d) of this Section shall
be payable on demand.
(f) For purposes of determining (i) the Applicable Revolving Loan
Margin for all Loans, (ii) the Applicable Revolving Loan Margin for the standby
letter of credit fees referred to in 2.3(e)(iii) and (iii) the Maximum Leverage
Ratio for the unused commitment fees referred to in Section 2.16, interest rates
on the Loans and such fees shall be calculated on the basis of the Maximum
Leverage Ratio set forth in the most recent Covenant Compliance Certificate
received by the Agent in accordance with Section 5.1(b). For accrued and unpaid
interest and fees only (no changes being made for interest or fee payments
previously made), changes in interest rates on the Loans or in such letter of
credit fees, attributable to changes in the Applicable Revolving Loan Margin
(with respect to Loans and letter of credit fees ) and changes in the Maximum
Leverage Ratio (with respect to unused commitment fees) caused by changes in the
Maximum Leverage Ratio shall be calculated upon the delivery of a Covenant
Compliance Certificate and such change shall be effective on the Base Rate
Loans, LIBOR Loans or such fees, from the day which is five days after receipt
by the Agent of such Covenant Compliance Certificate. If, for any reason, the
Borrower shall fail to deliver a Covenant Compliance Certificate when due in
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<PAGE> 25
accordance with Section 5.1(b), and such failure shall continue for a period of
ten days, the Revolving Loan Leverage Level shall be deemed to be Revolving Loan
Leverage Level 4 (for purposes of determining the Applicable Revolving Loan
Margin on Loans or Letter of Credit fees) and the applicable rate shall be
deemed to be the highest rate set forth in Section 2.16 (for purposes of
determining unused commitment fees), as applicable, in each case retroactive to
the date on which the Borrower should have delivered such Covenant Compliance
Certificate and shall continue until a Covenant Compliance Certificate
indicating a different Revolving Loan Leverage Level is delivered to the Agent.
2.9 Computation of Interest and Fees.
(a) Interest on Loans, unused commitment fees and all other Obligations
of the Borrower shall be calculated on the basis of a 360-day year for the
actual days elapsed. The Agent shall as soon as practicable notify the Borrower
and the Lenders of each determination of a LIBOR Adjusted Rate. Any change in
the interest rate on a Loan resulting from a change in the Base Rate or the
LIBOR Reserve Requirements shall become effective as of the opening of business
on the day on which such change in the Base Rate is announced or such change in
the LIBOR Reserve Requirements becomes effective, as the case may be. The Agent
shall as soon as practicable notify the Borrower and the Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the Borrower and
the Lenders in the absence of manifest error.
2.10 Inability to Determine Interest Rate. In the event that prior to
the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest error) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Adjusted Rate for such Interest Period, or
(b) the Agent shall have received notice from the Majority Lenders
acting in good faith that the LIBOR Adjusted Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period, the Agent shall give telecopy
or telephonic notice thereof to the Borrower and the Lenders as soon as
practicable thereafter. If such notice is given (x) any LIBOR Loans requested to
be made on the first day of such Interest Period shall accrue interest at the
Base Rate, (y) Loans that were to have been converted on the first day of such
Interest Period to LIBOR Loans shall be continued as Base Rate Loans and (z) any
outstanding LIBOR Loans shall be converted, on the first day of such Interest
Period, to Base Rate Loans. Until such notice has been withdrawn by the Agent,
no further LIBOR Loans shall be made or continued as such, nor shall the
Borrower have the right to convert Base Rate Loans to LIBOR Loans.
2.11 Pro Rata Treatment and Payments. Each borrowing by the Borrower
from the Lenders hereunder, and any reduction of the Aggregate Revolving Loan
Commitment, shall be made pro rata according to the respective Revolving Loan
Commitment Percentages of the
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Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans shall be made pro rata according to the
respective outstanding principal and interest amounts of the Loans then held by
the Lenders. All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 11:00 A.M., Los Angeles time, on the due date thereof to the Agent, for
the account of the applicable Lenders, at the Agent's office specified in
Section 9.2, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the applicable Lenders promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the LIBOR
Loans) becomes due and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day, and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension. If any payment on a LIBOR Loan becomes due and
payable on a day other than a Eurodollar Business Day, the maturity thereof
shall be extended to the next succeeding Eurodollar Business Day (and interest
shall continue to accrue thereon at the applicable rate) unless the result of
such extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding Eurodollar
Business Day.
2.12 Illegality. Notwithstanding any other provision herein, if any
change after the Closing Date in any Requirement of Law or in the interpretation
or application thereof shall make it unlawful for any Lender or Applicable
Lending Office to make or maintain LIBOR Loans as contemplated by this
Agreement, (a) the commitment of such Lender hereunder to make LIBOR Loans,
continue LIBOR Loans as such and convert Base Rate Loans to LIBOR Loans shall
forthwith be suspended during such period of illegality and (b) the Loans of
such Lender or Applicable Lending Office then outstanding as LIBOR Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last
days of the then current Interest Periods with respect to such Loans or within
such earlier period as required by law. If any such conversion of a LIBOR Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 2.15. To the extent that a Lender's
LIBOR Loans have been converted to Base Rate Loans pursuant to this Section
2.12, all payments and prepayments of principal that otherwise would be applied
to such Lender's LIBOR Loans shall be applied instead to its Base Rate Loans.
2.13 Increased Costs.
(a) In the event that any change after the Closing Date in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law but, if not having the force of law, generally applicable to and complied
with by banks and financial institutions of the same general type as such Lender
in the relevant jurisdiction) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirements against assets
held by, letters of credit or guarantees issued by, deposits or other
liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any
office of such
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Lender or Applicable Lending Office which is not otherwise included in
the determination of the LIBOR Adjusted Rate hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office
any other condition;
and the result of any of the foregoing is to increase the cost to the Agent of
issuing or maintaining any Letter of Credit by an amount which the Agent deems
to be material, or to such Lender or Applicable Lending Office, by an amount
which such Lender deems to be material, of making, converting into, continuing
or maintaining LIBOR Loans, or purchasing or maintaining any participation in a
Letter of Credit, or to reduce any amount receivable hereunder in respect
thereof then, in any such case, the Borrower shall immediately pay to the Agent,
for its own account or on behalf of such Lender or Applicable Lending Office, as
applicable, upon the demand of the Agent for itself or at the request of such
Lender, as applicable, any additional amounts necessary to compensate such
Lender or the Agent, as applicable, for such increased cost or reduced amount
receivable. If the Agent, any Lender or any Applicable Lending Office becomes
entitled to claim any additional amounts pursuant to this Section, it shall
promptly notify the Borrower, through the Agent, of the event by reason of which
it has become so entitled. A certificate as to any additional amounts payable
pursuant to this Section submitted by the Agent or such Lender or Applicable
Lending Office, through the Agent, to the Borrower shall be conclusive evidence
of the accuracy of the information so recorded, absent manifest error. This
covenant shall survive the termination of this Agreement, expiration of the
Letters of Credit and the payment of the Notes and all other amounts payable
hereunder.
(b) If, after the Closing Date, the introduction of or any change in
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any change in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, affects the
amount of capital required or expected to be maintained by any Lender or any
corporation controlling any Lender, and such Lender (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
determines that the amount of capital maintained by such Lender or such
corporation which is attributable to or based upon the Loans, the Letters of
Credit, the Commitments or this Agreement must be increased as a consequence of
such introduction or change by an amount deemed by such Lender to be material,
then, upon demand of the Agent at the request of such Lender, the Borrower shall
immediately pay to the Agent on behalf of such Lender, additional amounts
sufficient to compensate such Lender or such corporation for the increased costs
to such Lender or corporation of such increased capital. Any such demand shall
be accompanied by a certificate of such Lender setting forth in reasonable
detail the computation of any such increased costs, which certificate shall be
conclusive, absent manifest error. This covenant shall survive the termination
of this Agreement, expiration of the Letters of Credit and the payment of the
Notes and all other amounts payable hereunder.
2.14 Taxes.
(a) All payments made by the Borrower in respect of the Obligations
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority or any
political subdivision or taxing authority thereof or therein, other
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than Excluded Taxes (all such non-Excluded Taxes being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Agent or any Lender in respect of the Obligations, the amounts so payable to
the Agent or such Lender shall be increased to the extent necessary to yield to
the Agent or such Lender (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes. The Agent or a Lender, as the case may be, shall
deliver to the Borrower a certificate in good faith setting forth the amount of
such Taxes, the calculation of such Taxes and an explanation of the requirement
therefor, all in reasonable detail and such certificate shall be conclusive,
absent manifest error. Whenever any Taxes are payable by the Borrower, as
promptly as possible thereafter, the Borrower shall send to the Agent, for its
own account or for the account of such Lender, as the case may be, a copy of an
original official receipt received by the Borrower showing payment thereof or
such other evidence of payment reasonably satisfactory to the Agent. If the
Borrower fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to the Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Agent and the Lenders for any
incremental taxes, interest or penalties (and related reasonable fees and
expenses of counsel) that may become payable by the Agent or any Lender as a
result of any such failure. The agreements in this Section shall survive the
termination of this Agreement, the expiration of the Letters of Credit and the
payment of the Notes and all other amounts payable hereunder.
(b) Each Lender that is not organized under the laws of the United
States of America or a state thereof agrees that it will deliver to the Borrower
and the Agent (i) two duly completed copies of United States Internal Revenue
Service Form W-9, W-8BEN or W-8ECI (as applicable to it). Each such Lender also
agrees to deliver to the Borrower and the Agent two further copies of the said
Form W-9, W-8BEN or W-8ECI (as applicable to it), or successor applicable forms
or other manner or certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrower and the Agent, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Agent, unless in any such case an
event beyond the control of such Lender (including any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender so advised the Borrower and the Agent. Each such
Lender shall certify, pursuant to such Forms, that it is entitled to receive
payments under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes.
2.15 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from and to pay each Lender within 5 Business Days of
such Lender's demand the amount of any liability, loss or expense arising from
the reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained (including reasonable fees and
expenses of counsel) which such Lender may sustain or incur as a consequence of
(a) default by the Borrower in payment when due of the principal amount of or
interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing
of, conversion into or continuation of LIBOR Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (c) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (d) the making by the Borrower of a prepayment or conversion of
LIBOR
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Loans on a day which is not the last day of an Interest Period with respect
thereto (including any prepayment required as a result of acceleration of the
Loans under Article 7). A Lender's certificate as to such liability, loss or
expense shall be deemed conclusive, absent manifest error. This covenant shall
survive the termination of this Agreement, the expiration of the Letters of
Credit and the payment of the Notes and all other amounts payable hereunder.
2.16 Unused Commitment Fees. The Borrower agrees to pay to the Lenders
an unused commitment fee to be shared pro rata among the Lenders with respect to
the Revolving Loan Commitments for the period from and including the Closing
Date to but excluding the Revolving Loan Commitment Expiration Date, based on
the daily aggregate Available Revolving Loan Commitment from time to time in
effect and computed at the applicable per annum rate set forth below:
Revolving Loan Commitment
Leverage Level Fee Rate
-------------- ----------
1(less than or equal to 0.75) 0.250%
2(greater than 0.75 less than or equal to 1.00) 0.250%
3(greater than 1.00 less than or equal to 1.50) 0.375%
4(greater than 1.50) 0.375%
Such fee shall be payable quarterly in arrears on the last day of each January,
April, July and October and on the Revolving Loan Commitment Expiration Date,
commencing on the first such date to occur after the Closing Date.
2.17 Mitigation of Costs. If any Lender, by changing its Applicable
Lending Office or taking any other reasonable action, so long as making such
change or taking such other action is not disadvantageous to it in any
financial, regulatory or other respect, can mitigate any adverse effect on the
Borrower under Section 2.10, 2.12, 2.13, or 2.14, such Lender shall take such
action.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans and participate in the Letters of Credit, and to induce the Agent to issue
the Letters of Credit, the Borrower hereby represents and warrants to the Agent
and each Lender that:
3.1 Organization and Good Standing. The Borrower and each Subsidiary
(a) is duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization, (b) has all requisite power and authority
(corporate, partnership, limited liability company and otherwise) to own its
properties and to conduct its business as now conducted and as currently
proposed to be conducted and (c) is duly qualified to conduct business as a
foreign organization, and is currently in good standing, in each state and other
jurisdiction in which its failure to be so qualified or in good standing could
reasonably be expected to have a Material Adverse Effect. Each state and other
jurisdiction in which the Borrower or any Subsidiary is organized or is
qualified to conduct business is listed on Schedule 3.1 hereto.
3.2 Power and Authority. The Borrower has all requisite power and
authority under applicable Requirements of Law to borrow hereunder. The Borrower
and each Subsidiary has all
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requisite power and authority under applicable Requirements of Law to execute,
deliver and perform the obligations under the Loan Documents to which it is a
party. All actions, waivers and consents (corporate, regulatory and otherwise)
necessary for the Borrower and each Subsidiary to execute, deliver and perform
the Loan Documents to which it is a party have been taken and/or received.
3.3 Validity and Legal Effect. This Agreement constitutes, and the
other Loan Documents to which the Borrower or any Subsidiary is a party
constitute (or will constitute when executed and delivered), the legal, valid
and binding obligations of the Borrower and each Subsidiary enforceable against
it in accordance with the terms thereof, except as enforceability may be limited
by bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally or by equitable principles relating to
enforceability.
3.4 No Violation of Laws or Agreements. The execution, delivery and
performance of the Loan Documents (a) will not violate or contravene any
material Requirement of Law, (b) will not result in any material breach or
violation of, or constitute a material default under, any agreement or
instrument by which the Borrower, any Subsidiary or any of its respective
property may be bound, and (c) will not result in or require the creation of any
Lien (other than pursuant to the Loan Documents) upon or with respect to any
properties of the Borrower or any Subsidiary, whether such properties are now
owned or hereafter acquired.
3.5 Title to Assets; Existing Encumbrances. The Borrower and each
Subsidiary have good and marketable title to all Properties purported to be
owned thereby, free and clear of any Liens, except (i) the Liens granted to the
Agent for the benefit of the Lenders under the Loan Documents and (ii) the Liens
against the assets of Na Pali set forth on Schedule 3.5A. The property and
assets of the Borrower and its Subsidiaries are in good order and repair
(ordinary wear and tear excepted) and are fully covered by the insurance
required under the Loan Documents. Neither the Borrower nor any Domestic
Subsidiary has used (or permitted the filing of any financing statement under)
any legal or operating name at any time during the twelve consecutive calendar
months immediately preceding the execution of this Agreement, except as
identified on Schedule 3.5B hereto.
3.6 Taxes and Assessments. The Borrower and each Subsidiary has timely
filed all required tax returns and reports (federal, state and local) or has
properly filed for extensions of the time for the filing thereof. The Borrower
does not have knowledge of any deficiency, penalty or additional assessment due
or appropriate in connection with any such taxes. All taxes (federal, state and
local) imposed upon the Borrower or any Subsidiary or any of its properties,
operations or income have been paid and discharged prior to the date when any
interest or penalty would accrue for the nonpayment thereof, except for those
taxes being contested in good faith by appropriate proceedings diligently
prosecuted and with adequate reserves reflected on the financial statements in
accordance with GAAP. There are no taxes imposed on the Borrower or its
Subsidiaries by any political subdivision or taxing authority due or payable
either on or by virtue of the execution and delivery by the Borrower, the Agent,
or the Lenders of this Agreement or any other Loan Document to which the
Borrower or the Subsidiaries are party, or on any payment to be made by the
Borrower pursuant hereto or thereto.
3.7 Litigation and Legal Proceedings. Except as disclosed on Schedule
3.7 hereto, there is no litigation, claim, investigation, administrative
proceeding, labor controversy or similar action that is pending or, to the best
of the Borrower's knowledge, threatened (i) with respect to
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any Loan Document or the transactions contemplated thereby or (ii) against the
Borrower or any Subsidiary that, if adversely resolved, could reasonably be
expected to have a Material Adverse Effect.
3.8 Accuracy of Financial Information.
(a) All information previously furnished to the Agent and the Lenders
that was prepared by or on behalf of the Borrower concerning the financial
condition and operations of the Borrower and its Subsidiaries, including the
audited consolidated financial statements of the Borrower as of October 31, 1999
for the fiscal year then ended, (A) have been prepared in accordance with GAAP
consistently applied, (B) are true, accurate and complete in all material
respects, (C) fairly present the financial condition of the organizations
covered thereby as of the dates and for the periods covered thereby and (D)
disclose all material liabilities (contingent and otherwise) of the Borrower and
its Subsidiaries.
(b) Since October 31, 1999 there has been no event or condition
resulting in a Material Adverse Effect.
3.9 Accuracy of Other Information. All information contained in any
material application, schedule, report, certificate, or any other document given
to the Agent or any Lender by the Borrower or any other Person in connection
with the Loan Documents is in all material respects true, accurate and complete,
and no such Person has omitted to state therein (or failed to include in any
such document) any material fact or any fact necessary to make such information
not misleading. All projections given to the Agent or any Lender by the Borrower
or any other Person on behalf of the Borrower have been prepared with a
reasonable basis and in good faith making use of such information as was
available at the date such projection was made. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by the Borrower to be reasonable at the time
made and as of the Closing Date, it being recognized 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.
3.10 Compliance with Laws Generally. The Borrower and each Subsidiary
is in compliance in all material respects with all Requirements of Law
applicable to it, its operations and its properties.
3.11 ERISA Compliance.
(a) The Borrower and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA, and all rules, regulations and
orders implementing ERISA.
(b) Neither the Borrower, nor any Subsidiary or any ERISA Affiliate
thereof maintains or contributes to (or has maintained or contributed to) any
Multiemployer Plan under which the Borrower, any Subsidiary or any ERISA
Affiliate thereof could have any withdrawal liability.
(c) Neither the Borrower, nor any Subsidiary or any ERISA Affiliate
thereof sponsors or maintains any defined benefit pension plan under which there
is an accumulated funding deficiency within the meaning of Section 412 of the
Code, whether or not waived.
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(d) The liability for accrued benefits under each defined benefit
pension plan that will be sponsored or maintained by the Borrower, any
Subsidiary or any ERISA Affiliate thereof (determined on the basis of the
actuarial assumptions utilized by the PBGC) does not exceed the aggregate fair
market value of the assets under each such defined benefit pension plan.
(e) The aggregate liability of the Borrower, each Subsidiary and each
ERISA Affiliate thereof arising out of or relating to a failure of any employee
benefit plan within the meaning of Section 3(2) of ERISA to comply with
provisions of ERISA or the Code will not have a Material Adverse Effect.
(f) There does not exist any unfunded liability (determined on the
basis of actuarial assumptions utilized by the actuary for the plan in preparing
the most recent annual report) of the Borrower, any Subsidiary or any ERISA
Affiliate thereof under any plan, program or arrangement providing
post-retirement, life or health benefits.
(g) No Reportable Event and no Prohibited Transaction (as defined in
ERISA) has occurred or is occurring with respect to any plan with which the
Borrower or any Subsidiary is associated.
3.12 Environmental Compliance.
(a) The Borrower and each Subsidiary has received all permits and filed
all notifications necessary under and is otherwise in compliance in all material
respects with all national, federal, state and local laws, rules and
regulations, whether domestic or foreign, governing the control, removal,
storage, transportation, spill, release or discharge of hazardous or toxic
wastes, substances and petroleum products, including as provided in the
provisions of and the regulations under (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendment and Reauthorization Act of 1986, (ii) the Solid Waste Disposal Act,
(iii) the Clean Water Act and the Clean Air Act, (iv) the Hazardous Materials
Transportation Act, (v) the Resource Conservation and Recovery Act of 1976 and
(vi) the Federal Water Pollution Control Act Amendments of 1972 (all of the
foregoing enumerated and non-enumerated statutes, including any applicable state
or local statutes, all as amended, collectively, the "Environmental Control
Statutes").
(b) Neither the Borrower nor any Subsidiary has given any written or
oral notice to the Environmental Protection Agency ("EPA") or any state or local
agency with regard to any actual or imminently threatened removal, storage,
transportation, spill, release or discharge of hazardous or toxic wastes,
substances or petroleum products either (i) on properties owned or leased by the
Borrower or such Subsidiary or (ii) otherwise in connection with the conduct of
its business and operations.
(c) Neither the Borrower nor any Subsidiary has received notice that it
is potentially responsible for costs of clean-up of any actual or imminently
threatened spill, release or discharge of hazardous or toxic wastes or
substances or petroleum products pursuant to any Environmental Control Statute.
(d) No judicial proceedings or governmental or administrative action is
pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Control Statute to which the Borrower or any of its Subsidiaries
is named as a party with respect to the Properties or the
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business conducted at the Properties, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental
Control Statute with respect to the Properties or such business.
3.13 Federal Regulations. No Letter of Credit and no part of the
proceeds of any Loans are intended to be or will be used, directly or indirectly
for any purpose which violates the provisions of the Regulations of the Board of
Governors of the Federal Reserve System. If requested by any Lender or the
Agent, the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of Form U-1 referred to in
Regulation U.
3.14 Fees and Commissions. Except as required by Section 2.16 hereof or
the letter referred to in Section 4.1(f), neither the Borrower nor any
Subsidiary owes or will owe any fees or commissions of any kind in connection
with this Agreement or the transactions contemplated hereby, and the Borrower
does not know of any claim (or any basis for any claim) for any fees or
commissions in connection with this Agreement or such transactions.
3.15 Solvency. Immediately prior to and upon the execution of this
Agreement and the funding of the Loans and the issuance of any Letters of Credit
to be funded or issued on the Closing Date, the Borrower, both individually and
together with its Subsidiaries, was, is and will be Solvent.
3.16 Investment Company Act; Other Regulations. Neither the Borrower
nor any Subsidiary is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
3.17 Nature of Business. Neither the Borrower nor any Subsidiary is
engaged in any business other than the ownership and operation of retail apparel
stores, the marketing, advertising and promotion of consumer products, the
design and arrangement of apparel manufacturing and the importing of apparel and
accessories.
3.18 Ranking of Loans. This Agreement and the other Loan Documents to
which the Borrower is a party, when executed, and the Loans, when borrowed are
and will be the direct and general obligations of the Borrower. The Borrower's
obligations hereunder and thereunder rank and will rank at least pari passu in
priority of payment to all other senior Indebtedness of the Borrower.
3.19 Subsidiaries. The Borrower has no Subsidiaries other than those
listed on Schedule 3.20 hereto.
ARTICLE 4. CONDITIONS PRECEDENT
4.1 Conditions to Closing Date. The agreement of each Lender to make
the Loans requested to be made by it on the Closing Date and participate in any
Letters of Credit issued on the Closing Date and the agreement of the Agent to
issue any Letters of Credit requested to be issued on the Closing Date are
subject to the satisfaction, immediately prior to or concurrently with the
making of such Loans and/or the issuance of and participation in such Letters of
Credit on the Closing Date, of the following conditions precedent:
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(a) Revolving Credit Agreement. The Agent shall have received this
Agreement, executed and delivered by an officer of the Borrower as of the
Closing Date.
(b) Other Loan Documents. The Agent shall have received the Notes, the
Security Agreement, the Intercreditor Agreement and all UCC-1 Financing
Statements and other agreements or instruments required to create or perfect a
security interest in the Collateral executed in connection herewith, in each
case executed and delivered by an officer of the Borrower.
(c) Incumbency Certificates. The Agent shall have received an
incumbency certificate of the Borrower dated as of the Closing Date, executed by
its Secretary or Assistant Secretary.
(d) Corporate Proceedings. The Agent shall have received a copy of the
resolutions of the Board of Directors of the Borrower authorizing (i) the
execution, delivery and performance of the Loan Documents to which it is or will
be a party and (ii) the borrowings contemplated hereunder, certified by the
Secretary or an Assistant Secretary of the Borrower as of the Closing Date,
which certificate states that such resolutions thereby certified have not been
amended, modified, revoked or rescinded and are in full force and effect.
(e) Organic Documents. The Agent shall have received copies of the
Organic Documents of the Borrower, certified as of the Closing Date as complete
and correct copies thereof by the Secretary or an Assistant Secretary of the
Borrower.
(f) Fees and Costs. The Agent shall have received payment of all fees,
costs and expenses, including legal fees (if requested by the Agent) and the
fees set forth in the fee side letter executed by the Borrower and the Agent in
connection herewith, accrued and unpaid and otherwise due and payable on or
before the Closing Date by the Borrower in connection with this Agreement.
(g) Legal Opinions. The Agent shall have received the following
executed legal opinions:
(i) the executed legal opinion of Hewitt & McGuire, LLP,
counsel to the Borrower, in form and substance satisfactory to the
Agent; and
(ii) such other legal opinions as the Agent may reasonably
request.
(h) Lien Searches. The Agent shall have received such UCC, U.S.
trademark and other Lien searches as it shall deem necessary.
(i) Good Standing Certificates. With respect to the Borrower, the Agent
shall have received a certificate, dated a recent date, of the Secretary of
State of the state of formation of such Obligor and each other jurisdiction
where such Obligor is required to be qualified to do business under such
jurisdiction's law, certifying as to the existence and good standing of, and the
payment of taxes by, each Obligor in such state.
(j) No Default/Representations. No Default shall have occurred and be
continuing on the Closing Date or would occur after giving effect to the Loans
requested to be made, or
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Letters of Credit requested to be issued, on the Closing Date, and the
representations and warranties contained in this Agreement and each other Loan
Document and certificate or other writing delivered to the Lenders in
satisfaction of the conditions set forth in this Section 4.1 prior to or on the
Closing Date shall be correct in all material respects on and as of the Closing
Date, and the Agent shall have received a certificate of the Borrower to such
effect in the form of Exhibit D, dated as of the Closing Date and executed by a
Responsible Officer of the Borrower.
(k) Financial Information. The Agent shall have received (i) a
Borrowing Base Certificate as of March 31, 2000, (ii) the asset based audit
report, (iii) projections of domestic operations and consolidated operations for
fiscal year 2000 and (iv) a certificate of the Chief Financial Officer of the
Borrower setting forth the Maximum Leverage Ratio as of January 31, 2000 (which
shall be used in determining the initial Applicable Revolving Loan Margin).
(l) Insurance Policies. The Agent shall have received evidence that the
insurance policies provided for in Section 5.5 are in full force and effect,
certified by the insurance broker therefor.
(m) Responsible Officer Certificate. The Agent shall have received a
certificate from the Borrower executed by a Responsible Officer designating the
name of employees authorized to execute Letter of Credit Requests.
(n) Existing Line. The Agent shall have received satisfactory evidence
of the payment of all amounts outstanding under, and termination of, the
Existing Line, provided that any letters of credit outstanding under the
Existing Line may remain outstanding and, upon the Closing Date, shall become
Letters of Credit outstanding under this Agreement.
(o) Additional Proceedings. The Agent shall have received such other
approvals, opinions and documents as any Lender, through the Agent, may
reasonably request and all legal matters incident to the making of such Loans
and issuance of such Letters of Credit shall be satisfactory to the Agent.
4.2 Conditions to Each Loan or Letter of Credit. The agreement of each
Lender to make each Loan, and the agreement of the Agent to issue each Letter of
Credit, requested to be made or issued by it is subject to the satisfaction,
immediately prior to or concurrently with the making of such Loan or the
issuance of such Letter of Credit, of the following conditions precedent:
(a) Representations and Warranties; No Default. The following
statements shall be true and the Borrower's acceptance of the proceeds of such
Loan or its delivery of an executed Letter of Credit Request shall be deemed to
be a representation and warranty of the Borrower on the date of such Loan or as
of the date of issuance of such Letter of Credit, as applicable, that:
(i) The representations and warranties contained in this
Agreement and in each other Loan Document and certificate or other
writing delivered to the Lenders prior to, on or after the Closing Date
pursuant hereto and on or prior to the date for such Loan or the
issuance of such Letter of Credit are correct on and as of such date in
all material respects as though made on and as of such date except to
the extent that such representations and warranties expressly relate to
an earlier date; and
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(ii) No Default has occurred and is continuing or would result
from the making of the Loan to be made on such date or the issuance of
such Letter of Credit as of such date.
(b) Legality. The making of such Loan or the issuance of such Letter of
Credit, as applicable, shall not contravene any law, rule or regulation
applicable to any Lender or the Borrower or any other Obligor.
(c) Revolving Borrowing Notice, Swing Line Borrowing Notice, Letter of
Credit Request. The Agent shall have received a Revolving Borrowing Notice,
Swing Line Borrowing Notice or Letter of Credit Request, as applicable, pursuant
to the provisions of this Agreement from the Borrower.
4.3 Condition Subsequent. The Borrower shall deliver the following to
the Agent as soon as possible, but not later than May 31, 2000: (a) the Na Pali
Security Agreement, executed and delivered by officers of the Borrower and Na
Pali; (b) an incumbency certificate of Na Pali, executed by its Secretary or
Assistant Secretary; (c) a copy of the resolutions of the Board of Directors of
Na Pali authorizing the execution, delivery and performance of the Na Pali
Security Agreement, certified by the Secretary or an Assistant Secretary of Na
Pali, which certificate states that such resolutions thereby certified have not
been amended, modified, revoked or rescinded and are in full force and effect;
(d) copies of the Organic Documents of Na Pali, certified as complete and
correct copies thereof by the Secretary or an Assistant Secretary of Na Pali;
(e) such documents, instruments, filings and approvals as the Agent shall
request to evidence the pledge of, and perfection in, the stock of Na Pali in
favor of the Agent; and (f) the executed legal opinions of Hewitt & McGuire,
LLP, counsel to the Borrower, and Cariddi, Mee, Rue, French counsel to Na Pali,
with respect to the Na Pali Security Agreement, in form and substance
satisfactory to the Agent.
ARTICLE 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitment remains in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
5.1 Financial Statements.
(a) Within 105 days after the end of each fiscal year, the Borrower
shall deliver to the Lenders a complete set of audited annual consolidated
financial statements of the Borrower and unaudited consolidating financial
statements with respect to the Borrower and its Domestic Subsidiaries, including
a balance sheet, an income statement and a cash flow statement (with
accompanying notes and schedules). Such financial statements (i) must be
prepared in accordance with GAAP consistently applied and (ii) must be certified
without qualification by the Accountants. Together with the audited financial
statements, the Agent must also receive (A) a certificate signed by such
Accountants, at the time of the completion of the annual audit, stating that the
financial statements fairly present the consolidated financial condition of the
Borrower as of the date thereof and for the periods covered thereby, (B) a
certificate executed by the Chief Financial Officer of the Borrower certifying
that the financial statements fairly present the financial condition of the
Borrower and its Subsidiaries as of the date thereof and for the period covered
thereby and that as of the date of such certificate such officer has obtained no
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knowledge of any Default except as specified in such certificate and (C) a
Covenant Compliance Certificate.
(b) Within 60 days after the end of each of the Borrower's first three
fiscal quarters, the Borrower shall deliver to the Lenders the consolidated
financial statements of the Borrower and unaudited consolidating financial
statements with respect to the Borrower and its Domestic Subsidiaries for such
quarter, including a balance sheet, an income statement and a cash flow
statement (with accompanying notes and schedules). Such financial statements
shall be prepared in accordance with GAAP consistently applied. Together with
the quarterly financial statements, the Lenders must also receive (i) a
certificate executed by the Chief Financial Officer of the Borrower (A) stating
that the financial statements fairly present the financial condition of the
Borrower and its Subsidiaries as of the date thereof and for the period covered
thereby and (B) certifying that as of the date of such certificate such officer
has obtained no knowledge of any Default except as specified in such certificate
and (ii) a Covenant Compliance Certificate; and
(c) Within 30 days after the end of each month, the Borrower shall
deliver to the Agent, for distribution to the Lenders, a Borrowing Base
Certificate as of the end of such month.
5.2 Certificates; Other Information. The Borrower shall furnish to the
Agent, for distribution to the Lenders:
(a) within 10 days after the same are filed, copies of all financial
statements and reports which the Borrower or any Subsidiary may make to, or file
with, the Securities and Exchange Commission or any successor Governmental
Authority;
(b) promptly but, in any event, within 10 days after receipt thereof,
copies of all financial reports (including management letters), if any,
submitted to the Borrower or any Subsidiary by the Accountants in connection
with any annual or interim audit of the books thereof;
(c) as soon as possible and in any event within five Business Days
after the occurrence of a Default or, in the good faith determination of a
Responsible Officer of the Borrower, a Material Adverse Effect, the written
statement by a Responsible Officer of the Borrower, setting forth the details of
such Default or Material Adverse Effect and the action which the Borrower
proposes to take with respect thereto;
(d) (A) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Termination Event with respect to
any Plan has occurred, a statement of a Responsible Officer of the Borrower
describing such Termination Event and the action, if any, which the Borrower
proposes to take with respect thereto, (B) promptly and in any event within ten
days after receipt thereof by the Borrower or any ERISA Affiliate of the
Borrower from the PBGC, copies of each notice received by the Borrower or such
ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan, (C) promptly and in any event within
30 days after the filing thereof with the Internal Revenue Service, copies of
each Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
with respect to each Single Employer Plan maintained for or covering employees
of the Borrower or any Subsidiary if the present value of the accrued benefits
under the Plan exceeds its assets by an amount in excess of $500,000 and (D)
promptly and in any
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event within ten days after receipt thereof by the Borrower or any ERISA
Affiliate of the Borrower from a sponsor of a Multiemployer Plan or from the
PBGC, a copy of each notice received by the Borrower or such ERISA Affiliate
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA;
(e) promptly after the commencement thereof, but in any event not later
than 10 days after service of process with respect thereto on, or the obtaining
of knowledge by, the Borrower or any Subsidiary, notice of (i) each material
action, suit or proceeding before any Governmental Authority and (ii) any claim
under any Environmental Control Statute;
(f) promptly upon any Subsidiary's becoming a Material Domestic
Subsidiary or a Material Foreign Subsidiary, or upon the Borrower's direct or
indirect creation or acquisition of a Material Domestic Subsidiary or a Material
Foreign Subsidiary, notice of the same; and
(g) promptly, such additional financial information as any Lender,
through the Agent, may from time to time reasonably request.
5.3 Payment of Obligations. The Borrower shall, and shall cause each of
its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its obligations of
whatever nature (including all taxes, assessments, governmental charges and
levies), except where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP with respect thereto have been provided on the books of the Borrower
or such Subsidiaries, as the case may be.
5.4 Conduct of Business; Maintenance of Existence and Licenses;
Contractual Obligations. The Borrower shall, and shall cause each of its
Subsidiaries to, (i) continue to engage in business of the same general type as
conducted by the Borrower and such Subsidiaries as of the Closing Date, (ii)
preserve, renew and keep in full force and effect its corporate or other legal
existence, unless the Board of Directors of any Subsidiary other than a Material
Domestic Subsidiary or a Material Foreign Subsidiary determines that the
preservation of its corporate or other legal existence is no longer desirable,
and the loss thereof could not reasonably be expected to have a Material Adverse
Effect, (iii) maintain all rights, registrations, licenses, privileges and
franchises necessary or desirable in the normal conduct of its business, except
to the extent that failure to so maintain would not have a Material Adverse
Effect, and (iv) comply with all Contractual Obligations except to the extent
that failure to comply therewith would not have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. The Borrower shall, and shall
cause each of its Subsidiaries to, keep all property useful or necessary in its
business in good working order and condition (ordinary wear and tear excepted);
maintain with financially sound and reputable insurance companies or
associations insurance on such of its property in at least such amounts and
against such risks as are usually insured against in the same general area by
companies engaged in the same or a similar business; and furnish to the Agent
evidence of the continued effectiveness of such insurance at all times (but with
respect to Foreign Subsidiaries, only upon request by the Agent). All such
policies of insurance on the property of the Borrower and the Domestic
Subsidiaries shall contain an endorsement, in form and substance satisfactory to
the Agent, (i) showing the Agent, on behalf of the Lenders, as additional
insured or loss payee, as
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appropriate, and (ii) providing that the insurance companies will give the Agent
at least 20 days' prior written notice before any such policy or policies of
insurance shall be materially altered or canceled. All policies of insurance
required to be maintained under this Agreement shall be in customary form and
with insurers reasonably acceptable to the Agent and all such policies shall be
in such amounts as shall be customary for similar companies in the same or
similar business in the same geographical area. The Borrower shall deliver to
the Agent insurance certificates certified by the Borrower's insurance brokers,
as to the existence and effectiveness of each policy of insurance and evidence
of payment of all premiums then due and payable therefor. In addition, the
Borrower shall notify the Agent promptly of any occurrence causing a material
loss of any insured Property and the estimated (or actual, if available) amount
of such loss. In addition, the Borrower shall cause the insurance policies
maintained by it and the Domestic Subsidiaries to be in conformity with the
following:
(i) Each policy for liability insurance shall provide for all
losses to be paid on behalf of the Agent and the Borrower or Domestic
Subsidiary (as the case may be), as their respective interests may
appear, and each policy for property damage insurance shall, to the
extent applicable to equipment and inventory, provide for all losses
(except for losses of less than $1,000,000 per occurrence, which may be
paid directly to the Borrower or such Domestic Subsidiary, as
applicable) to be paid directly to the Agent.
(ii) Reimbursement under any liability insurance maintained by
the Borrower or its Subsidiaries pursuant to this Section 5.5 may be
paid directly to the Person who shall have incurred liability covered
by such insurance. In the case of any loss involving damage to
equipment or inventory as to which clause (iii) of this Section 5.5 is
not applicable, the Borrower will make or cause to be made the
necessary repairs to or replacements of such equipment or inventory,
and any proceeds of insurance maintained by the Borrower or its
Domestic Subsidiaries pursuant to this Section 5.5 shall be paid by the
insurer or the Agent, as applicable, to the Borrower or the applicable
Domestic Subsidiary, upon presentation of invoices and other evidence
of obligations, as reimbursement for the costs of such repairs or
replacements. Any such payment by the Agent shall not be unreasonably
withheld or delayed.
(iii) Upon the occurrence and during the continuance of a
Default, all insurance proceeds in respect of any equipment or
inventory shall be paid to the Agent and applied in repayment of the
Loans, as set forth in Section 2.5.
Notwithstanding any provision in this Section 5.5 to the contrary, the Borrower
shall have until June 30, 2000 to deliver to the Agent evidence, in form and
substance reasonably satisfactory thereto, that the Borrower has complied with
the requirements of this Section 5.5, provided that the Borrower shall deliver
to the Agent by the Closing Date, pursuant to Section 4.1(l), evidence of
insurance complying with the first sentence of this Section 5.5.
5.6 Inspection of Property; Books and Records; Discussions. The
Borrower shall, and shall cause each of its Subsidiaries to, keep proper books
of records and account in which full, true and correct entries in conformity
with GAAP and all material Requirements of Law shall be made of all material
dealings and transactions in relation to its business and activities; and upon
reasonable notice and at such reasonable times during usual business hours,
permit representatives of any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any
reasonable time and as often as may
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reasonably be desired and to discuss the business, operations, properties and
financial and other condition of the Borrower and its Subsidiaries with officers
and employees of the Borrower and its Subsidiaries and with its Accountants.
5.7 Environmental Laws. The Borrower shall, and shall cause each of its
Subsidiaries to:
(a) Comply in all material respects with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Control
Statutes and obtain and comply in all material respects with any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Control Statutes;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Control Statutes and promptly comply in all material respects with
all lawful orders and directives of all Governmental Authorities regarding
Environmental Control Statutes except to the extent that the same are being
contested in good faith by appropriate proceedings; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under any Environmental Control Statutes
applicable to the operations of the Borrower or any of its Subsidiaries, or the
Borrower's or any of its Subsidiaries' interest in Properties, or any orders,
requirements or demands of Governmental Authorities related thereto, including
attorneys' and consultants' fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct of the party
seeking indemnification therefor. This indemnity shall continue in full force
and effect regardless of the termination of this Agreement, the expiration of
the Letter of Credit and the payment of the Notes and all other amounts payable
hereunder.
5.8 Use of Proceeds. The Borrower will use the proceeds of the Loans
solely to provide funds for working capital, capital expenditures, acquisitions
permitted by Section 6.7(d), for the repayment of amounts outstanding under the
Existing Line and for general corporate purposes of the Borrower and its
Domestic Subsidiaries. Notwithstanding anything herein to the contrary, no Loan
or Letter of Credit will be used for the purchasing or carrying of any Margin
Stock.
5.9 Compliance With Laws, Etc. The Borrower shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
applicable Requirements of Law.
5.10 Guarantees, Etc.
(a) The Borrower will cause each of its Material Domestic Subsidiaries
to execute and deliver to the Agent, promptly upon request thereby, (i) a
Guarantee guaranteeing the Obligations, (ii) a Guarantor Security Agreement
granting to the Agent, for the benefit of the Lenders, a security interest in
the tangible and intangible personal property (excluding trademarks, trade names
and other intellectual-property rights) of such Domestic Subsidiary,
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together with appropriate Lien searches requested by the Agent indicating the
Lenders' first priority Lien on such personal property and (iii) UCC-1 Financing
Statements, duly executed by such Subsidiary, in form and substance satisfactory
to the Agent and, in connection with such deliveries, cause to be delivered to
the Agent (A) a favorable written opinion of counsel satisfactory to the Agent
as to such matters relating thereto as any Lender through the Agent may
reasonably request, in form and substance satisfactory to the Agent, (B) such
other agreements, instruments, approvals or other documents as any Lender
through the Agent may reasonably request, and (C) copies of the organizational
documents, resolutions and incumbency certificates of such Domestic Subsidiary.
(b) The Borrower will, and will cause each Material Foreign Subsidiary
and each Subsidiary holding any equity interest in a Material Foreign Subsidiary
to, deliver to the Agent, promptly upon request thereby, (i) a pledge of 65% of
the equity interests in such Foreign Subsidiary (or such greater amount of such
equity interests as shall not cause the Borrower to incur material adverse tax
consequences under United States tax law), (ii) such agreements, certificates,
filings, notices, consents and other actions as the Agent may request to
evidence and perfect such pledge and (iii) an executed legal opinion of local
counsel to the Borrower, such Foreign Subsidiary and such Subsidiary in form and
substance, and from a firm of attorneys, reasonably acceptable to the Agent;
provided that no such deliveries shall be required with respect to any Material
Foreign Subsidiary which is wholly-owned by a Foreign Subsidiary with respect to
which the Borrower has complied with this Section 5.10(b).
ARTICLE 6. NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitment remains in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
6.1 Financial Condition Covenants. The Borrower shall not:
(a) Maximum Leverage Ratio Permit the Maximum Leverage Ratio of the
Borrower and its Subsidiaries on a consolidated basis, as of the end of any
fiscal quarter of the Borrower, to exceed 1.75:1.
(b) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio
of the Borrower and its Subsidiaries on a consolidated basis, as of the end of
any fiscal quarter of the Borrower, to be less than 1.25:1.
(c) Minimum Profitability. Permit, with respect to the Borrower and its
Subsidiaries on a consolidated basis, a net loss to exist for any two
consecutive fiscal quarters of the Borrower.
(d) Commitments and Indebtedness of Na Pali. Permit Na Pali and its
Subsidiaries to have outstanding at any time credit commitments thereto
(including commitments in the form of borrowing commitments, commitments to
issue letters of credit and bank overdraft line commitments), and Indebtedness
resulting therefrom or otherwise, in an aggregate principal amount in excess of
$95,000,000.
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6.2 Limitation on Indebtedness. The Borrower shall not create, incur,
assume or suffer to exist any Indebtedness, and shall not permit any of its
Domestic Subsidiaries to create, incur, assume or suffer to exist any
Indebtedness, except for:
(a) Indebtedness created hereunder and under the other Loan Documents;
(b) Indebtedness of the Borrower outstanding on the Closing Date and
listed on Schedule 6.2;
(c) Indebtedness (i) evidenced by performance bonds or letters of
credit issued in the ordinary course of business or reimbursement obligations in
respect thereof, (ii) evidenced by a letter of credit facility related to
insurance associated with claims for work-related injuries or (iii) for bank
overdrafts incurred in the ordinary course of business that are promptly repaid;
(d) trade credit incurred to acquire goods, supplies, services and
incurred in the ordinary and normal course of business;
(e) Lease Expenses;
(f) Indebtedness of the Borrower with respect to the Term Loan; and
(g) in addition to the foregoing, Indebtedness of the Borrower not
exceeding $5,000,000 in aggregate principal amount at any time outstanding.
6.3 Limitation on Liens. The Borrower shall not, and shall not permit
any of its Domestic Subsidiaries to, create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens existing on any Property at the time of its acquisition and
not created in anticipation of such acquisition;
(c) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Domestic
Subsidiaries, as the case may be, in conformity with GAAP;
(d) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 45 days or which are being contested in good faith by appropriate
proceedings;
(e) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
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(f) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, would not cause a Material Adverse Effect;
(h) Liens in favor of the Term Loan Lender securing the Term Loan,
which Liens are subject to the terms of the Intercreditor Agreement; and
(i) Liens securing Indebtedness incurred after the date hereof to
purchase, or to finance the purchase of, fixed assets, provided that (i) any
such Lien is limited to the fixed asset or assets acquired or financed, and any
subsequent improvements thereto, and (ii) such Indebtedness is otherwise
permitted under Section 6.2(g).
6.4 Limitation on Fundamental Changes. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), except as permitted by Section 5.4, or
create or acquire any Subsidiary, or convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property, business or
assets, except that the Borrower may consummate Acquisitions permitted by
Section 6.7(d).
6.5 Limitation on Sale of Assets. The Borrower shall not, and shall not
permit any of its Subsidiaries to, make any Asset Disposition unless (i) such
Asset Disposition is for fair market value, (ii) the consideration for such
Asset Disposition is all cash, (iii) no Default has occurred and is continuing
or would result from such Asset Disposition and (iv) the consideration for such
Asset Disposition, when aggregated with the consideration for all previous Asset
Dispositions during the same calendar year, does not exceed $10,000,000.
6.6 Limitation on Dividends. The Borrower shall not, and shall not
permit any of its Subsidiaries to, (a) if a corporation, declare or pay any
dividend (other than dividends payable solely in common stock of the Borrower or
its Subsidiaries) on, or make any payment on account of, or set apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or its Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, and (b) if a partnership or
a limited liability company, make any distribution with respect to the ownership
interests therein, or, in either case, any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasance, retirements, acquisitions and
distributions being herein called "Restricted Payments"); provided, however,
that (i) the Borrower and its Subsidiaries shall be permitted to make Restricted
Payments so long as no Default has occurred and is continuing (with the
exception that redemptions shall not exceed the sum of $20,000,000 from the
Closing Date to but excluding the Revolving Loan Commitment Expiration Date) and
(ii) the Subsidiaries shall in any case be permitted to pay cash dividends to
the Borrower.
6.7 Limitation on Investments, Loans and Advances. The Borrower shall
not, and shall not permit any of its Subsidiaries to, make any advance, loan,
extension of credit or capital
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contribution to, or purchase any stock, bonds, notes, debentures or other
securities of or any assets constituting a business unit of, or make any other
investment in (any of the foregoing, an "investment"), any Person, or otherwise
make any Acquisition, except for:
(a) the Borrower's ownership interest in its Subsidiaries;
(b) investments in marketable securities, liquid investments and other
financial instruments that are acquired for investment purposes and may be
readily sold or otherwise liquidated, that have a value which may be readily
established and which are investment grade;
(c) extensions of trade credit in the ordinary course of business;
(d) Acquisitions of Persons or businesses in the same line of business
as that described in Section 3.17; provided that (i) no Default has occurred and
is continuing or would result from the consummation of such Acquisition (and the
Borrower shall have delivered to the Agent a Covenant Compliance Certificate
showing pro forma calculations assuming such Acquisition had been consummated);
(ii) the aggregate Consideration therefor shall not exceed $10,000,000; and
(iii) the Agent shall have received, reviewed and approved all documents
requested by the Agent to insure that the Lenders have a first priority security
interest in, and assignment of, all personal property assets and interests
acquired (excluding intellectual property), including consents of third parties
if reasonably requested;
(e) investments existing on the Closing Date and listed on Schedule
6.7; and
(f) loans and advances to officers and employees of the Borrower or any
Subsidiary, provided that such loans and advances do not exceed $1,000,000 in
aggregate principal amount at any time outstanding.
6.8 Transactions with Affiliates. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction, including any
purchase, sale, lease or exchange of property or the rendering of any service,
with any Affiliate or with any Subsidiary that has not executed a Guarantee and
Guarantor Collateral Documents, unless such transaction is in the ordinary
course of the Borrower's or such Subsidiary's business and is upon terms no less
favorable to the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person not an Affiliate
or a Subsidiary.
6.9 Fiscal Year. The Borrower shall not permit its fiscal year or the
fiscal year of any of its Subsidiaries to end on a day other than October 31.
6.10 Sale-Leaseback Transactions. The Borrower shall not, and shall not
permit any of its Subsidiaries to, sell, assign or otherwise transfer any of its
Properties, rights or assets (whether now owned or hereafter acquired) to any
Person and thereafter directly or indirectly lease back the same or similar
property for consideration exceeding $5,000,000 in the aggregate in any calendar
year.
6.11 Unfunded Liabilities. The Borrower shall not permit unfunded
liabilities for any and all Plans maintained for or covering employees of the
Borrower or any Subsidiary to exceed $500,000 in the aggregate at any time.
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6.12 Hedging Obligations. The Borrower shall not, and shall not permit
any of its Subsidiaries to, enter into any Hedging Arrangement, except that the
Borrower or any Subsidiary may enter into any Hedging Arrangement that (a) is of
a non-speculative nature, (b) is for the purpose of hedging the Borrower's or
such Subsidiary's reasonably estimated interest rate, foreign currency or
commodity exposure and (c) in the case of the Borrower or any Domestic
Subsidiary, is with a Lender.
ARTICLE 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal on any Note when due,
or the Borrower shall fail to pay any interest on any Note, any fee referred to
in this Agreement or the letter referred to in Section 4.1(f) or any other
amount payable hereunder when due; or
(b) Any representation or warranty made or deemed made by any Obligor
herein or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any other Loan Document shall prove to have
been incorrect in any material respect when made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 4.3, 5.2(c), 5.6, 5.8 or 5.10 or in any provision
of Article 6; or
(d) Any Obligor shall default in the observance or performance of any
other material agreement contained in this Agreement or the other Loan Documents
(other than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of 30 days after the earlier of
(i) notice thereof from the Agent to the Borrower and (ii) actual knowledge
thereof by a Responsible Officer of such Obligor; or
(e) Any material provision of any Loan Document shall at any time for
any reason be declared null and void, or the validity or enforceability of any
Loan Document shall at any time be contested by any Obligor, or a proceeding
shall be commenced by any Obligor, or by any Governmental Authority or other
Person having jurisdiction over any Obligor, seeking to establish the invalidity
or unenforceability thereof, or any Obligor shall deny that it has any liability
or obligation purported to be created under any Loan Document; or
(f) Any Obligor shall (i) default in any payment of principal or
interest, regardless of the amount, due in respect of any (A) Indebtedness
(other than the Notes), issued under the same indenture or other agreement, if
the original principal amount of Indebtedness covered by such indenture or
agreement is $750,000 or greater or (B) Guarantee Obligation with respect to an
amount of $750,000 or greater, in either case beyond the period of grace, if
any, provided in the instrument or agreement under which such Indebtedness or
Guarantee Obligation was created, whether or not such default has been waived by
the holders of such Indebtedness or Guarantee Obligation; or (ii) default in the
observance or performance of any other material agreement or condition relating
to any such Indebtedness or Guarantee Obligation or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee
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Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if required,
such Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable or such Indebtedness to be required to be defeased
or purchased; or any "Event of Default" (as defined in the Revolving Credit
Agreement evidencing the Term Loan) shall occur; provided that any default by an
Obligor under a Guarantee Obligation with respect to a real property lease shall
not constitute a Default under this Section 7(f) if such Obligor is contesting
the validity of such default in good faith by appropriate proceedings, such
Obligor is maintaining reserves in conformity with GAAP with respect thereto and
such default could not reasonably be expected to have a Material Adverse Effect;
or
(g) (i) Any Obligor shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
assets, or any Obligor shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any Obligor any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a
period of 60 days; or (iii) there shall be commenced against any Obligor any
case, proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or (iv) any Obligor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any
Obligor shall generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due or there shall be a general
assignment for the benefit of creditors; or
(h) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to any
Plan, (iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee would reasonably be
expected to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA (other than a standard termination) or (v) the Borrower or any Commonly
Controlled Entity would reasonably be expected to incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan; and in each case regarding clauses (i) through (v) above,
such event or condition, together with all other such events or conditions, if
any, would reasonably be expected to subject any Obligor to any tax, penalty or
other liabilities in the aggregate to exceed $500,000; or
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(i) One or more judgments or decrees shall be entered against any
Obligor involving in the aggregate a liability (not paid or fully covered by
insurance) of $250,000 or more, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 60 days from
the entry thereof or in any event five days before the date of any sale pursuant
to such judgment or decree; or any non-monetary judgment or order shall be
entered against any Obligor that is reasonably likely to have a Material Adverse
Effect and either (i) enforcement proceedings shall have been commenced by any
Person upon such judgment which has not been stayed pending appeal or (ii) there
shall be any period of 10 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(j) Any material provision of any Loan Document, after delivery thereof
pursuant to the provisions hereof, shall, for any reason, cease to be valid or
enforceable in accordance with its terms, or any security interest created under
any Loan Document shall for any reason, cease to be a valid and perfected first
priority Lien (except as permitted by Section 6.3) in any material portion of
the Collateral, the Guarantor Collateral or the property purported to be covered
thereby; or
(k) Any event or condition shall occur which the Majority Lenders
reasonably believe could have a Material Adverse Effect;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above, automatically the Commitments to the Borrower and the
commitment to issue Letters of Credit shall immediately terminate and the Loans
made to the Borrower hereunder (with accrued interest thereon) and all other
Obligations shall immediately become due and payable and to the extent any
Letters of Credit are then outstanding, the Borrower shall make a cash
collateral deposit, to be held by the Agent as collateral under the Security
Agreement and (B) if such event is any other Event of Default, with the consent
of the Majority Lenders, the Agent may, or upon the request of the Majority
Lenders, the Agent shall, take any or all of the following actions: (i) by
notice to the Borrower declare the Commitments to the Borrower and the
commitment to issue Letters of Credit to be terminated forthwith, whereupon such
Commitments and the commitment to issue Letters of Credit shall immediately
terminate; and (ii) by notice to the Borrower, declare the Loans (with accrued
interest thereon) and all other Obligations under this Agreement and the Notes
to be due and payable forthwith, whereupon (x) the same shall immediately become
due and payable and (y) to the extent any Letters of Credit are then
outstanding, the Borrower shall make a cash collateral deposit, to be held by
the Agent as collateral under the Security Agreement, in an amount equal to the
aggregate Letter of Credit Amount of the Letters of Credit outstanding. In all
cases, with the consent of the Majority Lenders, the Agent may enforce any or
all of the Liens and security interests and other rights and remedies created
pursuant to any Loan Document or available at law or in equity. Except as
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived by the Borrower.
ARTICLE 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
Union Bank of California, N.A. as Agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes Union Bank
of California, N.A., as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement
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and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agent shall not have any duties or responsibilities, except
those expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower, any Subsidiary or any other
Obligor or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Borrower, any Subsidiary or any
other Obligor to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower, any Subsidiary or any other
Obligor.
8.4 Reliance by the Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including
counsel to the Borrower), the Accountants and independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Lenders or all Lenders, as it
deems appropriate, or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense (except to the extent incurred
as a result of the Agent's gross negligence or willful misconduct) which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Majority Lenders or all Lenders, as may be
required, and such request and any
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action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
8.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default hereunder unless the Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default and stating that such notice is a "notice of default".
In the event that the Agent receives such a notice, the Agent shall give notice
thereof to the Lenders. The Agent shall take such action with respect to such
Default as shall be reasonably directed by the Majority Lenders or all Lenders
as appropriate; provided that unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders or as the Agent shall
believe necessary to protect the Lenders' interests in the Collateral or the
Guarantor Collateral.
8.6 Non-Reliance on the Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereafter taken, including any
review of the affairs of the Borrower, any Subsidiary or any other Obligor,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower, each Subsidiary and the other
Obligors and made its own decision to make its Loans, and participate in Letters
of Credit, hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition and
creditworthiness of the Borrower, its Subsidiaries and the other Obligors.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower, any Subsidiary or
any other Obligor which may come into the possession of the Agent or any of its
respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 Indemnification. The Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower, its Subsidiaries
or the other Obligors and without limiting the obligation of such Persons to do
so), ratably according to the respective amounts of their Commitments, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs (including the allocated cost of internal
counsel), expenses or disbursements of any kind whatsoever which may at any time
(including at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Agent, in its capacity as Agent, but not as
a Lender hereunder, in any way relating to or arising out of this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action
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taken or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent resulting from the Agent's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Notes and all other amounts payable hereunder and the
expiration of the Letters of Credit.
8.8 The Agent in Its Individual Capacity. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower, any Subsidiary and the other Obligors (including the
extension of the Term Loan to the Borrower) as though the Agent were not the
Agent hereunder and under the other Loan Documents. With respect to the Agent,
the Loans made or renewed and the Letters of Credit issued or participated in by
the Agent, and any Note issued to the Agent shall have the same rights and
powers under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice
to the Lenders. If the Agent shall resign as Agent under this Agreement and the
other Loan Documents, then the Majority Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Borrower (which consent shall not be unreasonably withheld),
whereupon such successor agent shall succeed to the rights, powers and duties of
the Agent and the term "Agent" shall mean such successor agent, effective upon
its appointment, and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or any holders of the
Notes. After any retiring Agent's resignation as Agent, the provisions of this
Section shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement and the other Loan
Documents. In addition, after the replacement of an Agent hereunder, the
retiring Agent shall remain a party hereto and shall continue to have all the
rights and obligations of an Agent under this Agreement with respect to Letters
of Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.
8.10 Syndication Agent. The Syndication Agent, in its capacity as such,
shall have no rights, powers, duties or obligations under this Agreement or any
of the other Loan Documents.
ARTICLE 9. MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any Note, any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section. With the
prior written consent of the Majority Lenders and the Borrower (and, in the case
of any Loan Document other than this Agreement, the relevant Obligor), the
Borrower may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purposes of adding any provisions to this Agreement or the Notes or the other
Loan Documents or changing in any manner the rights of the Lenders, the Borrower
or any other Obligor hereunder or thereunder or waiving, on such terms and
conditions as may be specified in such instrument, any of the requirements of
this Agreement or the Notes or the other Loan Documents or any Default and its
consequences; provided, however, that no such waiver and no such
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amendment, supplement or modification shall (i) (a) reduce the amount or extend
the maturity of any Note or any installment due thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any fee, indemnity or reimbursement payable to any Lender
hereunder, or change the amount of any Lender's Revolving Loan Commitment, or
amend, modify or waive any provision of Section 2.4 or 2.5, in each case without
the written consent of the Lender affected thereby; or (b) amend, modify or
waive any provision of this Section 9.1 or reduce the percentage specified in or
otherwise modify the definition of Majority Lenders, or consent to the
assignment or transfer by any Obligor of any of its rights and obligations under
this Agreement and the other Loan Documents (except as permitted under Section
6.4); or (c) release any Obligor from any liability under its respective Loan
Documents; or (d) release any material portion of the Collateral or any material
portion of the Guarantor Collateral, except for any Asset Disposition permitted
by this Agreement or any other Loan Document; or (e) amend, modify or waive,
directly or indirectly, any of the provisions of Section 2.1(e), 2.11, 2.12 or
7(g); or (f) amend, modify or waive, directly or indirectly, the definition of
"Borrowing Base" in Section 1.1; (g) amend, modify or waive any provision of
this Agreement requiring the consent or approval of all Lenders, in each case
set forth in clauses (i)(b) through (i)(g) above without the written consent of
all the Lenders; or (ii) change the amount of the Swing Line Commitment or
amend, modify or waive any provision of Section 4.2 with respect to the making
of a Swing Line Loan, without the written consent of the Swing Line Lender; or
(iii) amend, modify or waive any provision of Article 8 without the written
consent of the then Agent, or any provision affecting the rights and duties of
the Agent as the issuer of Letters of Credit without the consent of the then
Agent. Any such waiver and any such amendment, supplement or modification shall
apply equally to each of the Lenders and shall be binding upon the Borrower, the
other Obligors, the Lenders, the Agent and all future holders of the Notes. In
the case of any waiver, the Borrower, the other Obligors, the Lenders and the
Agent shall be restored to their former position and rights hereunder and under
the outstanding Notes and any other Loan Documents, and any Default waived shall
be deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default, or impair any right consequent thereon.
9.2 Notices. All notices, requests and demands or other communications
to or upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or 3 days
after being deposited in the United States mail, certified and postage prepaid
and return receipt requested, or, in the case of telecopy notice, when received,
in each case addressed as follows in the case of the Borrower and the Agent, and
as set forth on the signature page hereto, or in the Assignment and Acceptance
pursuant to which a Person becomes a party hereto, in the case of the Lenders,
or to such other address as may be hereafter notified by the respective parties
hereto and any future holders of the Notes:
The Borrower:
Quiksilver, Inc.
15202 Graham Avenue
Huntington Beach, California 92649
Attention: Steve Brink
Telecopy: (714) 889-2322
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The Agent: Union Bank of California, N.A., as Agent
500 South Main Street, Suite 201
Orange, California 92868
Attention: Margaret Furbank
Telecopy: (714) 565-5770
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to Section 2.1, 2.2, 2.3, 2.4 or 2.6 shall not be effective until
received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or
reimburse the Agent for all its reasonable costs and out-of-pocket expenses
(including travel and other expenses incurred by it or its agents in connection
with performing due diligence with regard hereto) incurred in connection with
the development, preparation and execution of, and any amendment, supplement or
modification to, this Agreement and the Notes and the other Loan Documents and
any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including syndication efforts in connection with this Agreement and the
reasonable fees and disbursements of counsel to the Agent (including the
allocated costs of internal counsel to the Agent), (b) to pay or reimburse the
Agent and each Lender for all its reasonable costs and out-of-pocket expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement, the Notes, the other Loan Documents and any such other documents
or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or any
insolvency or bankruptcy proceeding, including reasonable fees and disbursements
of legal counsel and financial advisors to the Agent and each Lender (including
the allocated costs of internal counsel to the Agent), (c) to pay, indemnify and
hold harmless each Lender and the Agent from any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes, the other Loan Documents and any such
other documents and (d) to pay, and indemnify and hold harmless each Lender and
the Agent from and against, any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs (including the allocated
cost of internal counsel and the reasonable legal fees and disbursements of
outside counsel to the Lenders and the Agent), expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the Notes and the other Loan
Documents, the Acquisitions or
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the use of the proceeds of the Loans or the Letters of Credit and any such other
documents (all the foregoing, collectively, the "indemnified liabilities"),
provided, that the Borrower shall have no obligation hereunder to the Agent or
any Lender with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Agent or such Lender. The agreements in
this Section shall survive repayment of the Notes and all other amounts payable
hereunder. The Agent and the Lenders agree to provide reasonable details and
supporting information concerning any costs and expenses required to be paid by
the Borrower pursuant to the terms hereof.
9.6 Successors and Assigns; Participations; Purchasing Lenders.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell to one
or more lenders or financial institutions ("Participants") participating
interests in any Loan owing to such Lender, any Letter of Credit participated in
by such Lender, any Note held by such Lender, any Revolving Loan Commitment of
such Lender or any other interest of such Lender hereunder and under the other
Loan Documents; provided that the holder of any such participation, other than
an Affiliate of such Lender, shall not be entitled to require such Lender to
take or omit to take any action hereunder except action directly affecting the
extension of the maturity of any portion of the principal amount of a Loan or
Commitment, the expiration of a Letter of Credit or any portion of interest or
fees related thereto allocated to such participation or a reduction of the
principal amount or principal payment amount of or the rate of interest payable
on the Loans or any fees related thereto or reduction of the amount to be
reimbursed under any Letter of Credit, or a release of any Obligor or any
substantial portion of the Collateral or the Guarantor Collateral or any
increase in participation amounts. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Note and the participant in any such Letter
of Credit for all purposes under this Agreement and the other Loan Documents,
and 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. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of setoff
in respect of its participating interest in amounts owing under this Agreement
and any Note to the same extent as if the amount continuing of its participating
interest were owing directly to it as a Lender under this Agreement or any Note,
provided that such Participant shall only be entitled to such right of setoff if
it shall have agreed in the agreement pursuant to which it shall have acquired
its participating interest to share with the Lenders the proceeds thereof as
provided in Section 9.7. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.13, 2.14 and 2.15 with respect to its
participation in the Commitments and the Loans and the Letters of Credit
outstanding from time to time; provided, that no Participant shall be entitled
to receive any greater amount pursuant to
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such Sections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell to any
of its Affiliates, to any Lender or any Affiliate thereof or to one or more
additional lenders or financial institutions, which additional lenders or
financial institutions shall be subject to the consent of the Borrower (such
consent not to be unreasonably withheld and not to be required if a Default has
occurred and is continuing) and the Agent (such consent not to be unreasonably
withheld) ("Purchasing Lenders"), all or any part of its rights and obligations
under this Agreement, the Notes and the other Loan Documents pursuant to an
Assignment and Acceptance, executed by such Purchasing Lender and such
transferor Lender and delivered to the Agent for its acceptance and recording in
the Register (as defined in (d) below), provided, that any such sale must result
in the Purchasing Lender having at least $10,000,000 in aggregate amount of
obligations (or, if less, the entire remaining amount of the selling Lender's
obligations) under this Agreement, the Notes and the other Loan Documents. Upon
such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Assignment and Acceptance, (x) the
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Revolving Loan Commitment as set forth therein, and (y) the
transferor Lender thereunder shall, to the extent of such assigned portion and
as provided in such Assignment and Acceptance, be released from its obligations
under this Agreement and the other Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a transferor
Lender's rights and obligations under this Agreement, such transferor Lender
shall cease to be a party hereto). Such Assignment and Acceptance shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Lender and the resulting adjustment
of Revolving Loan Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement, the Notes and the other Loan Documents.
On or prior to the transfer effective date determined pursuant to such
Assignment and Acceptance, the Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for the surrendered Note or Notes a new Note or
Notes to the order of such Purchasing Lender in an amount equal to the Revolving
Loan Commitments assumed by it pursuant to such Assignment and Acceptance, and
if the transferor Lender has retained a Revolving Loan Commitment hereunder, new
Notes to the order of the transferor Lender in an amount equal to the Revolving
Loan Commitments retained by it hereunder. Such new Notes shall be dated the
Closing Date and shall otherwise be in the form of the Notes replaced thereby.
The Notes surrendered by the transferor Lender shall be returned by the Agent to
the Borrower marked "canceled."
(d) The Agent shall maintain at its address referred to in Section 9.2
a copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
the Revolving Loan Commitments of, and principal amount of the Revolving Loans
owing to, and, if applicable, the Letters of Credit participated in by, each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Revolving Loans and the participant in the Letters of Credit, if applicable,
recorded therein for all purposes of this Agreement. The
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Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an Affiliate thereof, by the Borrower and the
Agent) together with payment to the Agent (except in the case of a Lender
assigning to its Affiliate) of a registration and processing fee of $3,000, the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Purchasing Lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning the
Borrower and its Subsidiaries and Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or any other
Loan Document or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of the Borrower and
its Subsidiaries and Affiliates prior to becoming a party to this Agreement.
(g) If, pursuant to this Section, any interest in this Agreement, any
Letter of Credit or any Note is transferred to any Transferee which is organized
under the laws of any jurisdiction other than the United States or any state
thereof, the transferor Lender shall cause such Transferee, concurrently with
the effectiveness of such transfer, (i) to represent to the transferor Lender
and the Agent (for the benefit of the transferor Lender, the Agent and the
Borrower) that under applicable law and treaties no taxes will be required to be
withheld by the Agent, the Borrower or the transferor Lender with respect to any
payments to be made to such Transferee in respect of the Revolving Loans or the
Letters of Credit, (ii) to furnish to the transferor Lender, the Agent and the
Borrower U.S. Internal Revenue Service Form W-9, W-8BEN or W-8ECI (as applicable
to it) (wherein such Transferee claims entitlement to complete exemption from
U.S. federal withholding tax on all interest payments hereunder) and (iii) to
agree (for the benefit of the transferor Lender, the Agent and the Borrower) to
provide the transferor Lender, the Agent and the Borrower a new Form W-9, W-8BEN
or W-8ECI (as applicable to it) upon the expiration or obsolescence of any
previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all applicable U.S.
laws and regulations with regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Lender from pledging or assigning
any of its rights under its Notes, or, if applicable, its participation in any
Letter of Credit, to any Federal Reserve Bank in accordance with applicable law.
9.7 Adjustments; Set-Off.
(a) If any Lender (a "benefited Lender") shall at any time receive any
payment of all or part of its Revolving Loans, its participations in Letters of
Credit, or interest thereon, or fees, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in Section 7(g), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Revolving Loans, its
participations in Letters of Credit, or interest
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thereon, or fees, such benefited Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's Revolving Loans, participations
in Letters of Credit, or fees, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Borrower agrees that each Lender so purchasing a portion of
another Lender's Revolving Loans or its participations in Letters of Credit may
exercise all rights of payment (including rights of set-off) with respect to
such portion as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, exercisable upon the occurrence and
during the continuance of an Event of Default, without prior notice to the
Borrower, any such notice being expressly waived by the Borrower to the extent
permitted by applicable law, to set-off and appropriate and apply against the
Obligations any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof or bank controlling such Lender to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower after any such set-off and application made by such Lender, provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
9.9 Severability. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9.10 Integration. This Agreement represents the entire agreement of the
Borrower, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE OF LAW RULES).
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9.12 Alternative Dispute Resolution.
(a) Claims Subject To Judicial Reference; Selection Of Referee. All
Claims, including any and all questions of law or fact relating thereto, shall,
at the written request of any Party, be determined by Reference. The Parties
shall select a single neutral referee, who shall be a retired state of federal
judge with at least five years of judicial experience in civil matters. In the
event that the Parties cannot agree upon a referee, the referee shall be
appointed by the court. The Parties shall equally bear the fees and expenses of
the referee unless the referee otherwise provides in the statement of decision.
(b) Waiver Of Jury Trial. In connection with a Reference or any other
action or proceeding, whether brought in state or federal court, the Parties
hereby expressly, intentionally and deliberately waive any right they may
otherwise have to trial by jury of any Claim.
(c) Conduct Of Reference. Except as provided in this Section 9.12, the
Reference shall be conducted pursuant to Applicable State Law. The referee shall
determine all issues relating to the applicability, interpretation, legality and
enforceability of this Section 9.12.
(d) Provisional Remedies, Self-Help And Foreclosure. No provision of
this Section 9.12 shall limit the right of any party to (i) exercise self-help
remedies including set-off, (ii) foreclose against or sell any Collateral or
Guarantor Collateral, by power of sale or otherwise or (iii) obtain or oppose
provisional or ancillary remedies from a court of competent jurisdiction before,
after or during the pendency of the Reference. The exercise of, or opposition
to, any such remedy does not waive the right of any Party to Reference pursuant
to this Section 9.12.
(e) Limitation On Damages. In the event that punitive damages are
permitted under Applicable State Law, the amount thereof shall not exceed a sum
equal to three times the amount of actual damages as determined by the referee.
(f) Severability. In the event that any provision of this Section 9.12
is found to be illegal or unenforceable, the remainder of this Section 9.12
shall remain in full force and effect.
(g) Miscellaneous. In the event that multiple Claims are asserted, some
of which are found not subject to this Section 9.12, the Parties agree to stay
the proceedings of the Claims not subject to this Section 9.12 until all other
Claims are resolved in accordance with this Section. In the event that Claims
are asserted against multiple parties, some of whom are not subject to this
Section, the Parties agree to sever the Claims subject to this Section 9.12 and
resolve them in accordance with this Section 9.12. In the event of any challenge
to the legality or enforceability of this Section 9.12, the prevailing Party
shall be entitled to recover the costs and expenses, including reasonable
attorneys' fees, incurred by it in connection therewith. Applicable State Law
shall govern the interpretation of this Section 9.12.
(h) Defined Terms. As used in this Section 9.12, the following terms
shall have the respective meanings set forth below:
"Applicable State Law": the law of the State of California; provided,
however, that if any Party seeks to (i) exercise self-help remedies, including
set-off, (ii) foreclose against or sell any Collateral or Guarantor Collateral,
by power of sale or otherwise or (iii) obtain or oppose provisional or ancillary
remedies from a court of competent jurisdiction before, after or during
57
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the pendency of the Reference, the law of the state where such Collateral or
Guarantor Collateral, as the case may be, is located shall govern the exercise
of or opposition to such rights and remedies.
"Claim": any claim, cause of action, action, dispute or controversy
between or among the Parties, whether sounding in contract, tort or otherwise,
which arises out of or relates to: (i) any of the Loan Documents; (ii) any
negotiations or communications relating to any of the Loan Documents, whether or
not incorporated into the Loan Documents or any indebtedness evidenced thereby;
or (iii) any alleged agreements, promises, representations or transactions in
connection therewith.
"Party": any Obligor, any Lender or the Agent.
"Reference": a judicial reference conducted pursuant to this Section
9.12 in accordance with Applicable State Law, as in effect at the time the
referee is selected pursuant to Section 9.12(a).
9.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the Notes and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship to
the Borrower solely by virtue of any of the Loan Documents, and the relationship
pursuant to the Loan Documents between the Agent and the Lenders, on one hand,
and the Borrower on the other hand, is solely that of creditor and debtor; and
(c) no joint venture exists among the Lenders or among the Borrower, on
one hand and the Lenders, on the other hand.
9.14 Intercreditor Agreement. By executing this Agreement as a Lender,
or by becoming a Lender hereunder pursuant to an Assignment and Acceptance, each
Lender hereby agrees to the terms of the Intercreditor Agreement, acknowledges
that certain of its rights hereunder shall be subject thereto, and consents to
the execution thereof by the Agent on behalf of such Lender.
9.15 Headings. Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
9.16 Copies of Certificates, Etc. Whenever the Borrower is required to
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent for delivery to any Lender (including under Article 4),
it shall do so in such number of copies as the Agent shall reasonably specify.
9.17 Confidentiality. The Agent and the Lenders shall take normal and
reasonable precautions to maintain the confidentiality of all non-public
information obtained pursuant to the requirements of this Agreement which has
been identified as such by the Borrower, but may, in any event, make disclosures
(i) reasonably required by any bona fide transferee, assignee or participant in
connection with the contemplated transfer or assignment of any Revolving Loan
58
<PAGE> 59
Commitments or Revolving Loans or participations therein or participations in
Letters of Credit or (ii) as required or requested by any governmental agency or
representative thereof or as required pursuant to legal process or (iii) to its
attorneys and accountants or (iv) as required by law or (v) in connection with
litigation involving any Lender; provided that (a) such transferee, assignee or
participant agrees to comply with the provisions of this Section 9.17 unless
specifically prohibited by applicable law or court order and (b) in no event
shall any Lender be obligated or required to return any materials furnished by
the Borrower or the Subsidiary.
59
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWER
QUIKSILVER, INC.
By: /s/ Steven L. Brink
---------------------------------------
Name: Steven L. Brink
Title: Chief Financial Officer, Secretary
and Treasurer
AGENT
UNION BANK OF CALIFORNIA, N.A., as Agent
By: /s/ Margaret Furbank
---------------------------------------
Name: Margaret Furbank
Title: Vice President
<PAGE> 61
LENDERS
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Margaret Furbank
---------------------------------------
Name: Margaret Furbank
Title: Vice President
Revolving Loan Commitment: $40,000,000
(Swing Line Commitment: $ 5,000,000)
Address for Notices
-------------------
(a) For Credit:
500 South Main Street, Suite 201
Orange, California 92868
Attention: Margaret Furbank
Telephone: (714) 565-5579
Facsimile: (714) 565-5770
(b) For Operations:
1980 Saturn Street,
Monterey Park, California 91755
Attention: Ruby Gonzales
Telephone: (323) 720-7055
Facsimile: (323) 724-6198
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate
Loans:
500 South Main Street, Suite 201
Orange, California 92868
Applicable Lending Office for LIBOR Loans:
500 South Main Street, Suite 201
Orange, California 92868
Applicable Lending Office for Participations
in Letters of Credit:
1980 Saturn Street
Monterey Park, California 91755
<PAGE> 62
THE CHASE MANHATTAN BANK, as a Lender
By: /s/ Roberta L. Weissenberg
---------------------------------------
Name: Roberta L. Weissenberg
Title: Vice President
Revolving Loan Commitment: $22,500,000
Address for Notices
-------------------
(a) For Credit:
1375 Broadway, 8th Floor
New York, New York 10018
Attention: Robbie Weissenberg
Telephone: (212) 827-4447
Facsimile: (212) 827-4497
(b) For Operations
(Other Than Letters of Credit):
1375 Broadway, 8th Floor
New York, New York 10018
Attention: Millie Nogueras
Telephone: (212) 827-4437
Facsimile: (212) 827-4479
(c) For Letters of Credit
Global Trade Services
4 Chase MetroTech Center 8
Brooklyn, New York 11245
Attention: Mildred Bowens
Telephone: (718) 242-4907
Facsimile: (718) 242-6535
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate
Loans:
1375 Broadway, 8th Floor
New York, New York 10018
Applicable Lending Office for LIBOR
Loans:
1375 Broadway, 8th Floor
New York, New York 10018
Applicable Lending Office for Participations
in Letters of Credit:
Global Trade Services
4 Chase MetroTech Center 8
Brooklyn, New York 11245
<PAGE> 63
FLEET NATIONAL BANK
By: /s/ Stephen J. Garvin
---------------------------------------
Name: Stephen J. Garvin
Title: Director
Revolving Loan Commitment: $20,000,000
Address for Notice
------------------
(a) For Credit
150 Federal Street, MADE 10009E
Boston, Massachusetts 02110
Attention: Stephen J. Garvin, Director
Telephone: (617) 434-9399
Facsimile: (617) 434-6685
(b) For Operations
One Federal Street
Boston, Massachusetts 02110
Attention: Dwayne Nelson
Telephone: (617) 346-4223
Facsimile: (617) 346-0597
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate
Loans:
One Federal Street
Boston, Massachusetts 02110
Applicable Lending Office for LIBOR Loans:
One Federal Street
Boston, Massachusetts 02110
Applicable Lending Office for Participations
in Letters of Credit:
One Federal Street
Boston, Massachusetts 02110
<PAGE> 64
PACIFIC CENTURY BANK, N.A.
By: /s/ Jill Schuberth
---------------------------------------
Name: Jill Schuberth
Title: Vice President
Revolving Loan Commitment: $7,500,000
Address for Notices
-------------------
(a) For Credit:
16030 Ventura Boulevard
Encino, California 91436
Attention: Jill Schuberth
Telephone: (818) 379-1286 or 1252
Facsimile: (818) 379-1620
(b) For Operations (Other Than Letters of
Credit):
2633 Cherry Avenue
Signal Hill, California 90806
Attention: Simin Saadati
Telephone: (562) 988-9605
Facsimile: (562) 426-9170
(c) For Letters of Credit
2633 Cherry Avenue
Signal Hill, California 90806
Attention: Jacques Naffaa
Telephone: (562) 988-9861
Facsimile: (562) 426-1897
Approved Lending Offices
------------------------
Applicable Lending Office for Base Rate
Loans:
2633 Cherry Avenue
Signal Hill, California 90806
Applicable Lending Office for LIBOR Loans:
2633 Cherry Avenue
Signal Hill, California 90806
Applicable Lending Office for Participations
in Letters of Credit:
2633 Cherry Avenue
Signal Hill, California 90806
