<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1998
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 1-9548
------
The Timberland Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 02-0312554
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
200 Domain Drive, Stratham, New Hampshire 03885
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 772-9500
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
On July 31, 1998, 9,132,261 shares of the registrant's Class A Common Stock were
outstanding and 2,338,162 shares of the registrant's Class B Common Stock were
outstanding.
<PAGE> 2
THE TIMBERLAND COMPANY
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
PART I FINANCIAL INFORMATION (unaudited)
Condensed Consolidated Balance Sheets - 1-2
June 26, 1998 and December 31, 1997
Condensed Consolidated Statements of Income - 3
For the three and six months ended June 26, 1998
and June 27, 1997
Condensed Consolidated Statements of Cash Flows - 4
For the six months ended June 26, 1998 and
June 27, 1997
Notes to Condensed Consolidated Financial Statements 5-6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
PART II OTHER INFORMATION 10-11
</TABLE>
<PAGE> 3
Form 10-Q
Page 1
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
(Unaudited)
June 26, December 31,
1998 1997
--------- ------------
<S> <C> <C>
Current assets
Cash and equivalents $ 24,757 $ 98,771
Accounts receivable, net of allowance for doubtful
accounts of $3,901 at June 26, 1998 and $3,742
at December 31, 1997 94,815 75,793
Inventory 199,956 142,613
Prepaid expense 11,797 12,856
Deferred and refundable income taxes 12,358 11,973
-------- --------
Total current assets 343,683 342,006
-------- --------
Property, plant and equipment 123,224 116,503
Less accumulated depreciation and amortization (69,565) (63,593)
-------- --------
Net property, plant and equipment 53,659 52,910
-------- --------
Excess of cost over fair value of net assets
acquired, net 20,060 20,902
Other assets, net 4,085 4,185
-------- --------
$421,487 $420,003
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
Form 10-Q
Page 2
<TABLE>
<CAPTION>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
June 26, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Current liabilities
Accounts payable $ 29,497 $ 20,390
Accrued expense
Payroll and related 16,535 28,233
Interest and other 34,752 32,786
Income taxes payable 7,697 17,686
-------- --------
Total current liabilities 88,481 99,095
-------- --------
Long-term debt 100,000 100,000
Deferred income taxes 6,113 6,013
Stockholders' equity
Preferred stock, $.01 par value; 2,000,000 shares authorized;
none issued -- --
Class A Common Stock, $.01 par value (1 vote per share);
30,000,000 shares authorized; 9,148,776 shares issued
at June 26, 1998 and 8,765,013 shares at December 31, 1997 91 88
Class B Common Stock, $.01 par value (10 votes per share); convertible
into Class A shares on a one-for-one basis; 15,000,000 shares
authorized; 2,338,162 shares issued at June 26, 1998 and 2,605,432
shares at December 31, 1997 23 26
Additional paid-in capital 71,543 68,568
Retained earnings 157,187 147,921
Accumulated other comprehensive loss -
cumulative translation adjustment (1,838) (1,595)
Less treasury stock at cost, 17,369 shares at June 26,
1998 and December 31, 1997 (113) (113)
-------- --------
226,893 214,895
-------- --------
$421,487 $420,003
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
Form 10-Q
Page 3
<TABLE>
<CAPTION>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
For the For the
Three Months Ended Six Months Ended
------------------------ -----------------------
June 26, June 27, June 26, June 27,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $144,741 $132,180 $307,798 $282,864
Cost of goods sold 87,310 80,325 183,422 169,395
-------- -------- -------- --------
Gross profit 57,431 51,855 124,376 113,469
-------- -------- -------- --------
Operating expense
Selling 41,062 35,388 83,467 74,623
General and administrative 11,463 12,106 23,599 23,569
Amortization of goodwill 421 421 842 842
-------- -------- -------- --------
Total operating expense 52,946 47,915 107,908 99,034
-------- -------- -------- --------
Operating income 4,485 3,940 16,468 14,435
-------- -------- -------- --------
Other expense (income)
Interest expense 2,337 3,553 4,571 8,130
Other, net (648) (409) (1,730) (628)
-------- -------- -------- --------
Total other expense 1,689 3,144 2,841 7,502
-------- -------- -------- --------
Income before income taxes 2,796 796 13,627 6,933
-------- -------- -------- --------
Provision for income taxes 895 239 4,361 2,080
-------- -------- -------- --------
Net income $ 1,901 $ 557 $ 9,266 $ 4,853
======== ======== ======== ========
Basic earnings per share $ .17 $ .05 $ .81 $ .43
======== ======== ======== ========
Average shares outstanding 11,459 11,262 11,419 11,221
======== ======== ======== ========
Diluted earnings per share $ .16 $ .05 $ .78 $ .42
======== ======== ======== ========
Average shares outstanding 11,920 11,735 11,867 11,651
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
Form 10-Q
Page 4
<TABLE>
<CAPTION>
THE TIMBERLAND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
For the
Six Months Ended
-------------------------
June 26, June 27,
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,266 $ 4,853
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Deferred income taxes (285) (1,926)
Depreciation and amortization 9,534 10,425
Increase (decrease) in cash from changes in working capital items:
Accounts receivable (19,147) 13,894
Inventory (57,358) (41,451)
Prepaid expense 1,047 (279)
Accounts payable 9,128 12,527
Accrued expense (10,011) (9,358)
Income taxes (9,998) (1,689)
-------- --------
Net cash used by operating activities (67,824) (13,004)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (8,528) (8,694)
Other, net (653) (2,323)
-------- --------
Net cash used by investing activities (9,181) (11,017)
-------- --------
Cash flows from financing activities:
Payments on long-term debt -- (40,728)
Issuance of common stock 2,975 2,828
-------- --------
Net cash provided (used) by financing activities 2,975 (37,900)
-------- --------
Effect of exchange rate changes on cash 16 (363)
-------- --------
Net decrease in cash and equivalents (74,014) (62,284)
Cash and equivalents at beginning of period 98,771 93,336
-------- --------
Cash and equivalents at end of period $ 24,757 $ 31,052
======== ========
Supplemental disclosures of cash flow information:
Interest paid $ 4,603 $ 8,374
Income taxes paid 14,635 5,812
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 7
Form 10-Q
Page 5
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain the adjustments necessary to
present fairly the Company's financial position, results of operations and
changes in cash flows for the interim periods presented. Such adjustments
consisted of normal recurring items. The unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
2. The results of operations for the three and six months ended June 26, 1998
are not necessarily indicative of the results to be expected for the full
year. Historically, the Company's revenue has been more heavily weighted to
the second half of the year.
3. Inventory consisted of the following:
<TABLE>
<CAPTION>
June 26, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Raw materials $ 7,635 $ 8,010
Work-in-process 5,566 4,103
Finished goods 186,755 130,500
-------- --------
$199,956 $142,613
======== ========
</TABLE>
4. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 130 "Reporting Comprehensive Income" in 1998. SFAS No. 130 requires the
reporting of comprehensive income, which, in the case of the Company, is
the combination of reported net income and the change in the cumulative
translation adjustment which is a component of stockholders' equity. SFAS
No. 130 has no impact on the Company's reported net income. Comprehensive
income for the three months and six months ended June 26, 1998 and June 27,
1997 follows:
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
---------------------- --------------------
June 26, June 27, June 26, June 27,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income $1,901 $ 557 $9,266 $ 4,853
Change in cumulative translation
adjustment (80) (418) (243) (3,776)
------ ----- ------ -------
Comprehensive income $1,821 $ 139 $9,023 $ 1,077
====== ===== ====== =======
</TABLE>
<PAGE> 8
Form 10-Q
Page 6
THE TIMBERLAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)
(Unaudited)
5. Indebtedness
On April 30, 1998, the Company entered into a new unsecured committed
revolving credit agreement (the "Agreement") with a group of banks. The
Agreement, which replaced the Company's existing revolving credit facility,
expires on June 19, 2001 and provides for $100,000 of committed borrowings
of which up to $80,000 may be used for letters of credit. Under the terms
of the Agreement, the Company may borrow at interest rates based upon the
lenders' cost of funds. The Agreement provides for a facility fee of 0.20%
per annum on the full commitment, places limitations on the payment of
dividends and incurrence of additional debt, and also contains certain
other financial and operating covenants.
<PAGE> 9
Form 10-Q
Page 7
THE TIMBERLAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
RESULTS OF OPERATIONS
SECOND QUARTER 1998 COMPARED WITH SECOND QUARTER 1997
Revenue for the second quarter of 1998 was $144.7 million, an increase of $12.6
million, or 9.5%, compared with the $132.2 million reported for the second
quarter of 1997.
Domestic revenue for the second quarter of 1998 was $102.2 million, an increase
of $3.7 million, or 3.7%, from the same period in 1997. The increase was
attributable to footwear sales growth partially offset by a decrease in North
American apparel sales, as discussed below.
International revenue for the second quarter of 1998 was $42.5 million, an
increase of $8.9 million, or 26.4%, compared with the second quarter of 1997.
International revenue comprised 29.4% of total revenue for the second quarter of
1998, compared with 25.4% for the second quarter of 1997. Internationally, both
the footwear and apparel categories had increases over last year.
Footwear revenue for the second quarter of 1998 was $110.9 million, an increase
of $13.3 million, or 13.7%, from the same period in 1997. Domestically, footwear
sales in the Company's performance, classic boots, men's and kids' categories
outperformed last year's second quarter. In total, footwear unit sales increased
19.6% while average selling price decreased 5.0%. The decrease in average
selling price was due to the introduction of tiered pricing in many categories
and the delivery of more spring-appropriate footwear products which carry lower
average selling prices than fall-appropriate categories.
Revenue attributable to apparel and accessories decreased $3.3 million, or 9.9%,
to $29.8 million in the second quarter of 1998, compared with the same period in
1997. Much of this reduction was domestic and reflected fewer off-price sales.
European apparel and accessories sales increased 20.3%.
Worldwide revenue from Company-owned retail and factory stores for the second
quarter of 1998 was $33.9 million, compared with $32.4 million for the second
quarter of 1997. Total domestic retail and factory store sales increased 4.8%
compared with the same period in 1997. Comparable domestic retail and factory
store sales increased 7.4%.
Gross profit as a percentage of revenue for the second quarter of 1998 was
39.7%, an increase of 0.5 percentage points from the 39.2% reported for the
second quarter of 1997. The improvement in gross margin was due primarily to
fewer apparel and footwear off-price sales.
Operating expense was $52.9 million for the second quarter of 1998, up $5.0
million, or 10.5%, from the $47.9 million reported for the second quarter of
1997. Operating expense as a percentage of revenue for the second quarter of
1998 increased to 36.6% from 36.2% for the second quarter of 1997. The majority
of the dollar increase was due to both advertising and promotional expense and
to further expenditures in product development. General and administrative
expense decreased as a percentage of revenue compared to the second quarter of
1997.
<PAGE> 10
Form 10-Q
Page 8
Interest expense for the second quarter of 1998 decreased by $1.2 million to
$2.3 million from the comparable period in 1997 resulting from a significant
reduction in long-term debt throughout 1997.
The effective tax rate for the second quarter of 1998 was 32% compared with a
tax rate of 30% for the same period last year. The increase in the tax rate was
attributable to a decrease in the percentage of pre-tax income derived from the
Company's Puerto Rico based manufacturing operations.
SIX MONTHS ENDED JUNE 26, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 27, 1997
Revenue for the first six months of 1998 was $307.8 million, an increase of
$24.9 million, or 8.8% from the $282.9 million for the comparable period in
1997.
Gross profit as a percentage of revenue for the first six months of 1998 was
40.4%, compared with 40.1% for the comparable period in 1997. This improvement
was attributable to both fewer off-price sales and to the introduction of higher
margin products.
Operating expense for the first six months of 1998 increased by $8.9 million to
$107.9 million from $99.0 million for the comparable period in 1997. The
increase compared with the prior year was primarily attributable to increased
selling, marketing and product development expenditures.
Interest expense for the first six months of 1998 was $4.6 million, a decrease
of $3.6 million from the comparable period in 1997, due to a reduction in
long-term debt.
The effective tax rate for the first six months of 1998 was 32%, compared with a
tax rate of 30% for the same period last year. This increase is due to the same
factor cited in the second quarter discussion.
<PAGE> 11
Form 10-Q
Page 9
LIQUIDITY AND CAPITAL RESOURCES
Cash used by operations during the first six months of 1998 was $67.8 million
compared with $13.0 million used during the same period in 1997. The use of cash
in 1998 was primarily due to inventory increasing $57.4 million and accounts
receivable increasing $19.1 million from year end 1997. The increase in
inventory is consistent with prior years as the Company prepares for fall
shipments. The increase in accounts receivable in 1998 as compared to the
decrease in 1997 was largely the result of a lower beginning receivable balance
in 1998 versus 1997. Days sales outstanding at both June 26, 1998 and June 27,
1997 were 59 days. Wholesale days sales outstanding decreased to 69 days at June
26, 1998 from 73 days at June 27, 1997. Inventory was $200.0 million at June 26,
1998, compared to $142.6 million at December 31, 1997 and $198.3 million at June
27, 1997. Inventory turns were 2.1 times for the second quarter of 1998,
compared with 1.8 times for the second quarter of 1997.
During the first six months of 1998, $9.2 million of cash was used in investing
activities, compared with $11.0 million used during the same period in 1997.
Capital expenditures for the first six months of 1998 were $8.5 million,
compared with $8.7 million for the same period in 1997. During the first six
months of 1998, $3.0 million of cash was provided by financing activities.
During the first six months of 1997, $37.9 million of cash was used, primarily
to prepay $40.7 million of unsecured notes and Industrial Revenue bonds.
The Company has available unsecured revolving and committed lines of credit as
sources of financing for its seasonal and other working capital requirements.
The Company's debt-to-capital ratio was 30.6% at June 26, 1998, compared with
31.8% at December 31, 1997 and 46.8% at June 27, 1997.
Management believes that the Company's capital needs for 1998 will be met
through its existing credit facilities and cash flows from operations without
the need for additional permanent financing. However, as discussed in an exhibit
to the Company's Form 10-K for the year ended December 31, 1997, entitled
"Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995", several risks and uncertainties could
cause the Company to need to raise additional capital through equity and/or debt
financing. The availability and terms of any such financing would be subject to
prevailing market conditions and other factors at that time.
NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income" and SFAS No. 131 "Disclosures about Segments of an Enterprise and
Related Information". In February 1998, the FASB issued SFAS No. 132,
"Employers' Disclosures about Pensions and other Postretirement Benefits". SFAS
No. 130 has been adopted as of January 1, 1998. SFAS No. 131 and No. 132 may
require additional disclosures in the filing for the year ending December 31,
1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This statement is effective for the
Company's fiscal year beginning January 1, 2000. The Company has not determined
the effect on the consolidated financial statements of adopting SFAS No. 133.
<PAGE> 12
Form 10-Q
Page 10
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Stockholders on May 21, 1998.
(b) At such Annual Meeting, proxies were solicited pursuant to
Regulation 14A of the Securities Exchange Act of 1934 and all
nominees for director were elected as indicated by the following
schedule of votes cast for each director. The holders of Class A
Common Stock elected the following directors:
<TABLE>
<CAPTION>
Total Votes for Each Total Votes Withheld
Nominee Director from Each Director
------- -------- -----------------
<S> <C> <C>
John F. Brennan 8,632,294 6,633
Abraham Zaleznik 8,592,806 46,121
</TABLE>
The holders of Class A Common Stock and the holders of Class B
Common Stock, voting together as a single class, elected the
following directors:
<TABLE>
<CAPTION>
Total Votes for Each Total Votes Withheld
Nominee Director from Each Director
------- -------- ------------------
<S> <C> <C>
Robert M. Agate 31,974,626 45,921
Ian W. Diery 32,013,739 6,808
John A. Fitzsimmons 32,013,739 6,808
Jeffrey B. Swartz 32,013,764 6,783
Sidney W. Swartz 32,013,989 6,558
</TABLE>
There were no abstentions or broker non-votes with respect to the
election of the director nominees.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description
------- -----------
10.12 $100,000,000 Credit Agreement dated as of
April 30, 1998 among The Timberland Company,
certain banks listed therein and Morgan Guaranty
Trust Company of New York, as Agent.
27 Financial Data Schedule
(b) Reports on Form 8-K - There were no reports on Form 8-K filed during
the period covered by this report.
<PAGE> 13
Form 10-Q
Page 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Timberland Company
-------------------------------------
(Registrant)
Date: August 7, 1998 /s/Geoffrey J. Hibner
-------------- -------------------------------------
Geoffrey J. Hibner
Senior Vice President -
Finance and Administration
and Chief Financial Officer
Date: August 7, 1998 /s/Dennis W. Hagele
-------------- -------------------------------------
Dennis W. Hagele
Vice President-Finance
and Corporate Controller
(Chief Accounting Officer)
<PAGE> 1
Exhibit 10.12
CONFORMED COPY
$100,000,000
CREDIT AGREEMENT
dated as of
April 30, 1998
among
The Timberland Company
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE> 2
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1 DEFINITIONS
SECTION 1.01. Definitions ....................................................1
SECTION 1.02. Accounting Terms and Determinations ...........................15
SECTION 1.03. Types of Borrowings ...........................................16
ARTICLE 2 THE CREDITS
SECTION 2.01. Commitments to Lend ...........................................16
SECTION 2.02. Notice of Committed Borrowings ................................17
SECTION 2.03. Money Market Borrowings .......................................17
SECTION 2.04. Notice to Banks; Funding of Loans .............................21
SECTION 2.05. Notes .........................................................22
SECTION 2.06. Maturity of Loans .............................................22
SECTION 2.07. Method of Electing Interest Rates .............................23
SECTION 2.08. Interest Rates ................................................24
SECTION 2.09. Letters of Credit .............................................26
SECTION 2.10. Facility Fees .................................................33
SECTION 2.11. Mandatory Termination of Commitments ..........................33
SECTION 2.12. Optional Termination or Reduction of Commitments ..............33
SECTION 2.13. Mandatory Prepayments .........................................34
SECTION 2.14. Optional Prepayments ..........................................34
SECTION 2.15. General Provisions as to Payments .............................35
SECTION 2.16. Funding Losses ................................................36
SECTION 2.17. Computation of Interest and Fees ..............................36
SECTION 2.18. Judgment Currency .............................................36
SECTION 2.19. Foreign Subsidiary Costs ......................................37
SECTION 2.20. Cash Collateral Account .......................................37
ARTICLE 3 CONDITIONS
SECTION 3.01. Effectiveness .................................................39
SECTION 3.02. Borrowings and Letter of Credit Issuances .....................40
SECTION 3.03. First Borrowing by Each Eligible Subsidiary ...................41
<PAGE> 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power .................................41
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention ..........................................................42
SECTION 4.03. Binding Effect ................................................42
SECTION 4.04. Financial Information .........................................42
SECTION 4.05. Litigation ....................................................42
SECTION 4.06. Compliance with ERISA .........................................43
SECTION 4.07. Environmental Matters .........................................43
SECTION 4.08. Taxes .........................................................43
SECTION 4.09. Subsidiaries ..................................................44
SECTION 4.10. Not an Investment Company .....................................44
SECTION 4.11. Full Disclosure ...............................................44
SECTION 4.12. Existing Letters of Credit and Continuing Money Market
Loans ..................................................................44
ARTICLE 5 COVENANTS
SECTION 5.01. Information ...................................................44
SECTION 5.02. Payment of Obligations ........................................47
SECTION 5.03. Maintenance of Property; Insurance ............................47
SECTION 5.04. Conduct of Business and Maintenance of existence ..............47
SECTION 5.05. Compliance with Laws ..........................................48
SECTION 5.06. Inspection of Property, Books and Records .....................48
SECTION 5.07. Fixed Charge Coverage Ratio ...................................48
SECTION 5.08. Debt ..........................................................48
SECTION 5.09. Minimum Consolidated Tangible Net Worth .......................50
SECTION 5.10. Restricted Payments ...........................................50
SECTION 5.11. Investments ...................................................50
SECTION 5.12. Maintenance of Ownership of Subsidiaries ......................51
SECTION 5.13. Negative Pledge ...............................................51
SECTION 5.14. Consolidations, Mergers and Sales of Assets ...................52
SECTION 5.15. Restrictions on Prepayments of and Amendments to
Certain Debt ...........................................................52
SECTION 5.16. Transactions with Affiliates ..................................53
SECTION 5.17. Use of Proceeds and Letters of Credit .........................54
SECTION 5.18. Leverage Ratio ................................................54
<PAGE> 4
ARTICLE 6 DEFAULTS
SECTION 6.01. Events of Default .............................................54
SECTION 6.02. Notice of Default .............................................56
SECTION 6.03. Cash Collateral ...............................................56
ARTICLE 7 THE AGENT
SECTION 7.01. Appointment and Authorization .................................57
SECTION 7.02. Agents and Affiliates .........................................57
SECTION 7.03. Action by Agent ...............................................57
SECTION 7.04. Consultation with Experts .....................................57
SECTION 7.05. Liability of Agent ............................................57
SECTION 7.06. Indemnification ...............................................58
SECTION 7.07. Credit Decision ...............................................58
SECTION 7.08. Successor Agent ...............................................58
SECTION 7.09. Agent's Fee ...................................................59
ARTICLE 8 CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ......59
SECTION 8.02. Illegality ....................................................60
SECTION 8.03. Increased Cost and Reduced Return .............................60
SECTION 8.04. Taxes .........................................................62
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate ...........63
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power .................................64
SECTION 9.02. Corporate and Governmental Authorization;
Contravention ..........................................................64
SECTION 9.03. Binding Effect ................................................65
SECTION 9.04. Taxes .........................................................65
ARTICLE 10 GUARANTY
SECTION 10.01. The Guaranty .................................................65
SECTION 10.02. Guaranty Unconditional .......................................65
<PAGE> 5
SECTION 10.03. Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances ..................................................66
SECTION 10.04. Waiver by the Company ........................................66
SECTION 10.05. Subrogation ..................................................67
SECTION 10.06. Stay of Acceleration .........................................67
ARTICLE 11 MISCELLANEOUS
SECTION 11.01. Notices ......................................................67
SECTION 11.02. No Waivers ...................................................68
SECTION 11.03. Expenses; Documentary Taxes; Indemnification .................68
SECTION 11.04. Sharing of Set-offs ..........................................68
SECTION 11.05. Amendments and Waivers .......................................69
SECTION 11.06. Successors and Assigns .......................................69
SECTION 11.07. Collateral ...................................................71
SECTION 11.08. Confidentiality ..............................................71
SECTION 11.09. Governing Law; Submission to Jurisdiction ....................71
SECTION 11.10. Counterparts; Integration ....................................72
SECTION 11.11. Waiver of Jury Trial .........................................72
<PAGE> 6
Schedule I - Existing Debt and Liens
Schedule II - Subsidiaries
Schedule III - Existing Letters of Credit
Schedule IV - Continuing Money Market Loans
Exhibit A - Note
Exhibit B - Notice of Committed Borrowing
Exhibit C - Money Market Quote Invitation
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Company
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I - Opinion of Counsel for the Borrower
Exhibit J - Form of Assignment and Assumption Agreement
<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of April 30, 1998 among THE TIMBERLAND COMPANY, the
BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"ABSOLUTE RATE AUCTION" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.03.
"ADJUSTED CONSOLIDATED CASH HOLDINGS" means, for any date, the excess, if
any, of (i) the sum of cash and Temporary Cash Investments of the Company and
its Subsidiaries determined on a consolidated basis on such date over (ii)
$5,000,000.
"ADJUSTED INTERBANK OFFERED RATE" has the meaning set forth in Section
2.08(b).
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Company) duly completed by such Bank.
"AFFILIATE" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Company (a "CONTROLLING PERSON") or (ii)
any Person (other than the Company or a Subsidiary) which is controlled by or is
under common control with a Controlling Person. As used herein, the term
"control" means possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"AGENT" means Morgan Guaranty Trust Company of New York in its capacity as
agent for the Banks hereunder, and its successors in such capacity.
"APPLICABLE LENDING OFFICE" means, with respect to any Bank, (i) in the
<PAGE> 8
case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"ASSIGNEE" has the meaning set forth in Section 11.06(c).
"BANK" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 11.06(c), and their respective
successors.
"BASE RATE" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
"BASE RATE LOAN" means (i) a Committed Loan which bears interest at a rate
determined on the basis of the Base Rate pursuant to the applicable Notice of
Committed Borrowing or Notice of Interest Rate Election or the provisions of
Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately
before it became overdue.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BORROWER" means the Company or any Eligible Subsidiary, as the context may
require, and their respective successors, and "BORROWERS" means all of the
foregoing.
"BORROWING" has the meaning set forth in Section 1.03.
"CALCULATION PERIOD" means, with respect to any day, the period of four
consecutive fiscal quarters of the Company ending on the last day of the most
recently ended fiscal quarter of the Company as to which the Company shall have
delivered a certificate pursuant to Section 5.01(c).
"CASH COLLATERAL ACCOUNT" has the meaning set forth in Section 2.20.
"COMMITMENT" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount may
be reduced from time to time pursuant to Section 2.12.
"COMMITTED LOAN" means a loan made by a Bank pursuant to Section 2.01;
provided that, if any such loan or loans (or portions thereof) are combined or
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<PAGE> 9
subdivided pursuant to a Notice of Interest Rate Election, the term "COMMITTED
LOAN" shall refer to the combined principal amount resulting from such
combination or to each of the separate principal amounts resulting from each
such subdivision, as the case may be.
"COMPANY" means The Timberland Company, a Delaware corporation, and its
successors.
"COMPANY'S 1997 FORM 10-K" means the Company's annual report on Form 10-K
for 1997 as filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
"CONSOLIDATED DEBT" means at any date the Debt of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"CONSOLIDATED EBITR" means, for any period, the sum of (i) Consolidated Net
Income of the Company and its Consolidated Subsidiaries for such period PLUS
(ii) to the extent deducted in determining such consolidated net income, the sum
of (A) Consolidated Interest Expense, (B) Consolidated Rental Expense and (C)
consolidated taxes of the Company and its Consolidated Subsidiaries for such
period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the interest expense
(less interest income) of the Company and its Consolidated Subsidiaries
determined on a consolidated basis for such period.
"CONSOLIDATED NET INCOME" means, for any fiscal period, the net income of
the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period.
"CONSOLIDATED NET WORTH" means at any date the consolidated stockholders'
equity of the Company and its Consolidated Subsidiaries (without giving effect
to any write-ups or write-downs resulting from foreign currency translations
after December 31, 1997) as of such date.
"CONSOLIDATED RENTAL EXPENSE" means, for any period, the rental expense of
the Company and its Consolidated Subsidiaries (other than with respect to
capital leases) determined on a consolidated basis for such period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Company in its
consolidated financial statements if such statements were prepared as of such
date.
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<PAGE> 10
"CONSOLIDATED TANGIBLE NET WORTH" means at any date Consolidated Net Worth
less the consolidated Intangible Assets of the Company and its Consolidated
Subsidiaries, all determined as of such date. For purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in determining
such Consolidated Net Worth) of (i) all write-ups (other than write-ups of
assets of a going concern business made within twelve months after the
acquisition of such business) subsequent to December 31, 1997 in the book value
of any asset owned by the Company or a Consolidated Subsidiary, (ii) all
Investments in unconsolidated Subsidiaries and all equity investments in Persons
which are not Subsidiaries and (iii) all unamortized debt discount and expense,
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, anticipated future benefit of tax loss carry-forwards, copyrights,
organization or developmental expenses and other intangible assets.
"CONTINUING MONEY MARKET LOANS" has the meaning set forth in Section
3.01(f).
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) for purposes of
Section 5.13 and the definitions of Material Debt and Material Financial
Obligations, all obligations, whether contingent or non-contingent, of such
Person to reimburse or prepay any bank or other Person in respect of amounts
paid under a letter of credit, banker's acceptance or similar instrument,
whether drawn or undrawn, (vi) all Debt of others secured by a Lien on any asset
of such Person, whether or not such Debt is assumed by such Person, and (vii)
all Debt of others Guaranteed by such Person.
"DECEMBER 1994 PRIVATE PLACEMENT DEBT" means Debt in respect of the
Company's 8.94% Senior Unsecured Notes due December 2001 issued in December
1994, as the same may, subject to Section 5.15, be amended from time to time.
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity
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<PAGE> 11
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Boston are authorized by law
to close.
"DOMESTIC LENDING OFFICE" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 3.01.
"ELECTION TO PARTICIPATE" means an Election to Participate substantially in
the form of Exhibit G hereto.
"ELECTION TO TERMINATE" means an Election to Terminate substantially in the
form of Exhibit H hereto.
"ELIGIBLE SUBSIDIARY" means any Wholly-Owned Consolidated Subsidiary of the
Company as to which an Election to Participate shall have been delivered to the
Agent and as to which an Election to Terminate shall not have been delivered to
the Agent. Each such Election to Participate and Election to Terminate shall be
duly executed on behalf of such Wholly-Owned Consolidated Subsidiary and the
Company in such number of copies as the Agent may request. The delivery of an
Election to Terminate shall not affect any obligation of an Eligible Subsidiary
theretofore incurred. The Agent shall promptly give notice to the Banks of the
receipt of any Election to Participate or Election to Terminate.
"ENVIRONMENTAL LAWs" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including, without limitation, ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
5
<PAGE> 12
disposal, transport or handling of pollutants, contaminants, Hazardous
Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Company
and the Agent.
"EURO-DOLLAR LOAN" means (i) a Committed Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or
Notice of Interest Rate Election or (ii) an overdue amount which was a
Euro-Dollar Loan immediately before it became overdue.
"EURO-DOLLAR MARGIN" has the meaning set forth in Section 2.08(b).
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to Section
2.08(b) on the basis of an Adjusted Interbank Offered Rate.
"EURO-DOLLAR RESERVE PERCENTAGE" has the meaning set forth in Section
2.08(b).
"EVENT OF DEFAULT" has the meaning set forth in Section 6.01.
"EXISTING CREDIT AGREEMENT" means the $100,000,000 Credit Agreement dated
as of June 21, 1996 among the Timberland Company, the banks listed therein and
Morgan Guaranty Trust Company of New York, as agent, as amended through the date
hereof.
"EXISTING LETTER OF CREDIT" means a Letter of Credit outstanding under the
Existing Credit Agreement.
6
<PAGE> 13
"FACTORABLE RECEIVABLES" means Receivables of the Company and its
Subsidiaries (i) that are produced in the ordinary course of business, (ii) that
are not contingent upon any further performance, or any product guarantee, by
the Company or any of its Subsidiaries and (iii) arising from sales of
inventory.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Agent.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of (i)
Consolidated EBITR for such period to (ii) the sum of (A) Consolidated Interest
Expense for such period, (B) Consolidated Rental Expense for such period and (C)
dividends on preferred stock of the Company and its Consolidated Subsidiaries
for such period (other than any such dividends paid to the Company or its
Consolidated Subsidiaries).
"FIXED RATE LOANS" means Euro-Dollar Loans or Money Market Loans (excluding
Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section
8.01(a)) or any combination of the foregoing.
"GROUP OF LOANS" means at any time a group of Committed Loans to the same
Borrower consisting of (i) all such Committed Loans which are Base Rate Loans at
such time or (ii) all such Committed Loans which are Euro-Dollar Loans having
the same Interest Period at such time; provided that, if a Committed Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Section
8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans
from time to time as it would have been in if it had not been so converted or
made.
"GUARANTEE" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or
7
<PAGE> 14
other obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "GUARANTEE" used as a verb has a
corresponding meaning.
"HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydro-carbons, or any substance having any constituent elements displaying any
of the foregoing characteristics.
"INDEMNITEE" has the meaning set forth in Section 11.03.
"INTERBANK OFFERED RATE" has the meaning set forth in Section 2.08(b).
"INTEREST PERIOD" means: (1) with respect to each Euro-Dollar Loan, a
period commencing on the date of borrowing specified in the applicable Notice of
Committed Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business
Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date;
(2) with respect to each Money Market LIBOR Loan, the period commencing on
the date of borrowing specified in the applicable Notice of Money Market
Borrowing and ending such number of days thereafter (but not less than seven
days) as the Borrower may elect in accordance with Section 2.03; provided
8
<PAGE> 15
that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless, in the case of any Interest Period of at
least one month, such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date; and
(3) with respect to each Money Market Absolute Rate Loan, the period
commencing on the date of borrowing specified in the applicable Notice of Money
Market Borrowing and ending such number of days thereafter as the Borrower may
elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"INVESTMENT" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, time deposit or otherwise.
"ISSUING BANK" means BankBoston N.A. in its capacity as issuer of the
Letters of Credit, and its successors in such capacity.
"LETTER OF CREDIT" means a Standby Letter of Credit or a Trade Letter of
Credit.
"LETTER OF CREDIT LIABILITIES" means, with respect to any Bank at any time,
the sum of (i) its participation in the undrawn amount which is then, or may
thereafter become, available for drawing under all outstanding Letters of Credit
(including, with respect to Letters of Credit providing for drawings to be made
in currencies other than U.S. dollars, the U.S. dollar equivalent of the amount
available for drawing thereunder in such other currency, determined on the basis
of the exchange rate that would be applicable pursuant to Section 2.09(e)(i) if
such
9
<PAGE> 16
drawing were made at such time) and (ii) its participation in the amount of each
unpaid Reimbursement Obligation for drawings theretofore made under all Letters
of Credit.
"LEVEL I STATUS" exists on any date if (i) the Fixed Charge Coverage Ratio
for the Calculation Period with respect to such date is at least 2.75 to 1.0 and
(ii) the Leverage Ratio as of the last day of each fiscal quarter included in
the Calculation Period with respect to such date is less than 0.75 to 1.0.
"LEVEL II STATUS" exists on any date if (i) Level I Status does not exist,
(ii) the Fixed Charge Coverage Ratio for the Calculation Period with respect to
such date is at least 2.25 to 1.0, and (iii) the Leverage Ratio as of the last
day of each fiscal quarter included in the Calculation Period with respect to
such date is less than 1.0 to 1.0.
"LEVEL III STATUS" exists on any date if neither Level I Status nor Level
II Status exists.
"LEVERAGE RATIO" means, for any date, the ratio of (i) Consolidated Debt
less Adjusted Consolidated Cash Holdings on such date to (ii) Consolidated Net
Worth on such date.
"LIBOR AUCTION" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the Interbank Offered Rate pursuant to Section
2.03.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Company or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN" means a Base Rate Loan, a Euro-Dollar Loan or a Money Market Loan
and "Loans" means Base Rate Loans, Euro-Dollar Loans or Money Market Loans or
any combination of the foregoing.
"MATERIAL DEBT" means Debt (other than the Loans or the Reimbursement
Obligations) of the Company and/or one or more of its Subsidiaries, arising in
one or more related or unrelated transactions, in an aggregate principal amount
exceeding $5,000,000.
10
<PAGE> 17
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $5,000,000.
"MATERIAL PLAN" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $5,000,000.
"MONEY MARKET ABSOLUTE RATE" has the meaning set forth in Section 2.03(c).
"MONEY MARKET ABSOLUTE RATE LOAN" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"MONEY MARKET LENDING OFFICE" means, as to each Bank, its Domestic Lending
Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; provided that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"MONEY MARKET LIBOR LOAN" means a loan to be made by a Bank pursuant to a
LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant
to Section 8.01(a)).
"MONEY MARKET LOAN" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"MONEY MARKET MARGIN" has the meaning set forth in Section 2.03(c).
"MONEY MARKET QUOTE" means an offer by a Bank to make a Money Market Loan
in accordance with Section 2.03.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during
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<PAGE> 18
such five year period.
"NOTES" means promissory notes of a Borrower, substantially in the form of
Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans
made to it, and "Note" means any one of such promissory notes issued hereunder.
"NOTICE OF BORROWING" means a Notice of Committed Borrowing (as defined in
Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(d)).
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.07(a).
"NOTICE OF ISSUANCE" has the meaning set forth in Section 2.09(b).
"PARENT" means, with respect to any Bank, any Person controlling such Bank.
"PARTICIPANT" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED FACTORING TRANSACTION" means any sale or other transfer by the
Company or any of its Subsidiaries of Factorable Receivables, which sale or
transfer does not involve the creation of any recourse obligation in respect
thereof on the part of the Company or any of its Subsidiaries (other than with
respect to matters of title to, and the character (other than the
collectability) of, the Factorable Receivables so sold or transferred); provided
that the aggregate principal amount of Factorable Receivables that may be sold
or transferred pursuant to such sales or transfers during any fiscal year of the
Company may not exceed $50,000,000.
"PERMITTED SHORT-TERM DEBT" means Debt (other than Loans or Debt permitted
under Section 5.08(a)(vii)) of the Company or any of its Subsidiaries that is
payable on demand or that has a maturity, at the time such Debt is incurred or
at any time at which such maturity is extended, of not more than one year from
the date such Debt is incurred or such maturity is extended, as the case may be.
"PERSON" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
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<PAGE> 19
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY DATE" means the last Euro-Dollar Business Day of each March,
June, September and December.
"REFERENCE BANKS" means the principal London offices of ABN AMRO Bank N.V.,
BankBoston N.A. and Morgan Guaranty Trust Company of New York.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"REIMBURSEMENT OBLIGATION" means an obligation of the Company to reimburse
the Issuing Bank pursuant to Section 2.09(e) for the amount of a drawing under a
Letter of Credit.
"REQUIRED BANKS" means at any time Banks having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes and participations in Letters of Credit constituting
more than 50% of the sum of (i) the aggregate unpaid principal amount of the
Loans and (ii) the aggregate Letter of Credit Liabilities outstanding.
"RESTRICTED PAYMENT" means (i) any dividend or other distribution on any
shares of the Company's capital stock (except dividends payable solely in shares
of its capital stock) or (ii) any payment (other than payments for the
repurchase of shares of the Company's common stock from employees or former
employees of the Company or any of its Subsidiaries pursuant to the 1987
Employee Stock Purchase Plan, the 1991 Employee Stock Purchase Plan, the 1987
Stock Option Plan, the 1997 Stock Option Plan for Non-Executive Employees or the
1997 Incentive Plan, in each case as amended (other than to change in any
material respect any provisions relating to repurchases of any such shares) from
time to time (or any successor plans with substantially similar provisions), in
an aggregate amount not to exceed the proceeds received by the Company after
December 30, 1997 of sales of shares of the Company's common stock to employees
of the Company and its Subsidiaries) on account of the purchase, redemption,
retirement
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<PAGE> 20
or acquisition of (a) any shares of the Company's capital stock or (b) any
option, warrant or other right to acquire shares of the Company's capital stock.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"STANDBY LETTER OF CREDIT" means a letter of credit issued or to be issued
(or deemed issued pursuant to Section 2.09(a)(ii)) hereunder by the Issuing
Bank, other than a Trade Letter of Credit.
"STANDBY LETTER OF CREDIT COMMISSION RATE" has the meaning set forth in
Section 2.09(i).
"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"SWARTZ FAMILY" means Sidney W. Swartz, his estate, his spouse, his lineal
descendants, trusts established for his, her or their benefit, the Swartz Family
Charitable Trust and The Sidney W. Swartz 1982 Family Trust.
"TEMPORARY CASH INVESTMENT" means any Investment in (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper or banker's
acceptance rated at least A-2 by S&P or P-2 by Moody's (iii) time deposits with,
including certificates of deposit issued by, (x) any office located in the
United States of (A) any bank or trust company which is organized under the laws
of the United States or any state thereof and has capital, surplus and undivided
profits aggregating at least $100,000,000 or (B) any Bank or (y) in the case of
Investments made by a Subsidiary of the Company whose principal place of
business is located outside the United States, any office located outside the
United States of (A) any bank or trust company the long-term unsecured senior
debt of which is rated AA or higher by S&P or Aa or higher by Moody's or (B) any
Bank, (iv) money market funds which invest only in securities described in
clauses (i), (ii) and (iii)(x) above or (v) repurchase agreements with respect
to securities described in clause (i) above entered into with an office of a
bank or trust company meeting the criteria specified in clause (iii) above;
provided in each case that such Investment matures within one year from the date
of acquisition thereof by the Company or a Subsidiary.
"TERMINATION DATE" means June 19, 2001.
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"TRADE LETTER OF CREDIT" means a letter of credit issued or to be issued
(or deemed issued pursuant to Section 2.09(a)(ii)) hereunder by the Issuing Bank
to facilitate the payment of the purchase price for the acquisition by the
Company and the Subsidiaries of a specific shipment or shipments of inventory
and raw materials in the ordinary course of their business where the intended
and expected means of payment of such purchase price is through a drawing under
such letter of credit.
"TRADE LETTER OF CREDIT COMMISSION RATE" has the meaning set forth in
Section 2.09(i).
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), but only to the extent that
such excess represents a potential liability of a member of the ERISA Group to
the PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" means any Consolidated Subsidiary
all of the shares of capital stock or other ownership interests of which (except
directors' qualifying shares and similar shareholdings by directors and, in the
case of The Outdoor Footwear Company, shares of non-voting common stock of The
Outdoor Footwear Company issued to employees thereof under arrangements
consistent with past practice) are at the time directly or indirectly owned by
the Company.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article 5 to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article 5 for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of
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<PAGE> 22
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Company and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "BORROWING" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article 2 on the same date, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate Loans, have the same
Interest Period or initial Interest Period. Borrowings are classified for
purposes of this Agreement either by reference to the pricing of Loans
comprising such Borrowing (e.g., a "EURO-DOLLAR BORROWING" is a Borrowing
comprised of Euro-Dollar Loans) or by reference to the provisions of Article 2
under which participation therein is determined (i.e., a "COMMITTED BORROWING"
is a Borrowing under Section 2.01 in which all Banks participate in proportion
to their Commitments, while a "MONEY MARKET BORROWING" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the basis of their
bids in accordance therewith).
ARTICLE 2
SECTION 2.01. Commitments to Lend. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make loans to the Company or any
Eligible Subsidiary pursuant to this Section from time to time before the
Termination Date in amounts such that the outstanding aggregate principal amount
of Committed Loans and the aggregate Letter of Credit Liabilities of such Bank
shall not exceed the amount of its Commitment. Each Borrowing under this Section
shall be in an aggregate principal amount of (i) $500,000 or any larger multiple
of $100,000, in the case of a Base Rate Borrowing, and (ii) $1,000,000 or any
larger multiple of $100,000, in the case of a Euro-Dollar Borrowing (except that
any such Borrowing may be in the aggregate amount available in accordance with
Section 3.02(c)) and shall be made from the several Banks ratably in proportion
to their respective Commitments. Within the foregoing limits, a Borrower may
borrow under this Section, prepay Loans to the extent permitted by Section 2.14,
and reborrow at any time before the Termination Date under this Section. The
Commitments shall terminate on the Termination Date.
SECTION 2.02. Notice of Committed Borrowings. The applicable Borrower
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shall give the Agent notice, substantially in the form of Exhibit B hereto (a
"NOTICE OF COMMITTED BORROWING"), not later than 11:30 A.M. (New York City time)
on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or at a Euro-Dollar Rate, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings pursuant
to Section 2.01, any Borrower may, as set forth in this Section, request the
Banks prior to the Termination Date to make offers to make Money Market Loans to
the Borrower. The Banks may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section. Money Market Loans shall constitute Loans
made under this Credit Agreement, including, without limitation, for purposes of
Section 3.01(c) hereof, but shall not constitute a usage by the Bank making such
Money Market Loan of its Commitment. Accordingly, the making by any Bank of any
Money Market Loan shall not, subject to Section 3.01(c), reduce such Bank's
obligation to make Committed Loans pursuant to any Committed Borrowing pursuant
to Section 2.01 or participate in any Letter of Credit pursuant to Section 2.09.
(b) INVITATION FOR MONEY MARKET QUOTES. When a Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Banks by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto so as to be received no later than
(x) 9:00 A.M. (New York City time) on the third Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction, or
(y) 8:00 A.M. (New York City time) on the date of Borrowing proposed therein, in
the case of an Absolute Rate Auction (or, in either case, such other time or
date as
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<PAGE> 24
the Company and the Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Invitation for Money Market Quotes for
the first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $500,000
or a larger multiple of $100,000, provided that the sum of (A) the
aggregate principal amount of all Money Market Loans outstanding and (B)
the aggregate principal amount of all Permitted Short-Term Debt outstanding
shall at no time exceed $60,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than
one Interest Period in a single Invitation for Money Market Quotes. No
Invitation for Money Market Quotes shall be given within three Euro-Dollar
Business Days (or such other number of days as the Company and the Agent may
agree) of any other Invitation for Money Market Quotes.
(i) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. Each Bank may submit a
Money Market Quote containing an offer or offers to make Money Market Loans in
response to any Invitation for Money Market Quotes. Each Money Market Quote must
comply with the requirements of this subsection (c) and must be submitted to the
Borrower by telex or facsimile transmission at its offices specified in or
pursuant to Section 11.01 not later than (x) 10:30 A.M. (New York City time) on
the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Company and the Agent shall have
mutually agreed and shall have notified to the Banks not later than the date of
the Invitation for Money Market Quotes for the first LIBOR Auction or Absolute
Rate Auction for which such change is to be effective). Subject to Articles 3
and 6, any Money Market Quote so made shall be irrevocable except with the
written consent of the Borrower.
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(ii) Each Money Market Quote shall be in substantially the form of Exhibit
D hereto and shall in any case specify:
(A) the proposed date of Borrowing, which shall be the proposed date
of Borrowing set forth in the corresponding Invitation for Money Market
Quotes,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $500,000 or a larger
multiple of $100,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable Interbank Offered Rate (the "MONEY MARKET MARGIN") offered for
each such Money Market Loan, expressed as a percentage (specified to the
nearest 1/10,000 of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000 of 1%) (the "MONEY MARKET ABSOLUTE
RATE") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the
quoting Bank with respect to each Interest Period specified in the related
Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (c)(ii),
(B) contains qualifying, conditional or similar language,
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<PAGE> 26
(C) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes, or
(D) arrives after the time set forth in subsection (c)(i).
(d) ACCEPTANCE AND NOTICE BY BORROWER. Not later than (x) 11:30 A.M. (New
York City time) on the third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction, or (y) 11:00 A.M. (New York City
time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction
(or, in either case, such other time or date as the Company and the Agent shall
have mutually agreed and shall have notified the Banks not later than the date
of the Invitation for Money Market Quotes for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the Borrower
shall notify each Bank from which it has received a Money Market Quote of its
acceptance or non-acceptance of the offers contained in such Money Market Quote;
provided that if the Borrower shall have failed to give such notice to any such
Bank with respect to any Money Market Quote at or prior to such time, the offers
contained in such Money Market Quote shall be deemed to have been rejected by
such Borrower. In the case of acceptance, such notice (a "NOTICE OF MONEY MARKET
Borrowing"), a copy of which shall be sent by telex or telecopy to the Agent,
shall specify the aggregate principal amount of offers for each Interest Period
that are accepted from each Bank. The Borrower may accept any Money Market Quote
in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Invitation for
Money Market Quotes,
(ii) the principal amount of each Money Market Borrowing must be
$500,000 or a larger multiple of $100,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
(iv) immediately after the making of the Money Market Loans to be made
pursuant to all accepted Money Market Quotes, the sum of (A) the aggregate
principal amount of all Money Market Loans outstanding and (B) the
aggregate principal amount of all Permitted Short-Term Debt outstanding
shall not exceed $60,000,000, and
(v) the Borrower may not accept any offer that is described in
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<PAGE> 27
subsection (c)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(e) ALLOCATION BY BORROWER. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related Interest Period, the principal amount
of Money Market Loans in respect of which such offers are accepted shall be
allocated by the Borrower among such Banks as nearly as possible (in multiples
of $500,000, as the Borrower may deem appropriate) in proportion to the
aggregate principal amounts of such offers.
(f) On and as of the Effective Date, each Continuing Money Market Loan
shall be deemed to be a Money Market Loan hereunder and to have been made
pursuant to this Section 2.03 on the date upon which such Continuing Money
Market Loan was made under the Existing Credit Agreement, notwithstanding that
such date is prior to the Effective Date.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share, if any, of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(b) Not later than 1:30 P.M. (New York City time) on the date of each
Borrowing, each Bank participating therein shall make available its share of
such Borrowing, in Federal or other funds immediately available in New York
City, to the Agent at its address specified in or pursuant to Section 11.01.
Unless the Agent determines that any applicable condition specified in Article 3
has not been satisfied, the Agent will make the funds so received from the Banks
available to the Borrower at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsection (b) of this Section 2.04 and the Agent may, in reliance upon
such assumption, make available to the applicable Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the applicable Borrower
severally agree to repay to the Agent forthwith on demand such corresponding
amount
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together with interest thereon, for each day from the date such amount is made
available to the applicable Borrower until the date such amount is repaid to the
Agent, at (i) in the case of the applicable Borrower, a rate per annum equal to
the higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.08 and (ii) in the case of such Bank, the Federal Funds
Rate. If such Bank shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Bank's Loan included in such Borrowing
for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank to each Borrower shall be
evidenced by a single Note of such Borrower payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request that its
Loans of a particular type to such Borrower be evidenced by a separate Note of
such Borrower in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to a "Note"
or the "Notes" of such Bank shall be deemed to refer to and include any or all
of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or
3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount and type of each Loan made by it to each Borrower and the date
and amount of each payment of principal made with respect thereto, and may, if
such Bank so elects in connection with any transfer or enforcement of its Note
of any Borrower, endorse on the schedule forming a part thereof appropriate
notations to evidence the foregoing information with respect to each such Loan
to such Borrower then outstanding; provided that the failure of any Bank to make
any such recordation or endorsement shall not affect the obligations of any
Borrower hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by each Borrower so to endorse its Notes and to attach to and make a
part of any Note a continuation of any such schedule as and when required.
SECTION. 2.06. Maturity of Loans. (a)Each Committed Loan shall mature, and
the principal amount thereof shall be due and payable, on the Termination Date.
(b) Each Money Market Loan included in any Money Market Borrowing shall
mature, and the principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Borrowing.
SECTION 2.07 Method of Electing Interest Rates. (a) The Loans included in
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each Committed Borrowing shall bear interest initially at the type of rate
specified by the applicable Borrower in the applicable Notice of Borrowing.
Thereafter, the applicable Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the applicable Borrower may
elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day; and
(ii) if such Loans are Euro-Dollar Loans, the applicable Borrower may
elect to convert such Loans to Base Rate Loans or elect to continue such
Loans as Euro-Dollar Loans for an additional Interest Period, in each case
effective on the last day of the then current Interest Period applicable to
such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Agent at least three Euro-Dollar Business Days before the
conversion or continuation selected in such Notice is to be effective. A Notice
of Interest Rate Election may, if it so specifies, apply to only a portion of
the aggregate principal amount of the relevant Group of Loans; provided that (i)
such portion is allocated ratably among the Loans comprising such Group, (ii)
the portion to which such Notice applies, and the remaining portion to which it
does not apply, are (x) in the case of any portion that is to be converted to or
continued as Euro-Dollar Loans, at least $1,000,000 and (y) in the case of any
portion that is to be converted to or continued as Base Rate Loans, at least
$500,000 and (iii) no more than one of such portions is other than a multiple of
$100,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such Notice
applies;
(ii) the date on which the conversion or continuation selected in such
Notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) whether the Loans comprising such Group are to be converted and
if, after such conversion, such Loans are to be Euro-Dollar Loans, the
duration of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
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additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the applicable
Borrower pursuant to subsection (a) above, the Agent shall promptly notify each
Bank of the contents thereof and such Notice shall not thereafter be revocable
by the Company or the applicable Borrower. If the applicable Borrower fails to
deliver a timely Notice of Interest Rate Election to the Agent for any Group of
Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans on the
last day of the then current Interest Period applicable thereto.
SECTION 2.08 Interest Rates. (a) Each Base Rate Loan shall bear interest on
the outstanding principal amount thereof, for each day from the date such Loan
is made until it becomes due, at a rate per annum equal to the Base Rate for
such day. Such interest shall be payable quarterly in arrears on each Quarterly
Date and, with respect to the principal amount of any Base Rate Loan converted
to a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any
overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted Interbank Offered Rate applicable to such Interest Period. Such
interest shall be payable for each Interest Period on the last day thereof and,
if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"EURO-DOLLAR MARGIN" means, for any day, (a) if such day occurs prior to
the date upon which the Borrower delivers or is required to deliver the
certificate required by Section 5.01(c) for the second quarter of 1998, 0.40%
and (b) if such day occurs on or after the date upon which such certificate is
so delivered or required to be delivered (i) if Level I Status exists on such
day, 0.40%, (ii) if Level II Status exists on such day, 0.65% and (iii) if Level
III Status exists on such day, 0.90%.
The "ADJUSTED INTERBANK OFFERED RATE" applicable to any Interest Period
means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
Interbank
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Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The "INTERBANK OFFERED RATE" applicable to any Interest Period means the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Reference Banks in the London or, in the case of any Reference Bank that
does not accept interbank deposits in London, New York interbank market at
approximately 11:00 A.M. (London or New York time, as the case may be) two
Euro-Dollar Business Days before the first day of such Interest Period in an
amount approximately equal to the principal amount of the Euro-Dollar Loan of
such Reference Bank to which such Interest Period is to apply and for a period
of time comparable to such Interest Period.
"EURO-DOLLAR RESERVE PERCENTAGE" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day from and including the date payment
thereof was due to but excluding the date of actual payment, at a rate per annum
equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than six months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Reference Banks are offered to such Reference Bank in
the London or, in the case of any Reference Bank that does not accept interbank
deposits in London, New York interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, the rate applicable to Base Rate Loans for such day) and (ii)
the sum of the Euro-Dollar Margin for such day plus the Adjusted Interbank
Offered Rate applicable to such
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Loan at the date such payment was due.
(d) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.08(b) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
(e) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks by facsimile transmission, telex or cable of each rate of
interest so determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(f) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.09. Letters of Credit.
(a) COMMITMENT TO ISSUE LETTERS OF CREDIT.
(i) Subject to the terms and conditions hereof, the Issuing Bank
agrees to issue letters of credit hereunder from time to time before the
tenth day before the Termination Date upon the request of any Borrower (the
"LETTERS OF CREDIT"). Upon the date of issuance by the Issuing Bank of a
Letter of Credit, the Issuing Bank shall be deemed, without further action
by any party hereto, to have sold to each Bank, and each Bank shall be
deemed, without further action by any party hereto, to have purchased from
the
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Issuing Bank, a participation in such Letter of Credit and the related
Letter of Credit Liabilities in the proportion their respective Commitments
bear to the aggregate Commitments.
(ii) Notwithstanding any reference in any Existing Letter of Credit to
the Existing Credit Agreement, on and as of the Effective Date, each
Existing Letter of Credit shall be deemed to be a Letter of Credit and to
have been issued pursuant to clause (i) above on the Effective Date.
(b) NOTICE OF ISSUANCE.
(i) Any Borrower may request the Issuing Bank to issue a Letter of
Credit in favor of sellers of goods to the Company and its Subsidiaries on
any Domestic Business Day more than ten Domestic Business Days prior to the
Termination Date by delivering to the Issuing Bank, at its address referred
to in Section 11.01, a letter of credit application in the Issuing Bank's
form (a "NOTICE OF ISSUANCE"), completed to the reasonable satisfaction of
the Issuing Bank and specifying the date such Letter of Credit is to be
issued and the terms of such Letter of Credit.
(ii) Upon receipt of any Notice of Issuance from the Borrower, the
Issuing Bank shall process such Notice of Issuance in accordance with its
customary procedures and, subject to the terms and conditions hereof, shall
issue such Letter of Credit in accordance with the Company's instructions
by issuing the original of such Letter of Credit to the beneficiary thereof
and by furnishing a copy thereof to the applicable Borrower and, if the
Company is not the applicable Borrower, the Company.
(c) ADDITIONAL CONDITIONS TO ISSUANCE OF LETTERS OF CREDIT. In addition to
the conditions precedent set forth in Article 3, the obligations of the Issuing
Bank to issue Letters of Credit pursuant to this Section 2.09 are subject to the
additional conditions that (A) each Letter of Credit shall be in such form and
contain such terms as shall be reasonably satisfactory to the Issuing Bank and
(B) no Letter of Credit shall have an expiry date later than the earlier of (1)
ten days prior to the Termination Date and (2) one year after the issuance
thereof.
(d) DRAWINGS UNDER LETTERS OF CREDIT. Upon receipt from the beneficiary of
any Letter of Credit of any demand for payment or notice of a drawing under such
Letter of Credit, the Issuing Bank shall notify the Company and, unless the
instructions or documentation presented with respect to such demand or notice is
discrepant with the terms of such Letter of Credit, make available to the
beneficiary in accordance with the terms of such Letter of Credit the amount of
the drawing
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under such Letter of Credit. The Issuing Bank shall not honor, without the prior
consent of the Company, any demand for payment or notice of a drawing under a
Letter of Credit for which discrepant instructions or documentation has been
presented. The Issuing Bank shall promptly provide the Company with written,
electronic or oral notification of the existence and nature of any such
discrepancy. The Company shall instruct the Issuing Bank to honor or dishonor
such drawing within three (or such greater number as the Issuing Bank shall, in
its discretion, agree) Domestic Business Days of receipt of notification of the
discrepancy.
(e) REIMBURSEMENT AND OTHER PAYMENTS BY THE BORROWER.
(i) If any amount is drawn under any Letter of Credit, the Company
irrevocably and unconditionally agrees to reimburse the Issuing Bank, in
U.S. dollars, for all amounts paid by the Issuing Bank upon such drawing,
without presentment, demand, protest or other formalities of any kind,
together with any and all reasonable charges and expenses which the Issuing
Bank may pay or incur relative to such drawing. Such reimbursement payment
shall be due and payable not later than the date the Company receives
notification from the Issuing Bank of such drawing, if such notification is
given at or before 10:30 A.M. (New York City time). If such notification is
given after 10:30 A.M. (New York City time), such reimbursement payment
shall be due and payable not later than the first Domestic Business Day
succeeding the date the Company receives such notification. If a drawing is
payable in a currency other than U.S. dollars, the Company shall pay the
Issuing Bank the equivalent of the amount of such drawing in U.S. dollars,
at the Issuing Bank's then prevailing exchange rate, determined in each
case at the time such drawing is paid by the Issuing Bank.
(ii) In addition, the Company agrees to pay to the Issuing Bank
interest on any and all amounts unpaid (whether with the proceeds of Loans
or otherwise) by the Company when due hereunder with respect to a Letter of
Credit, for each day from and including the date when such amount becomes
due to but excluding the date such amount is paid in full, whether before
or after judgment, payable on demand, at a rate per annum equal to the sum
of 2% plus the rate applicable to Base Rate Loans for such day.
(f) PAYMENTS BY BANKS WITH RESPECT TO LETTERS OF CREDIT.
(i) Each Bank shall make available an amount, in U.S. dollars
(determined in accordance with the last sentence of Section 2.09(e)(i), in
the case of drawings paid in a currency other than U.S. dollars) equal to
its
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ratable share of any drawing under a Letter of Credit, in Federal or other
funds immediately available in New York City, to the Agent for the account
of the Issuing Bank by 2:00 P.M. (New York City time) on the later of (x)
the second Domestic Business Day following such drawing and (y) the date
the Company receives notification from the Issuing Bank, if such
notification is given at or before 10:30 A.M. (New York City time), or the
first Domestic Business Day succeeding the date the Company receives such
notification, if such notification is given later than 10:30 A.M. (New York
City time) (such later date, the "PAYMENT DATE"), together with interest
from and including the Payment Date to but excluding the date such amount
is so made available by such Bank on such amount at the average rate
charged to the Issuing Bank on overnight Federal funds transactions on the
date of such drawing as determined by the Issuing Bank, at the Issuing
Bank's address referred to in Section 11.01 hereof; provided that each
Bank's obligation shall be reduced by its pro rata share of any
reimbursement theretofore paid by the Company in respect of such drawing
pursuant to Section 2.09(e). The Issuing Bank shall notify the Agent and
the Agent shall notify each Bank of the amount of such Bank's obligation in
respect of any drawing under a Letter of Credit not later than 1:00 P.M.
(New York City time) on the day such payment by such Bank is due. Each Bank
shall be subrogated to the rights of the Issuing Bank against the Company
to the extent of all amounts due from such Bank to the Issuing Bank, plus
interest thereon, for each day from and including the day such amount is
due from such Bank to the (i) to but excluding the day the Company makes
payment to the Agent for the account of the Issuing Bank pursuant to
subsection (e) above, whether before or after judgment, at a rate per annum
equal to the sum of 2% plus the rate applicable to Base Rate Loans for such
day.
(ii) If any Bank fails to pay any amount required pursuant to clause
2.09(f)(i) on the date on which such payment is due, interest shall accrue
on such Bank's obligation to make such payment, for each day from and
including the date such payment becomes due to but excluding the date such
Bank makes such payment, whether before or after judgment, at a rate per
annum equal to (A) in the case of each day from and including the day such
payment is due through and including the first succeeding Domestic Business
Day (and any intervening days), the average rate charged to the Issuing
Bank on overnight Federal funds transactions for each such day as
determined by the Issuing Bank and (B) thereafter, the sum of 2% plus the
rate applicable to Base Rate Loans for such day. Any payment made by any
Bank after 3:00 P.M., New York City time, on any Domestic Business Day
shall be deemed for purposes of the preceding sentence to have been made
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on the next succeeding Domestic Business Day.
(iii) If the Company shall reimburse the Issuing Bank for any drawing
under a Letter of Credit after the Banks shall have made funds available to
the Issuing Bank with respect to such drawing in accordance with clause
2.09(f)(i), the Issuing Bank shall promptly upon receipt of such
reimbursement distribute to each Bank its pro rata share thereof, including
interest, to the extent received by the Issuing Bank.
(g) The obligations of the Company and each Bank under subsections (e) and
(f) above shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or any
Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of this Agreement or any Letter of Credit or any
document related hereto or thereto;
(iii) the use which may be made of any Letter of Credit by, or any
acts or omission of, a beneficiary of a Letter of Credit (or any Person for
whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other rights that
the Company may have at any time against a beneficiary of a Letter of
Credit (or any Person for whom the beneficiary may be acting), the Banks,
the Issuing Bank or any other Person, whether in connection with this
Agreement or the Letter of Credit or any document related hereto or thereto
or any unrelated transaction;
(v) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(vi) payment under a Letter of Credit against presentation to the
Issuing Bank of a draft or certificate that does not comply with the terms
of the Letter of Credit, provided that (x) the Issuing Bank has complied
with Section 2.09(d), (y) the Issuing Bank's determination that documents
presented under the Letter of Credit comply with the terms thereof shall
not
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have constituted gross negligence or willful misconduct of the Issuing Bank
and (z) failure of Issuing Bank to comply with Section 2.09(d) shall excuse
the Banks from their obligations under subsection (f) above to the same
extent, if any, that such failure excuses the Company from its obligations
under subsection (e) above; or
(vii) any other act or omission to act or delay of any kind by any
Bank, the Issuing Bank, the Agent or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of this clause
(vii), constitute a legal or equitable discharge of the Company's or such
Bank's obligations hereunder.
(h) The Company hereby indemnifies and holds harmless each Bank, the
Issuing Bank and the Agent from and against any and all claims, damages, losses,
liabilities, costs or expenses which such Bank, the Issuing Bank or the Agent
may incur (including, without limitation, any claims, damages, losses,
liabilities, costs or expenses which the Issuing Bank may incur by reason of or
in connection with the failure of any Bank to fulfill or comply with its
obligations to the Issuing Bank hereunder (but nothing herein contained shall
affect any rights the Company may have against such defaulting Bank)), and none
of the Banks, the Issuing Bank or the Agent nor any of their officers,
directors, employees or agents shall be liable or responsible, by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit, including without limitation any of
the circumstances enumerated in subsection (g) above, as well as (i) any error,
omission, interruption or delay in transmission or delivery of any messages, by
mail, cable, telegraph, telex, telecopy or otherwise, (ii) any loss or delay in
the transmission of any document required in order to make a drawing under a
Letter of Credit, (iii) any consequences arising from causes beyond the control
of the Issuing Bank, including, without limitation, any government acts, or any
other circumstances whatsoever in making or failing to make payment under such
Letter of Credit; provided that the Company shall not be required to indemnify
the Issuing Bank, the Agent or any Bank for any claims, damages, losses,
liabilities, costs or expenses, and the Company shall have a claim for direct
(but not consequential) damage suffered by it, to the extent caused by the gross
negligence or willful misconduct of such Bank, the Agent or of the Issuing Bank
in determining whether a request presented under any Letter of Credit complied
with the terms of such Letter of Credit or, in the case of the Issuing Bank
only, the Issuing Bank's failure to comply with Section 2.09(d). Nothing in this
subsection (h) is intended to limit this Agreement. To the extent the Company
does not indemnify the Issuing Bank as required by this subsection, the Banks
agree to do so ratably in accordance with their Commitments.
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(i) LETTER OF CREDIT COMMISSION; ISSUING BANK FEES.
(i) The Company shall pay to the Agent for the account of the Banks,
ratably in proportion to their Commitments or, if all Commitments have been
terminated, in proportion to their Commitments immediately before such
termination, a letter of credit commission (x) at the Trade Letter of
Credit Commission Rate on the daily average amount available for drawing
(whether or not any conditions to drawing can then be met) on all
outstanding Trade Letters of Credit and (y) at the Standby Letter of Credit
Commission Rate on the daily average amount available for drawing (whether
or not any conditions to drawing can then be met) on all outstanding
Standby Letters of Credit. Such letter of credit commissions shall accrue
from and including the Effective Date to but excluding the Termination Date
(or, if later, the date of expiration or termination of the last Letter of
Credit to expire or be terminated) and shall be payable quarterly in
arrears on each Quarterly Date and on the date of termination of the
Commitments in their entirety (or, if later, on the date of expiration or
termination of the last Letter of Credit to expire or be terminated).
"STANDBY LETTER OF CREDIT COMMISSION RATE" means, for any day, (a) if such
day occurs prior to the date upon which the Borrower delivers or is required to
deliver the certificate required by Section 5.01(c) for the second quarter of
1998, 0.40% and (b) if such day occurs on or after the date upon which such
certificate is so delivered or required to be delivered (i) if Level I Status
exists on such day, 0.40%, (ii) if Level II Status exists on such day, 0.65% and
(iii) if Level III Status exists on such day, 0.90%.
"TRADE LETTER OF CREDIT COMMISSION RATE" means, for any day, (a) if such
day occurs prior to the date upon which the Borrower delivers or is required to
deliver the certificate required by Section 5.01(c) for the second quarter of
1998, 0.275% and (b) if such day occurs on or after the date upon which such
certificate is so delivered or required to be delivered (i) if Level I Status
exists on such day, 0.275%, (ii) if Level II Status exists on such day, 0.525%
and (iii) if Level III Status exists on such day, 0.90%.
(ii) The Company agrees to pay to the Issuing Bank fees in the amounts
and at the times agreed between the Company and the Issuing Bank.
(j) FURTHER ASSURANCES. The Company hereby agrees, from time to time, to do
and perform any and all acts and to execute any and all further instruments
reasonably requested by the Issuing Bank or the Agent more fully to effect the
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purposes of this Section 2.09 and the issuance of the Letters of Credit.
(k) PROVISIONS NOT EXCLUSIVE. The provisions of this Section 2.09 in
respect of any Letters of Credit are supplemental to, and not in derogation of,
any rights and remedies of the Issuing Bank, the Agent and the Banks under the
Notices of Issuance related to such Letters of Credit and under other applicable
law. In the event of any conflict between the terms of this Agreement and the
terms of the Notices of Issuance, the terms set forth in this Agreement shall
control.
(l) ISSUING BANK REPORTS. The Issuing Bank will notify the Agent on a
biweekly basis of (i) the aggregate payments made by the Issuing Bank during the
preceding two week period under Letters of Credit, (ii) the aggregate undrawn
amount (including, in the case of Letters of Credit providing for drawings to be
made in currencies other than U.S. dollars, the U.S. dollar equivalent of such
undrawn amount, determined on the basis of the exchange rate that would be
applicable pursuant to Section 2.09(e)(i) if such undrawn amount were drawn on
such day) of Letters of Credit outstanding on the last day of such two week
period and (iii) each payment made by the Issuing Bank that has not been
reimbursed by the Borrower. In addition, the Issuing Bank will provide to the
Agent such information as to the Letters of Credit and payments and
reimbursements made or due with respect thereto as the Agent may, from time to
time, reasonably request.
(m) Letters of Credit may be issued, and notices, requests and other
communications (including, without limitation, Notices of Issuance) to any
Borrower or the Issuing Bank with respect thereto may be issued or transmitted,
in either written or electronic form.
SECTION 2.10. Facility Fees. The Company shall pay to the Agent for the
account of the Banks ratably in proportion to their Commitments (or, for any day
on or after the date upon which the Commitments shall have terminated in their
entirety, in proportion to the daily average of the aggregate outstanding
principal amount of their Loans and Letter of Credit Liabilities) a facility fee
at the rate of 0.20% per annum. Such facility fee shall accrue (i) from and
including the Effective Date to but excluding the Termination Date (or earlier
date of termination of the Commitments in their entirety), on the daily average
aggregate amount of the Commitments (whether used or unused) and (ii) from and
including such Termination Date or earlier date of termination to but excluding
the later of the date the Loans shall be repaid in their entirety and the date
of expiration or termination of the last Letter of Credit to expire or to be
terminated, on the daily sum of (A) the aggregate outstanding principal amount
of the Loans and (B) the aggregate Letter of Credit Liabilities. Accrued fees
under this Section shall be payable quarterly on each Quarterly Date and upon
the date of termination of the Commitments in their
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entirety and, if later, the date the Loans shall be repaid in their entirety and
the date of expiration or termination of the last Letter of Credit to expire or
be terminated.
SECTION 2.11. Mandatory Termination of Commitments. The Commitments shall
terminate in their entirety on the Termination Date.
SECTION 2.12. Optional Termination or Reduction of Commitments.
The Company may, upon at least three Domestic Business Days' notice to the
Agent, (i) terminate the Commitments at any time, if no Loans or Letters of
Credit are outstanding at such time, or (ii) ratably reduce the Commitments from
time to time by an aggregate amount of at least $5,000,000 so long as,
immediately after any such reduction the sum of the aggregate principal amount
of Loans outstanding and the aggregate Letter of Credit Liabilities of the
several Banks does not exceed the aggregate Commitments.
SECTION 2.13. Mandatory Prepayments.
(a) If, on any day, the sum (i) of the aggregate principal amount of Loans
outstanding and (ii) the aggregate Letter of Credit Liabilities of the several
Banks shall exceed the aggregate Commitments, the Borrowers shall prepay
Committed Loans (and, if, but only if, after all Committed Loans shall have been
prepaid, the aggregate principal amount of Loans outstanding shall continue to
exceed such sum, Money Market Loans), together with accrued interest thereon, to
the extent necessary to cause such sum, immediately after such prepayment, to be
less than or equal to the aggregate Commitments.
(b) If, on any day, the aggregate Letter of Credit Liabilities shall exceed
the lesser of (i) the aggregate Commitments and (ii) $80,000,000, the Borrowers
shall pay to the Issuing Bank an amount equal to such excess, to be deposited
with the Issuing Bank in the Cash Collateral Account to be held, applied or
released for application as provided in Section 2.20.
(c) Each prepayment of Loans required by this Section 2.13 shall be made
with respect to such Group or Groups of Loans and (subject to the limitations
set forth in subsection (a) above) such Money Market Borrowing or Borrowings as
the Borrowers may specify by notice to the Agent at or before the time of such
prepayment and shall be applied to prepay Loans comprising each such Group of
Loans or Loans comprising each such Money Market Borrowing pro rata; provided
that (i) subject to the limitations set forth in subsection (a) above, the
Borrowers shall specify Groups of Loans and Money Market Borrowings for
prepayment so as to minimize the amounts payable by the Borrowers pursuant to
Section 2.16 with respect to such prepayment and (ii) if no such timely
specification is given by the
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Borrowers, such prepayment shall be allocated first to Base Rate Loans, if any,
second to such Group or Groups of Euro-Dollar Loans as the Agent may determine,
until all such Groups of Euro-Dollar Loans shall have been repaid in full, and
third to such Money Market Borrowing or Borrowings as the Agent may determine.
SECTION 2.14. Optional Prepayments.
(a) Subject in the case of any Fixed Rate Borrowing to Section 2.16, any
Borrower may, upon notice to the Agent (i) not later than 11:30 A.M. (New York
City time) on the date of prepayment, in the case of a Group of Base Rate Loans
of such Borrower (or any Money Market Borrowing of such Borrower bearing
interest at the Base Rate pursuant to Section 8.01(a)) and (ii) at least three
Euro-Dollar Business Days prior to the date of prepayment, in the case of a
Group of Euro-Dollar Loans of such Borrower, prepay a Group of Loans of such
Borrower in whole at any time, or from time to time in part in amounts
aggregating (x) $500,000 or any larger multiple of $100,000, in the case of a
Group of Base Rate Loans or such a Money Market Borrowing or (y) $1,000,000 or a
larger multiple of $100,000, in the case of a Group of Euro-Dollar Loans, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group or
Borrowing.
(b) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share, if any, of such prepayment and such notice shall not thereafter
be revocable by the applicable Borrower.
SECTION 2.15. General Provisions as to Payments. (a) The Borrowers shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 11.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest on,
the Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on,
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the Money Market Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day. If the date for any payment of principal is extended
by operation of law or otherwise, interest thereon shall be payable for such
extended time.
(b) Unless the Agent shall have received notice from a Borrower prior to
the date on which any payment is due from such Borrower to the Banks hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent that such Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.16 Funding Losses. If a Borrower makes any payment of principal
with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a
Base Rate Loan (pursuant to Article 2, 6 or 8 or otherwise) on any day other
than the last day of an Interest Period applicable thereto, or the last day of
an applicable period fixed pursuant to Section 2.08(c), or if a Borrower fails
to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank
in accordance with Section 2.04(a) or 2.14(c), the Company shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan), including
(without limitation) any such loss incurred in obtaining, liquidating or
employing deposits from third parties, but excluding loss of margin for the
period after any such payment or conversion or failure to borrow or prepay,
provided that such Bank shall have delivered to the Company a certificate as to
the amount of such loss or expense, which certificate shall be conclusive in the
absence of manifest error.
SECTION 2.17. Computation of Interest and Fees. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and fees shall be
computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).
SECTION 2.18. Judgement Currency. If for the purpose of obtaining judgment
in any court it is necessary to convert a sum due from any Borrower
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hereunder or under any of the Notes in United States dollars ("DOLLARS") into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase dollars with
such other currency at the Agent's New York office on the Domestic Business Day
preceding that on which final judgment is given. The obligations of each
Borrower in respect of any sum due to any Bank or the Agent hereunder or under
any Note shall, notwithstanding any judgment in a currency other than dollars,
be discharged only to the extent that on the Domestic Business Day following
receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be
so due in such other currency such Bank or the Agent (as the case may be) may in
accordance with normal banking procedures purchase dollars with such other
currency; if the amount of dollars so purchased is less than the sum originally
due to such Bank or the Agent, as the case may be, in dollars, each Borrower
agrees, to the fullest extent that it may effectively do so, as a separate
obligation and notwithstanding any such judgment, to indemnify such Bank or the
Agent, as the case may be, against such deficiency, and if the amount of dollars
so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the
case may be, and (b) any amounts shared with other Banks as a result of
allocations of such excess as a disproportionate payment to such Bank under
Section 11.04, such Bank or the Agent, as the case may be, agrees to remit such
excess to the appropriate Borrower.
SECTION 2.19. Foreign Subsidiary Costs.
(a) If the cost to any Bank of making or maintaining any Loan to an
Eligible Subsidiary is increased, or the amount of any sum received or
receivable by any Bank (or its Applicable Lending Office) is reduced by an
amount deemed by such Bank to be material, by reason of the fact that such
Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction
outside the United States of America, the Company shall indemnify such Bank for
such increased cost or reduction within 15 days after demand by such Bank (with
a copy to the Agent). A certificate of such Bank claiming compensation under
this subsection (a) and setting forth the additional amount or amounts to be
paid to it hereunder shall be conclusive in the absence of manifest error.
(b) Each Bank will promptly notify the Company and the Agent of any event
of which it has knowledge that will entitle such Bank to additional interest or
payments pursuant to subsection (a) and will designate a different Applicable
Lending Office, if, in the judgment of such Bank, such designation will avoid
the need for, or reduce the amount of, such compensation and will not be
otherwise disadvantageous to such Bank.
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SECTION 2.20. Cash Collateral Account.
(a) All amounts required to be deposited as cash collateral with the
Issuing Bank pursuant to Section 2.13(b) or Section 6.03 shall be deposited in a
cash collateral account (the "CASH COLLATERAL ACCOUNT") established by the
Company with the Issuing Bank, to be held, applied or released for application
as provided in this Section 2.20.
(b) If and when any portion of the Letter of Credit Liabilities on which
any deposit of cash collateral was based (the "RELEVANT CONTINGENT EXPOSURE")
shall become fixed (a "DIRECT EXPOSURE") as a result of the payment by the
Issuing Bank of a draft presented under any relevant Letter of Credit, the
amount of such Direct Exposure (but not more than the amount in the Cash
Collateral Account at the time) shall be withdrawn by the Issuing Bank from the
Cash Collateral Account and shall be applied against such Direct Exposure and
the Relevant Contingent Exposure shall thereupon be reduced by such amount. If
at any time the amount in the Cash Collateral Account exceeds the Relevant
Contingent Exposure, the excess amount shall, so long as no Default shall have
occurred and be continuing, be promptly withdrawn by the Issuing Bank and paid
to the Company. If a Default shall have occurred and be continuing, such excess
amount shall be retained in the Cash Collateral Account and, if and when
requested by the Required Banks, shall be withdrawn by the Issuing Bank and
applied first to repay the Reimbursement Obligations and second any remaining
excess shall be paid to the Company.
(c) Interest and other payments and distributions made on or with respect
to the cash collateral held by the Issuing Bank in the Cash Collateral Account
shall be for the account of the Company and shall constitute cash collateral to
be held by the Issuing Bank or returned to the Company in accordance with
subsection (b) of this Section 2.20; provided that the Issuing Bank shall have
no obligation to invest any cash collateral on behalf of the Company or any
other Person. Beyond the exercise of reasonable care in the custody thereof, the
Issuing Bank shall have no duty as to any cash collateral in its possession or
control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Issuing Bank shall be deemed to have exercised
reasonable care in the custody and preservation of the cash collateral in its
possession if the cash collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the cash collateral, or for any diminution in
the value thereof, by reason of the act or omission of any agent or bailee
selected by the Issuing Bank in good faith. All expenses and liabilities
incurred by the Issuing Bank in connection with taking, holding and disposing of
any cash collateral (including customary custody and similar fees with respect
to
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any cash collateral held directly by the Issuing Bank) shall be paid by the
Company from time to time upon demand. Upon a Default, the Issuing Bank shall be
entitled to apply (and, at the request of the Required Banks but subject to
applicable law, shall apply) cash collateral or the proceeds thereof to payment
of any such expenses, liabilities and fees.
ARTICLE 3
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become effective upon the
satisfaction of each of the following conditions:
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed counterpart
shall not have been received, receipt by the Agent in form satisfactory to it of
telegraphic, telex, facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party);
(b) receipt by the Agent of a duly executed Note of the Company for the
account of each Bank dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent, with copies for each of the Banks, of an opinion
of Ropes & Gray, counsel for the Company, dated the Effective Date and
substantially in the form of Exhibit E hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required Banks
may reasonably request;
(d) receipt by the Agent, with copies for each of the Banks, of an opinion
of Davis Polk & Wardwell, special counsel for the Agent, dated the Effective
Date and substantially in the form of Exhibit F hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(e) receipt by the Agent and Issuing Bank of evidence satisfactory to the
Agent and (in the case of Existing Letters of Credit) the Issuing Bank that each
Continuing Money Market Loan and each Existing Letter of Credit shall have been
amended to the extent, if any, necessary to reflect the fact that on and after
the Effective Date such Continuing Money Market Loan or Existing Letter of
Credit shall be deemed to have been made or issued hereunder;
(f) all principal of and interest on any Loans (as defined in the Existing
Credit Agreement) outstanding under the Existing Credit Agreement (other than
Money Market Loans of any Bank which has agreed as of the Effective Date to
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maintain such Money Market Loans outstanding ("CONTINUING MONEY MARKET LOANS")),
and all other amounts accrued or otherwise payable under the Existing Credit
Agreement through the Effective Date (including, without limitation, all letter
of credit commissions accrued thereunder in respect of Existing Letters of
Credit, whether or not otherwise then due and payable, but excluding interest
accrued but not otherwise payable thereunder in respect of Continuing Money
Market Loans), shall have been paid in full and all commitments under the
Existing Credit Agreement shall have been terminated; and all amounts due and
payable to the banks or the agent hereunder shall have been paid in full; and
(g) receipt by the Agent, with copies for each of the Banks, of all other
documents the Agent may reasonably request relating to the existence of the
Company, the corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Agent.
The Agent shall promptly notify the Company and the Banks of the Effective
Date, and such notice shall be conclusive and binding on all parties hereto.
SECTION 3.02. Borrowings and Letter of Credit Issuances. The obligation of
any Bank to make a Loan on the occasion of any Borrowing (including the deemed
making of Money Market Loans pursuant to Section 2.03(f)), and the obligation of
the Issuing Bank to issue any Letter of Credit (including the deemed issuance of
the initial Letters of Credit pursuant to Section 2.09(a)(ii)), are subject to
the satisfaction of the following conditions:
(a) the fact that the Effective Date shall have occurred on or prior to
June 19, 1998;
(b) except in the case of the deemed issuance of the initial Letters of
Credit pursuant to Section 2.09(a)(ii) or of Money Market Loans pursuant to
Section 2.03(f), receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03 or a Notice of Issuance as required by Section 2.09(b), as
the case may be;
(c) the fact that, immediately after such Borrowing or the issuance of such
Letter of Credit, as the case may be, (i) the aggregate Letter of Credit
Liabilities of the several Banks shall not exceed $80,000,000 and (ii) the sum
of the aggregate outstanding principal amount of the Loans and the aggregate
Letter of Credit Liabilities of the several Banks shall not exceed the aggregate
Commitments;
(d) the fact that, immediately before and after such Borrowing or issuance
of such Letter of Credit, no Default shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrowers
contained in this Agreement shall be true on and as of the date of such
Borrowing.
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Each Borrowing and each issuance of a Letter of Credit hereunder shall be
deemed to be a representation and warranty by the Borrowers on the date of such
Borrowing or issuance of such Letter of Credit, as the case may be, as to the
facts specified in clauses (c), (d) and (e) of this Section, except to the
extent that such representations and warranties relate expressly to an earlier
date.
SECTION 3.03. First Borrowing by Each Eligible Subsidiary. The obligation
of each Bank to make a Loan on the occasion of the first Borrowing by each
Eligible Subsidiary is subject to the satisfaction of the following further
conditions:
(a) receipt by the Agent for the account of each Bank of a duly executed
Note of such Eligible Subsidiary dated on or before the date of such Borrowing
complying with the provisions of Section 2.05;
(b) receipt by the Agent of an opinion of counsel for such Eligible
Subsidiary acceptable to the Agent, substantially in the form of Exhibit I
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(c) receipt by the Agent of all documents which it may reasonably request
relating to the existence of such Eligible Subsidiary, the corporate authority
for and the validity of the Election to Participate of such Eligible Subsidiary,
this Agreement and the Notes of such Eligible Subsidiary, and any other matters
relevant thereto, all in form and substance satisfactory to the Agent.
The opinion referred to in clause (b) above shall be dated no more than
five Euro-Dollar Business Days before the date of the first Borrowing by such
Eligible Subsidiary hereunder.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
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SECTION 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Company of this Agreement and its
Notes are within the Company's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official (other than disclosure, if any,
thereof, and filing, if any, of a copy hereof with the Securities and Exchange
Commission, required by the Securities Act of 1933 or the Securities Exchange
Act of 1934, in each case as amended) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
SECTION 4.03. Building Effect. This Agreement constitutes a valid and
binding agreement of the Company and its Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of December 31, 1997 and the related consolidated statements of
operations, changes in stockholders' equity and cash flow for the fiscal year
then ended, reported on by Deloitte & Touche and set forth in the Company's 1997
Form 10-K, a copy of which has been delivered to each of the Banks, fairly
presented, in conformity with generally accepted accounting principles, the
consolidated financial position of the Company and its Consolidated Subsidiaries
as of such date and their consolidated results of operations and cash flows for
such fiscal year.
(b) Except as disclosed on the Company's 1997 Form 10-K, copies of which
have been provided to the Banks, since December 31, 1997 there has been no
material adverse change in the business, financial position or results of
operations of the Company and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Company threatened against or affecting, the
Company or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Company and its Consolidated Subsidiaries, considered as a whole, or which in
any
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manner draws into question the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the currently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Company conducts an ongoing review of the effect of Environmental
Laws on the business, operations and properties of the Company and its
Subsidiaries, in the course of which it identifies and evaluates associated
liabilities and costs (including, without limitation, any capital or operating
expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site disposal
of wastes or Hazardous Substances, and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On the
basis of this review, the Company has reasonably concluded that such associated
liabilities and costs, including the costs of compliance with Environmental
Laws, are unlikely to have a material adverse effect on the business, financial
condition, results of operations or prospects of the Company and its
Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of the
Company and its Subsidiaries have been closed through the fiscal year ended
December 31, 1991. The Company and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns which are required
to be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by the Company or any Subsidiary, except for
any such taxes being diligently contested in good faith by appropriate
proceedings. The
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charges, accruals and reserves on the books of the Company and its Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of the
Company, adequate.
SECTION 4.09. Subsidiaries. Each of the Company's Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all corporate or other powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.11. Full Disclosure. All information heretofore furnished by the
Company to the Agent, the Issuing Bank or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Company to the Agent, the
Issuing Bank or any Bank will be, true and accurate in all material respects on
the date as of which such information is stated or certified. The Company has
disclosed to the Banks in writing any and all facts, other than general economic
conditions, which materially and adversely affect or may affect (to the extent
the Company can now reasonably foresee) the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, considered as a
whole, or the ability of the Company to perform its obligations under this
Agreement and the Notes.
SECTION 4.12. Existing Letters of Credit and Continuing Money Market Loans.
Schedule III hereto identifies each Existing Letter of Credit outstanding as of
the date hereof and as of the Effective Date, and Schedule IV hereto identifies
each Continuing Money Market Loans outstanding as of the date hereof and as of
the Effective Date.
SECTION 4.13. Year 2000 Problem. The Company and its Subsidiaries have
reviewed the areas within their businesses and operations which could be
adversely affected by, and have developed or are developing a program to address
in its enterprise business systems on a timely basis, the risk that computer
applications used by the Company or any of its Subsidiaries may be unable to
recognize and properly perform date-sensitive functions involving certain dates
prior to and any date after December 31, 1999 (the "YEAR 2000 PROBLEM"). Based
upon such review, the Company reasonably believes that the cost of implementing
such program will not have any materially adverse effect on the business or
financial conditions of the Company or any of its Subsidiaries; however, the
Company and its Subsidiaries make no representation or warranty as to the
ability
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of external vendors who provide computer applications or information which
interfaces with the computer applications of the Company or any of its
Subsidiaries to address the Year 2000 Problem on a timely basis.
ARTICLE 5
COVENANTS
The Company agrees that, so long as any Bank has any Commitment or Letter
of Credit Liabilities hereunder or any amount payable under any Note remains
unpaid:
SECTION 5.01. Information. The Company will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end of
each fiscal year of the Company, consolidated and consolidating balance sheets
of the Company and its Consolidated Subsidiaries as of the end of such fiscal
year and the related consolidated and consolidating statements of operations and
consolidated statements of changes in stockholders' equity and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, (x) in the case of the consolidated statements, all
reported on in a manner acceptable to the Securities and Exchange Commission by
Deloitte & Touche or other independent public accountants of nationally
recognized standing, and (y) in the case of the consolidating statements, all
certified as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Company;
(b) as soon as available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year of the Company,
consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of operations and consolidated
statements of changes in stockholders' equity and cash flows for such quarter
and for the portion of the Company's fiscal year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Company's previous
fiscal year, all certified (subject to normal year-end adjustments and the
non-inclusion of notes permitted by the applicable regulations of the Securities
and Exchange Commission to be excluded from quarterly reports filed on Form
10-Q) as to fairness of presentation, generally accepted accounting principles
and consistency by the chief financial officer or the chief accounting officer
of the Company;
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(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the chief financial
officer, treasurer or the chief accounting officer of the Company (i) setting
forth in reasonable detail the calculations required to establish whether the
Company was in compliance with the requirements of Sections 5.07 through 5.11,
inclusive, and Sections 5.13 and 5.18 on the date of such financial statements
and (ii) stating whether any Default exists on the date of such certificate and,
if any Default then exists, setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a certificate of the firm of independent public
accountants which reported on such statements (i) whether anything has come to
their attention to cause them to believe that any Default existed on the date of
such statements and (ii) confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Company obtains knowledge of
any Default, if such Default is then continuing, a certificate of the chief
financial officer or the chief accounting officer of the Company setting forth
the details thereof and the action which the Company is taking or proposes to
take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of all financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8 or
its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which the Company shall have filed with the Securities and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any "reportable event" (as defined in Section 4043 of
ERISA) with respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability under
Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums
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under Section 4007 of ERISA) in respect of, or appoint a trustee to administer
any Plan, a copy of such notice; (iv) applies for a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the chief financial officer or the chief accounting
officer of the Company setting forth details as to such occurrence and action,
if any, which the Company or applicable member of the ERISA Group is required or
proposes to take; and
(i) from time to time such additional information regarding the financial
position or business of the Company and its Subsidiaries as the Agent, at the
request of any Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Company will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before maturity or in
accordance with customary trade practices, all their respective material
obligations and liabilities, including, without limitation, tax liabilities,
except where the same may be contested in good faith by appropriate proceedings,
and will maintain, and will cause each Subsidiary to maintain, in accordance
with generally accepted accounting principles, appropriate reserves for the
accrual of any of the same.
SECTION 5.03. Maintenance of Property; Insurance.
(a) The Company will maintain, and will cause each Subsidiary to maintain,
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Company will, and will cause each of its Subsidiaries to, maintain
(either in the name of the Company or in such Subsidiary's own name) with
financially sound and responsible insurance companies, insurance on all their
respective properties in at least such amounts and against at least such risks
(and with such risk retention) as are (i) insured against under the policies of
insurance of the Company and its Subsidiaries set forth on the schedule
previously provided by the Company to the Banks or (ii) usually insured against
in the same general area by companies of established repute engaged in the same
or a similar business; and will furnish to the Banks, upon request from the
Agent, information presented in
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reasonable detail as to the insurance so carried.
SECTION 5.04. Conduct of Business and Maintenance of existence. The Company
will continue, and will cause each Subsidiary to continue, to engage in business
of the same general type as now conducted by the Company and its Subsidiaries,
and will preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect their respective
corporate existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business; provided that nothing
in this Section 5.04 shall prohibit the merger or consolidation of a Subsidiary
with or into another Person if the corporation surviving such consolidation or
merger is a Wholly-Owned Subsidiary or the merger of a Subsidiary into the
Company if, in each case, after giving effect thereto, no Default shall have
occurred and be continuing, the termination of the corporate existence of any
Subsidiary if such termination is not materially disadvantageous to the Banks
and the Company in good faith determines that such termination is in the best
interest of the Company or a sale of capital stock of a Subsidiary permitted
under Section 5.12(ii).
SECTION 5.05. Compliance with Laws. The Company will comply, and will cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
SECTION 5.06. Inspection of Property, Books and Records. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of any Bank at such Bank's
expense to visit and inspect any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times, upon
reasonable notice and as often as may reasonably be desired.
SECTION 5.07. Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio
will at no time be less than 1.5 to 1.00.
SECTION 5.08. Debt. (a) The Company will not, and will not permit any of
its Subsidiaries to, incur or at any time be liable with respect to any Debt
except:
(i) Debt outstanding under this Agreement and the Notes,
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provided that for a minimum of thirty consecutive days in the period
between November 1 and March 1 (inclusive) of every 12 months there shall
be no Loans outstanding under this Agreement and no Permitted Short-Term
Debt outstanding;
(ii) Debt of any of the Company's Subsidiaries owing to the Company or
any of its Wholly-Owned Consolidated Subsidiaries permitted by Section
5.11;
(iii) Debt of the Company owing to Wholly-Owned Consolidated
Subsidiaries of the Company;
(iv) Guarantees by the Company or any of its Subsidiaries of Debt of
employees of the Company or any of its Wholly-Owned Consolidated
Subsidiaries, in an aggregate principal amount at any time outstanding not
to exceed $1,000,000;
(v) Debt of the Company or any of its Wholly-Owned Consolidated
Subsidiaries owing to a Subsidiary of the Company incurred as a result of
the transfer of funds from an account under the control of such Subsidiary
to an account under the control of the Company or such Wholly-Owned
Consolidated Subsidiary in connection with the Company's cash management
program;
(vi) Permitted Short-Term Debt of the Company in an aggregate
principal amount at any time outstanding not to exceed $30,000,000,
provided that for a minimum of thirty consecutive days in the period
between November 1 and March 1 (inclusive) of every 12 months there shall
be no such Debt outstanding and no Loans outstanding under this Agreement;
(vii) Debt denominated in currencies other than United States dollars
and having a maturity, at the time such Debt is incurred, of not more than
one year from the date such Debt is incurred in an aggregate principal
amount at the time of incurrence of any such Debt (the dollar equivalent of
all Debt outstanding at the time of any such incurrence being recalculated
as of the time of such incurrence on the basis of exchange rates then in
effect) not to exceed the equivalent of $25,000,000;
(viii) Debt outstanding on the date hereof and identified on Schedule
I hereto and, extensions, renewals and refinancings thereof, provided that
no such extension, renewal or refinancing shall increase the principal
amount
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of such Debt, shorten the maturity thereof or accelerate the amortization
thereof;
(ix) Debt in an aggregate principal amount not to exceed $15,000,000
at any time outstanding incurred or assumed for the purpose of financing
all or part of the cost of acquiring assets or consisting of the principal
component of rental payments of capitalized provided that the term of each
such lease is not, at the time such lease is entered into, less than five
years; and
(x) Debt not otherwise permitted under the foregoing clauses of this
Section in an aggregate principal amount not to exceed $10,000,000 at any
time outstanding.
SECTION 5.09. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be less than the sum of $100,000,000, 60% of
Consolidated Net Income for each fiscal quarter beginning with the second fiscal
quarter of 1998 which has ended at or before such time for which Consolidated
Net Income is positive and 75% of the net cash proceeds of all issuances by the
Company of shares of its capital stock after the Effective Date and at or before
such time.
SECTION 5.10. Restricted Payments. Neither the Company nor any Subsidiary
will declare or make any Restricted Payment unless, after giving effect thereto,
the aggregate of all Restricted Payments declared or made subsequent to March
27, 1998 does not exceed the sum of $100,000,000 plus 40% of Consolidated Net
Income for the period from March 27, 1998 through the end of the Company's then
most recent fiscal quarter (treated for this purpose as a single accounting
period). Nothing in this Section 5.10 shall prohibit the payment of any dividend
or distribution within 60 days after the declaration thereof if such declaration
was not prohibited by this Section 5.10.
SECTION 5.11. Investments. Neither the Company nor any Subsidiary will make
or acquire any Investment in any Person other than:
(a) Investments in Persons which immediately before and after giving effect
to such Investment are Subsidiaries of the Company, if, immediately thereafter,
the aggregate amount of all such Investments made after the date hereof does not
exceed $50,000,000 at any one time outstanding;
(b) Temporary Cash Investments;
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(c) loans or advances to current employees of the Company or such
Consolidated Subsidiary having a maturity of less than one year in an aggregate
principal amount at any time outstanding not to exceed $1,000,000;
(d) Investments the sole consideration for which is newly issued common
stock of the Company or newly issued preferred stock of the Company that is not
subject to mandatory redemption or redemption at the option of the holder before
the fourth anniversary of the date of issuance thereof;
(e) Investments consisting of Debt permitted under Section 5.08(a)(iii) or
5.08(a)(v); and
(f) any Investment not otherwise permitted by the foregoing clauses of this
Section if, immediately after such Investment is made or acquired, the aggregate
amount of all Investments permitted by this clause (f) does not exceed
$25,000,000 at any one time outstanding.
The amount of any Investment shall be the original cost of such Investment
plus the cost of all additions thereto, without adjustments for increases or
decreases in value, write-ups, write-downs or write-offs with respect to such
Investment.
SECTION 5.12. Maintenance of Ownership of Subsidiaries. The Company will at
all times maintain direct or indirect legal and beneficial ownership of the
percentage of outstanding shares of each class of capital stock set forth on
Schedule II of each of its Subsidiaries, except as modified by sales by
Subsidiaries of directors' qualifying shares, mergers and liquidations permitted
pursuant to the proviso to Section 5.14 and grants or sales by The Outdoor
Footwear Company of shares of its non-voting common stock to its employees
consistent with past practice.
SECTION 5.13. Negative Pledge. Neither the Company nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal amount not exceeding
$15,000,000 and identified on Schedule I;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
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purpose of financing all or any part of the cost of acquiring or constructing
such asset, provided that such Lien attaches to such asset concurrently with or
within 90 days after the acquisition or construction thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Company or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Company or a Subsidiary and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section 5.13, provided that such Debt is not increased and is
not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do not
secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an
amount exceeding $20,000,000 and (iii) do not in the aggregate materially
detract from the value of the Company's assets or materially impair the use
thereof in the operation of its business;
(h) Liens on assets of Subsidiaries securing Debt owing to the Company or
to Wholly-Owned Consolidated Subsidiaries permitted by Section 5.08(a);
(i) Liens on cash and cash equivalents securing Derivatives Obligations,
provided that the aggregate amount of cash and cash equivalents subject to such
Liens may at no time exceed $5,000,000;
(j) Liens on Factorable Receivables arising in connection with and as part
of the sale or transfer of such Factorable Receivables pursuant to Permitted
Factoring Transactions;
(k) Liens on amounts in the Cash Collateral Account securing obligations of
the Borrower with respect to Letters of Credit;
(l) Liens on inventory (including raw materials) acquired in the ordinary
course of business securing obligations as account party in respect of trade
letters of credit issued in support of the purchase of such inventory not to
exceed $25,000,000 at any one time outstanding; and
(m) Liens not otherwise permitted by the foregoing clauses of this Section
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securing Debt in an aggregate principal or face amount at any time outstanding
not to exceed $5,000,000.
SECTION 5.14. Consolidations, Mergers and Sales of Assets. The Company will
not consolidate or merge with or into any other Person or sell, lease or
otherwise transfer, directly or indirectly in one transaction or a series of
related transactions, all or any substantial part of the assets of the Company
and its Subsidiaries, taken as a whole, to any other Person; provided that a
Subsidiary of the Company may merge with or liquidate into the Company if the
Company is the corporation surviving such merger or liquidation and immediately
after giving effect to such merger, no Default shall have occurred and be
continuing.
SECTION 5.15. Restictions on Prepayments of and Amendments to Certain Debt.
(a) Except with the proceeds of the issuance by the Company of shares of
its common stock or refinancings thereof permitted under Section 5.08(a)(viii),
the Company will not, and will not permit any of its Subsidiaries to,
voluntarily repay or prepay the principal of December 1994 Private Placement
Debt; provided, however, that the Company may make such voluntary repayments and
prepayments in an aggregate amount of up to $100,000,000 if, during the period
from and including the sixtieth day prior to any such repayment or prepayment to
and including the thirtieth day after such repayment or prepayment, there shall
be no Loans or Permitted Short-Term Debt outstanding.
(b) The Company will not consent to any amendment of the amount or date of
any required repayment or prepayment of any Debt outstanding under any December
1994 Private Placement Debt except for an amendment of any such date to a date
on or after the earlier of (A) the date of such required repayment or prepayment
as in effect prior to such amendment and (B) the ninety-first day after the
Termination Date.
SECTION 5.16. The Company will not, and will not permit any Subsidiary to,
directly or indirectly, pay any funds to or for the account of, make any
investment (whether by acquisition of stock or indebtedness, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section 5.16 shall not prohibit (a) the Company from
declaring or paying any lawful dividend so long as, after giving effect thereto,
no Default shall have
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occurred and be continuing, (b) the Company or any Subsidiary from making sales
to or purchases from any Affiliate and, in connection therewith, extending
credit or making payments, or from making payments for services rendered by any
Affiliate, if such sales or purchases are made or such services are rendered in
the ordinary course of business and on terms and conditions at least as
favorable to the Company or such Subsidiary as the terms and conditions which
would apply in a similar transaction with a Person not an Affiliate, (c) the
Company or any Subsidiary from making payments of principal, interest and
premium on any Debt of the Company or such Subsidiary held by an Affiliate if
the terms of such Debt are substantially as favorable to the Company or such
Subsidiary as the terms which could have been obtained at the time of the
creation of such Debt from a lender which was not an Affiliate and (d) the
Company or any Subsidiary from participating in, or effecting any transaction in
connection with, any joint enterprise or other joint arrangement with any
Affiliate if the Company or such Subsidiary participates in the ordinary course
of its business and on a basis no less advantageous than the basis on which such
Affiliate participates.
SECTION 5.17. Use of Proceeds and Letters of Credit. The proceeds of the
Loans made (or deemed made pursuant to Section 2.03(f)) under this Agreement
will be used by the Borrowers for general corporate purposes, including working
capital. The Letters of Credit issued (or deemed issued pursuant to Section
2.09(a)(ii)) under this Agreement shall be used for general corporate purposes
or to support the purchase by the Company and its Subsidiaries of inventory and
raw materials in the ordinary course of business. None of such proceeds or
Letters of Credit will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
SECTION 5.18. Leverage Ratio. The Leverage Ratio will at no time exceed
1.35 to 1.00.
ARTICLE 6
DEFAULTS
6.01 SECTION. If one or more of the following events ("EVENTS OF DEFAULT")
shall have occurred and be continuing:
(a) any principal of any Loan or any Reimbursement Obligation shall not be
paid when due, or any interest, any fees or any other amount payable hereunder
shall not be paid within two Domestic Business Days of the due date thereof;
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(b) the Company shall fail to observe or perform any covenant contained in
Sections 5.07 to 5.15, inclusive, and 5.17 and 5.18;
(c) any Borrower shall fail to observe or perform any covenant or agreement
contained in this Agreement (other than those covered by clause (a) or (b)
above) for 30 days after written notice thereof has been given to the Company by
the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by any
Borrower in this Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been incorrect
in any material respect when made (or deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in respect
of any Material Financial Obligation when due or within any applicable grace
period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice or
lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Company or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Company or any Subsidiary seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
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(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $5,000,000;
(j) a judgment or order for the payment of money in excess of $5,000,000
shall be rendered against the Company or any Subsidiary and such judgment or
order shall continue unsatisfied and unstayed for a period of (i) in the case of
a judgment or order rendered by a court, arbitrator or governmental authority
located in the United States, 10 days or (ii) in the case of a judgment or order
rendered by a court, arbitrator or governmental authority located outside the
United States, 30 days; or
(k) any person or group of persons (within the meaning of Section 13 or 14
of the Securities Exchange Act of 1934, as amended) (other than the Swartz
Family) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
50% or more of the outstanding shares of common stock of the Company or 20% or
more of the voting power to elect a majority of the board of directors of the
Company; or the Swartz Family shall cease to have beneficial ownership of 51% of
the ordinary voting power to elect a majority of the board of directors of the
Company; or during any period of twelve consecutive calendar months, individuals
who were directors of the Company on the first day of such period shall cease to
constitute a majority of the board of the directors of the Company; then, and in
every such event, the Agent shall (i) if requested by Banks having more than 50%
in aggregate amount of the Commitments, by notice to the Company terminate the
Commitments and they shall thereupon terminate, and (ii) if requested by Banks
holding Notes evidencing more than 50% in aggregate principal amount of the
Loans, by notice to the Company declare the Notes (together with accrued
interest thereon) to be, and the Notes shall thereupon become, immediately due
and
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payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by each Borrower; provided that in the case of any of
the Events of Default specified in clause (g) or (h) above with respect to any
Borrower, without any notice to any Borrower or any other act by the Agent or
the Banks, the Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by each Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the Company
under Section 6.01(c) promptly upon being requested to do so by any Bank and
shall thereupon notify all the Banks and the Issuing Bank thereof.
SECTION 6.03. Cash Collateral. If any Event of Default specified in clause
(g) or (h) of Section 6.01 with respect to the Borrower shall occur, or the
Loans shall otherwise be accelerated or the Commitments terminated pursuant to
Section 6.01, then without any request or the taking of any other action by the
Agent, the Issuing Bank or any of the Banks, the Company shall be obligated
forthwith to pay to the Issuing Bank an amount in immediately available funds
equal to the then aggregate Letter of Credit Liabilities, to be held by the
Issuing Bank as cash collateral as provided in Section 2.20.
ARTICLE 7
THE AGENT
7.01 SECTION. Each Bank irrevocably appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the Notes as are delegated to the Agent by the terms hereof or
thereof, together with all such powers as are reasonably incidental thereto.
7.02 SECTION. Morgan Guaranty Trust Company of New York shall have the same
rights and powers under this Agreement as any other Bank and may exercise or
refrain from exercising the same as though it were not the Agent, and Morgan
Guaranty Trust Company of New York and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of business with any Borrower or
any Subsidiary or affiliate of any Borrower as if it were not the Agent
hereunder.
7.03 SECTION. The obligations of the Agent hereunder are
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only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article 6.
SECTION 7.04. Consultation With Experts. The Agent may consult with legal
counsel (who may be counsel for any Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates or any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks or (ii) in the
absence of its own gross negligence or willful misconduct. Neither the Agent nor
any of its affiliates or any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into
or verify (i) any statement, warranty or representation made in connection with
this Agreement or any Borrowing or issuance of a Letter of Credit hereunder;
(ii) the performance or observance of any of the covenants or agreements of any
Borrower; (iii) the satisfaction of any condition specified in Article 3, except
receipt of items required to be delivered to the Agent; or (iv) the validity,
effectiveness or genuineness of this Agreement, the Notes or any other
instrument or writing furnished in connection herewith. The Agent shall not
incur any liability by acting in reliance upon any notice, consent, certificate,
statement or other writing (which may be a bank wire, facsimile transmission,
telex or similar writing) believed by it to be genuine or to be signed by the
proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with
its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with this Agreement or any action taken or omitted
by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent, the Issuing Bank or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance upon the
Agent,
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the Issuing Bank or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks, the Issuing Bank and the Company. Upon any
such resignation, the Required Banks shall have the right to appoint a successor
Agent with the consent of the Borrower, which consent shall not be unreasonably
withheld. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks and without the consent of the Borrower, appoint a successor
Agent, which shall be a commercial bank organized or licensed under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus of at least $100,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agent's Fee. The Company shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon between the
Company and the Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar or Money
Market LIBOR Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in dollars
(in the applicable amounts) are not being offered to the Reference Banks in the
relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of the
aggregate amount of the Commitments advise the Agent that the Adjusted Interbank
Offered Rate, as determined by the Agent, will not adequately and fairly
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reflect the cost to such Banks of funding their Euro-Dollar Loans for such
Interest Period, the Agent shall forthwith give notice thereof to the Company
and the Banks, whereupon until the Agent notifies the Company that the
circumstances giving rise to such suspension no longer exist, the obligations of
the Banks to make Euro-Dollar Loans, or of the applicable Banks that shall have
submitted Money Market Quotes in respect of such Money Market LIBOR Borrowing to
make Money Market LIBOR Loans, shall be suspended, and each outstanding
Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the
then current Interest Period applicable thereto. If the applicable Borrower
shall have received such a notice from the Agent, unless the applicable Borrower
notifies the Agent at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a
Committed Borrowing, such Borrowing shall instead be made as a Base Rate
Borrowing, and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR
Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear
interest for each day from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Base Rate for such day.
SECTION 8.02 Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or such
Applicable Lending Office) to make, maintain or fund its Euro-Dollar Loans or
Money Market LIBOR Loans to any Borrower pursuant to this Agreement and such
Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to
the other Banks and the Company, whereupon until such Bank notifies the Company
and the Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Euro-Dollar Loans or to convert
outstanding Loans into Euro-Dollar Loans, as the case may be, shall be
suspended. Before giving any notice with respect to Euro-Dollar Loans or Money
Market LIBOR Loans to the Agent pursuant to this Section, such Bank shall
designate a different Euro-Dollar Lending Office or Money Market Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given with respect to Euro-Dollar Loans or Money Market LIBOR Loans,
each Euro-Dollar Loan or, in the
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circumstances described in clause (b) below, Money Market LIBOR Loan of such
Bank then outstanding shall be converted t(b) case of Euro-Dollar Loans only, on
the last day of the then current Interest Period applicable to such Euro-Dollar
Loan, if such Bank may lawfully continue to maintain and fund such Loan to such
day, or immediately, if such Bank shall determine that it may not lawfully
continue to maintain and fund such Euro-Dollar Loan or Money Market LIBOR Loan
to such day.
Section 8.03. Increased Cost and Related Return.
(a) If on or after (x) the date hereof, in the case of any Committed Loan
or any obligation to make Committed Loans or (y) the date of the related Money
Market Quote, in the case of a Money Market Loan, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Issuing Bank or
any Bank (or its Applicable Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency, shall either (i) impose, modify or deem applicable any
reserve (including, without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding with respect to
any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar
Reserve Percentage), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on any
Bank (or its Applicable Lending Office) or on the United States market for
certificates of deposit or the London interbank market any other condition
affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate
Loans or (ii) impose on the Issuing Bank or any Bank any other condition
(including, without limitation, any assessment for federal deposit insurance)
regarding any Letter of Credit, the Issuing Bank's obligation to issue any
Letter of Credit or any Bank's obligation to pay the Issuing Bank its ratable
share of any drawing under any Letter of Credit, and the result of any event
referred to in clause (i) or (ii) of this subsection is to increase the cost to
such Bank (or its Applicable Lending Office) of making or maintaining any Fixed
Rate Loan, or to reduce the amount of any sum received or receivable by such
Bank (or its Applicable Lending Office) under this Agreement or under its Notes
with respect thereto, by an amount deemed by such Bank to be material, then
within 15 days after demand by such Bank (with a copy to the Agent), the Company
shall pay to such Bank such additional amount or amounts as will compensate such
Bank for such increased cost or reduction.
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(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on capital
of such Bank (or its Parent) as a consequence of such Bank's obligations
hereunder to a level below that which such Bank (or its Parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Bank to be material, then from time to time, within 15 days after demand
by such Bank (with a copy to the Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank (or its Parent) for
such reduction.
(c) Each of the Issuing Bank and the Banks will promptly notify the Company
and the Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this Section
and will designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of the Issuing Bank or any Bank claiming compensation under this
Section 8.03 and setting forth the additional amount or amounts to be paid to it
hereunder shall be conclusive in the absence of manifest error. In determining
such amount, such Bank may use any reasonable averaging and attribution methods.
SECTION 8.04. Taxes.
(a) Any and all payments by any Borrower to or for the account of any Bank
or the Agent hereunder or under any Note shall be made free and clear of and
without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Bank, the Issuing Bank and the Agent,
taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank, the Issuing Bank or the Agent
(as the case may be) is organized or any political subdivision thereof and, in
the case of each Bank, taxes imposed on its income, and franchise or similar
taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending
Office or any political subdivision thereof (all such non-excluded taxes,
duties, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "TAXES"). If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Bank or the Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions
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(including deductions applicable to additional sums payable under this Section
8.04) such Bank or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) such
Borrower shall make such deductions, (iii) such Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) such Borrower shall furnish to the
Agent, at its address referred to in Section 11.01, the original or a certified
copy of a receipt evidencing payment thereof.
(b) In addition, the Company agrees to pay any present or future stamp or
documentary taxes and any other excise taxes, or charges or similar levies, or
any future property taxes, which arise from any payment made hereunder or under
any Note or from the execution or delivery of, or otherwise with respect to,
this Agreement, any Election to Participate or Election to Terminate or any Note
(hereinafter referred to as "OTHER TAXES").
(c) The Company agrees to indemnify each Bank, the Issuing Bank and the
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 8.04) paid by such Bank, the Issuing Bank or
the Agent (as the case may be) and any liability (including penalties, interest
and expenses, other than penalties, interest or expenses arising solely from
such Bank's gross negligence or willful misconduct) arising therefrom or with
respect thereto. This indemnification shall be made within 15 days from the date
such Bank, the Issuing Bank or the Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the United
States, on or prior to the date of its execution and delivery of this Agreement
in the case of each Bank listed on the signature pages hereof and on or prior to
the date on which it becomes a Bank in the case of each other Bank, and from
time to time thereafter if requested in writing by the Company (but only so long
as such Bank remains lawfully able to do so), shall provide the Company and the
Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.04(a).
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(e) For any period with respect to which a Bank has failed to provide the
Company with the appropriate form pursuant to Section 8.04(d) (unless such
failure is due to a change in treaty, law or regulation occurring subsequent to
the date on which a form originally was required to be provided), such Bank
shall not be entitled to indemnification under Section 8.04(a) with respect to
Taxes imposed by the United States; provided that should a Bank, which is
otherwise exempt from or subject to a reduced rate of withholding tax, become
subject to Taxes because of its failure to deliver a form required hereunder,
each Borrower shall take such steps as such Bank shall reasonably request to
assist such Bank to recover such Taxes.
(f) If any Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section 8.04, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate. If (i)
the obligation of any Bank to make Euro-Dollar Loans to any Borrower, or to
convert outstanding Loans to any Borrower into or to continue outstanding Loans
to any Borrower as Euro-Dollar Loans, pursuant to this Agreement has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans to any Borrower
and the Company shall, by at least five Euro-Dollar Business Days' prior notice
to such Bank through the Agent, have elected that the provisions of this Section
8.05 shall apply to such Bank, then, unless and until such Bank notifies the
Company that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by such Bank
as (or continued as or converted into) Euro-Dollar Loans shall instead be Base
Rate Loans (on which interest and principal shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Banks), and
(b) if Base Rate Loans are substituted for Euro-Dollar Loans, after each of
its Euro-Dollar Loans to such Borrower has been repaid (or converted to a Base
Rate Loan), all payments of principal which would otherwise be applied to repay
such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead.
If such Bank notifies the Company that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan which
was substituted for a Euro-Dollar Loan shall be converted into a Euro-Dollar
Loan on the first day of the next succeeding Interest Period applicable to the
related
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Euro-Dollar Loans of the other Banks.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and delivery of
its Election to Participate to have represented and warranted as of the date
thereof that:
SECTION 9.01. Corporate Existence and Power. It is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is a Wholly-Owned Subsidiary of the Company.
SECTION 9.02. Corporate and Governmental Authorization; Contravention. The
execution and delivery by it of its Election to Participate and the performance
by it of this Agreement and its Notes, are within its corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of its certificate of incorporation or by-laws or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or such Eligible Subsidiary or result in the creation or imposition
of any Lien on any asset of the Company or any Subsidiary.
SECTION 9.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of such Eligible Subsidiary and its Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of such Eligible Subsidiary.
SECTION 9.04. Taxes. Except as disclosed in such Election to Participate,
there is no income, stamp or other tax of any country, or any taxing authority
thereof or therein, imposed by or in the nature of withholding or otherwise,
which is imposed on any payment to be made by such Eligible Subsidiary pursuant
hereto or on its Notes, or is imposed on or by virtue of the execution, delivery
or enforcement of its Election to Participate or its Notes.
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ARTICLE 10
GUARANTY
SECTION 10.01. The Guaranty. The Company hereby unconditionally guarantees
the full and punctual payment of the principal of and interest on each Note
(whether at stated maturity, upon acceleration or otherwise) issued by any
Eligible Subsidiary and all other amounts payable by any Eligible Subsidiary
under this Agreement. Upon failure by any Eligible Subsidiary to pay punctually
any such amount, the Company shall forthwith on demand pay the amount not so
paid at the place and in the manner specified in this Agreement.
SECTION 10.02. Guaranty Unconditional. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this Agreement
or any Note;
(iii) any release, non-perfection or invalidity of any direct or
indirect security for any obligation of any Eligible Subsidiary under this
Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of
any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting any Eligible Subsidiary or its assets or
any resulting release or discharge of any obligation of any Eligible
Subsidiary contained in this Agreement or any Note;
(v) the existence of any claim, set-off or other rights which the
Company may have at any time against any Eligible Subsidiary, the Agent,
any Bank or any other Person, whether in connection herewith or with any
unrelated transactions, provided that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Eligible Subsidiary of the principal of or interest on any
Note or any other amount payable by it under this Agreement; or
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<PAGE> 73
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, the Agent, the Issuing Bank, any Bank or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge of
the Company's obligations hereunder.
SECTION 10.03. Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement shall have been paid in full. If
at any time any payment of the principal of or interest on any Note or any other
amount payable by any Eligible Subsidiary under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
SECTION 10.04. Waiver by the Company. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. Subrogation. Upon making any payment hereunder with respect
to any Borrower other than the Company, the Company shall be subrogated to the
rights of the payee against such Borrower with respect to such payment; provided
that the Company shall not enforce any payment by way of subrogation until all
amounts of principal of and interest on the Notes and all other amounts payable
by the Borrowers under this Agreement have been paid in full.
SECTION 10.06. Stay of Acceleration. In the event that acceleration of the
time for payment of any amount payable by any Eligible Subsidiary under this
Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization
of such Eligible Subsidiary, all such amounts otherwise subject to acceleration
under the terms of this Agreement shall nonetheless be payable by the Company
hereunder forthwith on demand by the Agent made at the request of the Required
Banks.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. Except as otherwise expressly provided herein, all
notices, requests and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar writing)
and shall be given to such party: (x) in the case of any Borrower, the Issuing
Bank or the Agent, at its address or telex or facsimile transmission number set
forth on the signature pages hereof (or, in the case of an Eligible Subsidiary,
its Election to Participate), (y) in the case of any Bank, at its address or
telex or facsimile transmission number set forth in its Administrative
Questionnaire or (z) in the case of any party, at such other address or telex or
facsimile transmission number as such party may hereafter specify for the
purpose by notice to the Agent and the Company. Each such notice, request or
other communication shall be effective (i) if given by telex, when such telex is
transmitted to the number specified in or pursuant to this Section and the
appropriate answerback is received, (ii) if given by certified mail, return
receipt requested, three Domestic Business Days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified in
or pursuant to this Section; provided that notices to the Agent or the Issuing
Bank under Article 2 or Article 8 shall not be effective until received.
SECTION 11.02. No Waivers. No failure or delay by the Agent, the Issuing
Bank or any Bank in exercising any right, power or privilege hereunder or under
any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 11.03. Expenses; Documentary Taxes; Indemnification.
(a) The Company shall pay (i) all direct out-of-pocket expenses (not to
include in any event any indirect or overhead charges) of the Agent, including
reasonable fees and disbursements of special counsel for the Agent, in
connection with the preparation and administration of this Agreement and the
Notes, any waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder and (ii) if an Event of Default occurs, all direct
out-of-pocket expenses (not to include in any event any indirect or overhead
charges) incurred by the Agent, the Issuing Bank and each Bank, including fees
and disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) The Company agrees to indemnify the Agent, the Issuing Bank and
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<PAGE> 75
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "INDEMNITEE") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of this Agreement or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 11.04. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to any Note held by it and its participation in any Reimbursement Obligation and
interest, if any, thereon (collectively, the "RELEVANT DEBT" of such Bank) which
is greater than the proportion received by any other Bank in respect of the
aggregate amount of principal and interest due with respect to the Relevant Debt
of such other Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Relevant Debt of the other Banks, and
such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Relevant Debt of the
Banks shall be shared by the Banks pro rata; provided that nothing in this
Section shall impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of the Borrower other than its indebtedness hereunder.
The Borrower agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note or a Reimbursement
Obligation, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
SECTION 11.05. Amendments and Waivers. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Company and the Required Banks (and, if the
rights or duties of the Issuing Bank or the Agent are affected thereby, by the
Issuing Bank or the Agent as the case may be); provided that no such amendment
or waiver shall, unless signed by all the Banks, (i) increase or decrease the
Commitment of any Bank (except for a ratable decrease in the Commitments of all
Banks) or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any
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<PAGE> 76
payment of principal of or interest on any Loan or any fees hereunder or for any
reduction or termination of any Commitment, (iv) release the Company from all or
substantially all of its obligations under Article 10, or (v) change the
percentage of the Commitments, the aggregate unpaid principal amount of the
Loans or the aggregate Letter of Credit Liabilities or change the number of
Banks which shall be required for the Banks or any of them to take any action
under this Section 11.05 or any other provision of this Agreement; and provided,
further, that no such amendment, waiver or modification shall, unless signed by
an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional
obligation, (x) increase the principal of or rate of interest on any outstanding
Loan of such Eligible Subsidiary, (y) accelerate the stated maturity of any
outstanding Loan of such Eligible Subsidiary or (z) change this proviso.
SECTION 11.06. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no Borrower may assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time, upon (except in the case of grants of
participating interests in Money Market Loans only) notice to the Company and
the Agent, grant to one or more banks or other institutions (each a
"PARTICIPANT") participating interests in its Commitment or any or all of its
Loans. In the event of any such grant by a Bank of a participating interest to a
Participant, whether or not upon notice to the Borrowers, the Issuing Bank and
the Agent, such Bank shall remain responsible for the performance of its
obligations hereunder, and the Borrowers, the Issuing Bank and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the obligations
of the Borrowers hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Bank will not
agree to any modification, amendment or waiver of this Agreement described in
clause (i), (ii) or (iii) of subsection 11.05(a) without the consent of the
Participant. The Borrowers agree that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.19 and Article 8 with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
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<PAGE> 77
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit J hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Company, the Issuing Bank and the Agent; provided that (i) any
such assignment must be in an amount of at least $5,000,000, (ii) if an Assignee
is an affiliate of such transferor Bank or a Bank party hereto, no such consent
shall be required and (iii) such assignment may, but need not, include rights of
the transferor Bank in respect of outstanding Money Market Loans. Upon execution
and delivery of such instrument and payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a Commitment as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the consummation
of any assignment pursuant to this subsection (c), the transferor Bank, the
Agent and the Borrowers shall make appropriate arrangements so that, if
required, new Notes are issued to the Assignee. In connection with any such
assignment, the transferor Bank shall pay to the Agent an administrative fee for
processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which in(c) r for its account, deliver to
the Company and the Agent (and, in the case of any such Assignee to whom any
Letter of Credit Liabilities have been assigned, the Issuing Bank) certification
as to exemption from deduction or withholding of any United States federal
income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Company's prior written consent or by
reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to
designate a different Applicable Lending Office under certain circumstances or
at a time when the circumstances giving rise to such greater payment did not
exist.
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SECTION 11.07. Collateral. Each of the Banks represents to the Agent, the
Issuing Bank and each of the other Banks that it in good faith is not relying
upon any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 11.08. Confidentiality. The Agent and each Bank and Participant
shall keep confidential any information provided by any Borrower and clearly
identified as confidential; provided that nothing herein shall prevent the Agent
or any Bank from disclosing such information (i) to its officers, directors,
employees, agents, attorneys and accountants in connection with the entry into
and administration of this Agreement and the extensions of credit hereunder,
(ii) upon the order of a court or administrative agency, provided that the
Agent, such Bank or such Participant shall, to the extent permitted under
applicable law, use its reasonable efforts to provide the Company with notice of
any such order so as to afford the Company, at its own expense, with an
opportunity to appeal such order or obtain a protective order in respect of such
disclosure, (iii) upon the request or demand of any regulatory agency or
authority having jurisdiction over such party, (iv) which has become publicly
available without breach of any agreement among the parties hereto, (v) as
necessary for the exercise of any remedy hereunder or under any Note or (vi)
subject to the provisions of this Section, to any prospective Participant or
Assignee.
SECTION 11.09. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 11.10. Counterparts; Integration. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 11.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS,
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THE AGENT, THE ISSUING BANK AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE TIMBERLAND COMPANY
By: /s/ Carden N. Welsh
-----------------------
Title: Treasurer
200 Domain Drive
Stratham, NH 03885
Attention: Carden N. Welsh
Facsimile transmission
number: 603-773-1645
<PAGE> 81
Commitments Banks
- ----------- -----
$20,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Robert Bottamedi
----------------------------
Title: Vice President
$20,000,000 BANKBOSTON N.A.
By: /s/ Susan L. Pardus-Galland
----------------------------
Title: Vice President
$20,000,000 ABN AMRO NORTH AMERICA,
INC., AS AGENT FOR ABN
AMRO BANK N.V.
By: /s/ James E. Davis
---------------------------------
Title: Group Vice President
By: /s/ John D. Rogers
----------------------------------
Title: Vice President
$15,000,000 THE NORTHERN TRUST
COMPANY
By: /s/ James F. Monhart
----------------------------------
Title: Vice President
<PAGE> 82
$15,000,000 CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Alain Papiasse
----------------------------------
Title: Executive Vice President
$10,000,000 CORESTATE BANK, N.A.
By: /s/ Anne Marie Fitzsimmons Hughes
----------------------------------
Title: Vice President
- -------------------
Total Commitments
$ 100,000,000
=================
<PAGE> 83
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By: /s/ Robert Bottamedi
---------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention:
Telex number: 177615
Facsimile transmission
number:
BANKBOSTON N.A., as Issuing Bank
By: /s/ Susan L. Pardus-Galland
----------------------------
Title: Vice President
P.O. Box 1763
Boston, Massachusetts 02105
Attention: International and
Banking Department
Telex number: 4886527
Swiftcode: FNBBUS33
Facsimile transmission
number:
<PAGE> 84
EXHIBIT A
FORM OF NOTE
New York, New York
________ __, 199_
For value received, [NAME OF BORROWER], a [jurisdiction of incorporation]
corporation (the "Borrower"), promises to pay to the order of [NAME OF BANK]
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the Termination Date provided for in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be made
in lawful money of the United States in Federal or other immediately available
funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall
Street, New York, New York.
All Loans made by the Bank, the respective types thereof and all repayments
of the principal thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding may be endorsed by the Bank on the schedule attached hereto, or
on a continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as
of April 30, 1998 among The Timberland Company, the banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent
(as the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
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[The Timberland Company has, pursuant to the provisions of the Credit
Agreement, unconditionally guaranteed the payment in full of the principal of
and interest on this note.](1)
[NAME OF BORROWER]
By
-------------------------------
Title:
- ------------------------
(1) To be deleted in case of Notes executed and delivered by the Company.
2
<PAGE> 86
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EXHIBIT B
FORM OF NOTICE OF COMMITTED BORROWING
Morgan Guaranty Trust Company
of New York, as Agent
under the Credit Agreement referred
to below
60 Wall Street
New York, New York 10260-0060
Attention: Credit Administration
Re: $100,000,000 Credit Agreement dated as of April 30, 1998 among The
Timberland Company, the Banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent (the "Credit
Agreement")
------------------------------------------------------------------------
Ladies and Gentlemen:
We, [name of Borrower] (the "Borrower"), refer to the Credit Agreement and
hereby give notice pursuant to Section 2.02 of the Credit Agreement that we wish
to make a Committed Borrowing as set forth below:
Date of Borrowing: __________(1)
Aggregate Principal Amount of Borrowing: __________(2)
Type of Borrowing (choose one):
[Base Rate]/[Euro-Dollar]
Initial Interest Period: __________(3)
- ----------
(1) Not earlier than the third Euro-Dollar Business Day after the date of the
Notice of Committed Borrowing, in the case of a Euro-Dollar Borrowing; may be
the same day as the Notice of Committed Borrowing, in the case of a Base Rate
Borrowing.
(2) Must be a multiple of $100,000 and, for a Base Rate Borrowing, at least
$500,000 and,
(3) One, two, three or six months, for a Euro-Dollar Borrowing; does not
apply for a Base Rate Borrowing.
1
<PAGE> 88
Dated: __________ __, 199_
Very truly yours,
[BORROWER]
By:
-------------------
Title: (4)
- ----------
(4) For the Company, the President, the Executive Vice President, the Senior
Vice President - Finance and Administration, the Vice President - Finance or the
Treasurer only.
2
<PAGE> 89
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
From: [Name of Borrower] (the "Borrower")
Re: $100,000,000 Credit Agreement dated as of April 30, 1998 among The
Timberland Company, the Banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent (the "Credit
Agreement")
Pursuant to Section 2.03 of the Credit Agreement we are pleased to invite
you to submit Money Market Quotes to us for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________(1)
PRINCIPAL AMOUNT (2) INTEREST PERIOD (3)
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin](4)
- ----------
(1) Must be at least three Euro-Dollar Business Days after the date of the
Invitation, for a LIBOR Auction; may be the date of the Invitation, for an
Absolute Rate Auction.
(2) Amount must be $500,000 or a larger multiple of $100,000.
(3) Not less than 7 days in the case of a LIBOR Auction, subject to the
provisions of the definition of Interest Period.
(4) To be included for LIBOR Auctions only.
1
<PAGE> 90
[Absolute Rate]. (5) [The applicable base rate is the Interbank Offered Rate.]*
Please respond to this invitation by no later than [10:30 A.M.]*
[9:15 A.M.]** New York City time) on [date]. (6)
[NAME OF BORROWER]
By
--------------------
Authorized Officer (7)
- ----------
(5) To be included for Absolute Rate Auctions only.
(6) The third Euro-Dollar Business Day prior to the Date of Borrowing, for a
LIBOR Auction, or the Date of Borrowing, for an Absolute Rate Auction.
(7) For the Company, the President, the Executive Vice President, the Senior
Vice President - Finance and Administration, the Vice President - Finance or the
Treasurer only.
2
<PAGE> 91
EXHIBIT D
FORM OF MONEY MARKET QUOTE
To: [Name of Borrower] (the "Borrower")
Re: Money Market Quote to the Borrower
In response to your invitation dated _____________, 19__, we hereby make
the following Money Market Quote on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
----------------------------------
3. Date of Borrowing: ____________________(1)
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount (2) Period (3) [Margin (4)][Absolute Rate (5)]
---------- ---------- -------------------------------
$
$
- ----------
(1) As specified in the related Invitation.
(2) Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$500,000 or a larger multiple of $100,000.
(3) Not less than 7 days in the case of LIBOR Auction, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
(4) Margin over or under the Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
(5) Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
1
<PAGE> 92
[Provided, that the aggregate
principal amount of Money Market Loans
for which the above offers may be
accepted shall not exceed
$____________.]**
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of April 30, 1998 among The Timberland Company, the Banks listed on the
signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent,
irrevocably obligates us to make the Money Market Loan(s) for which any offer(s)
are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:_____________________
Authorized Officer
2
<PAGE> 93
EXHIBIT E
OPINION OF
COUNSEL FOR THE COMPANY
-----------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
This opinion is being furnished to you pursuant to Section 3.01(c) of the
Credit Agreement dated as of April 30, 1998 (the "Credit Agreement") among The
Timberland Company, a Delaware corporation (the "Company"), the banks listed on
the signature pages thereof and Morgan Guaranty Trust Company of New York, as
Agent, in connection with the closing held this day under the Credit Agreement.
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein with the meanings so defined.
We have acted as counsel to the Company in connection with the Credit
Agreement and the transactions contemplated thereby and as such are familiar
with the proceedings taken by the Company in connection therewith. Please be
advised, however, that, although we represent the Company on a regular basis,
the scope of our representation does not include, and, except as specified
herein, we have not undertaken, any special factual investigation into the
business, properties, agreements or affairs of the Company and its Subsidiaries
for purposes of rendering the opinions expressed in paragraphs 9, 10 and 11
below.
We have participated in the preparation of the Credit Agreement and have
examined copies, executed by the Company, of the Credit Agreement and each of
the Notes delivered to the Banks on the date hereof.
1
<PAGE> 94
We have also examined such certificates, documents and records, and have
made such examination of law, as we have deemed necessary to enable us to render
the opinions expressed below. In addition, we have examined and relied upon
representations and warranties contained in the Credit Agreement and in
certificates delivered to you in connection therewith as to matters of fact
(other than facts constituting conclusions of law) and upon the covenants
contained in the Credit Agreement as to the application of the proceeds of the
loans made pursuant thereto.
The opinion expressed in clause (c) of paragraph 11 below assumes, without
investigation, that the transactions contemplated by the Credit Agreement will
not result in a violation of financial ratios which are contained in covenants.
We call your attention to the fact that the Credit Agreement and the Notes
provide that they are to be governed by and construed in accordance with the
internal laws of the State of New York and we understand that you are relying on
the advice of your own counsel with respect to all matters of New York law. We
are of the opinion that a Massachusetts court or a federal court sitting in
Massachusetts would, under conflict of laws principles observed by the courts of
Massachusetts, give effect to such provision. For purposes of rendering the
opinions expressed in paragraphs 6 and 8 below, we have assumed that the Credit
Agreement and each Note provides that it is to be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts.
The opinions expressed below are limited to matters governed by the laws of
The Commonwealth of Massachusetts, the General Corporation Law of the State of
Delaware and the federal laws of the United States. With respect to the opinions
expressed in paragraphs 2 and 4 below concerning (i) the qualification and good
standing of the Company as a foreign corporation under the laws of New Hampshire
and (ii) the qualification and good standing of The Outdoor Footwear Company, a
Delaware corporation ("TOFC"), as a foreign corporation under the laws of Puerto
Rico, such opinions are based solely upon certificates from officials of such
jurisdictions, copies of which have been furnished to you.
Based on the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware with corporate powers
adequate for the execution, delivery and performance of the Credit Agreement and
the Notes and for carrying on the business now conducted by it.
2. The Company is duly qualified to do business as a foreign corporation
under the laws of New Hampshire.
2
<PAGE> 95
3. TOFC is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware with corporate powers adequate
for carrying on the business now conducted by it.
4. TOFC is duly qualified to do business as a foreign corporation under the
laws of Puerto Rico.
5. The Credit Agreement has been duly authorized, executed and delivered by
the Company.
6. Subject to the qualifications stated in the penultimate paragraph
hereof, the Credit Agreement constitutes the legal, valid and binding obligation
of the Company and is enforceable against the Company in accordance with its
terms.
7. The Notes being delivered to the Banks today have been duly authorized,
executed and delivered by the Company.
8. Subject to the qualifications stated in the penultimate paragraph
hereof, the Notes being delivered to the Banks today constitute the legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with the terms thereof.
9. The execution and delivery of the Credit Agreement do not, and the
performance by the Company of the terms thereof applicable to it will not,
result in any violation of, or be in conflict with, constitute a default under
or result in the creation of a lien under, any term or provision of: (a) its
charter or bylaws, (b) any presently existing federal or Massachusetts law,
statute or governmental regulation or the General Corporation Law of the State
of Delaware, or (c) any agreement, indenture or other instrument listed in
paragraph (4) of Exhibit A hereto.
10. Under existing provisions of law, no approval of, or authorization or
other action by, or filing with, any federal or Massachusetts governmental
authority, and no approval, authorization or other action or filing under the
General Corporation Law of the State of Delaware, is required to be obtained or
made by the Company in connection with the execution, delivery or performance of
the Credit Agreement or the Notes, except for such filings as do not affect the
validity or enforceability of the Credit Agreement and the Notes.
11. To the best of our knowledge after having made due inquiry of officers
of the Company, but without having investigated any governmental records or
court dockets, there is no governmental action or proceeding and no litigation
pending against the Company or any of its Subsidiaries which places in question
the validity or enforceability of the Credit Agreement or the Notes.
3
<PAGE> 96
We call your attention to the fact that [John E. Beard] is the Secretary of
the Company. Our opinions expressed herein do not include matters which may have
come to the attention of [John E. Beard] in that capacity and which have not
been referred to us for substantive legal advice.
Our opinions that the Credit Agreement and the Notes being delivered to the
Banks today are legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms are subject to (i)
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and (ii) general
principles of equity, regardless of whether applied in proceedings in equity or
at law. Such opinions are also subject to the following qualifications:
(a) the enforceability of the provisions of the Credit Agreement
providing for indemnification may be affected by public policy
considerations or court decisions which may limit the right of the
indemnified party to obtain indemnification;
(b) we express no opinion as to the enforceability of any
provision of the Credit Agreement which purports to grant the right of
setoff to a purchaser of a participation in the obligations of the
Company under the Credit Agreement and the Notes from a bank party to
the Credit Agreement; and
(c) we express no opinion as to the enforceability of any
provision of the Credit Agreement to the extent it requires the
Company to indemnify any of you or any other party against loss in
obtaining the currency due under the Credit Agreement from a court
judgment, order, award or decision in another currency.
In addition, we call your attention to the fact that certain waivers contained
in the Credit Agreement may be unenforceable in whole or in part by reason of
certain laws or judicial decisions; however, the inclusion of such waivers in
the Credit Agreement does not affect the validity of any of the other provisions
of the Credit Agreement.
The foregoing opinion is solely for your benefit and may not be relied on
by any other person.
Very truly yours,
4
<PAGE> 97
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Ladies and Gentlemen:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of April 30, 1998 among The Timberland Company, a
Delaware corporation (the "Company"), the banks listed on the signature pages
thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent
(the "Agent"), and have acted as special counsel for the Agent for the purpose
of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Company of the Credit
Agreement and its Notes are within the Company's corporate powers and have been
duly authorized by all necessary corporate action.
1
<PAGE> 98
2. The Credit Agreement constitutes a valid and binding agreement of the
Company and its Notes constitute valid and binding obligations of the Company,
in each case enforceable against the Company in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditor's rights generally and equitable principles of general applicability.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 99
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
for the Banks named in the Credit Agreement dated
as of April 30, 1998 among The Timberland Company,
such Banks and such Agent (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to be an Eligible Subsidiary for
purposes of the Credit Agreement, effective from the date hereof until an
Election to Terminate shall have been delivered on behalf of the undersigned in
accordance with the Credit Agreement. The undersigned confirms that the
representations and warranties set forth in Article 9 of the Credit Agreement
are true and correct as to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Section 11.10 thereof, as if the
undersigned were a signatory party thereto.
[Tax disclosure pursuant to Section 9.04]
1
<PAGE> 100
The address to which all notices to the undersigned under the Credit
Agreement should be directed is: . This instrument shall be
construed in accordance with and governed by the laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
---------------------------
Title:
The undersigned hereby confirms that [name of Eligible Subsidiary] is an
Eligible Subsidiary for purposes of the Credit Agreement described above.
THE TIMBERLAND COMPANY
By
---------------------------
Title:
Receipt of the above Election to Participate is hereby acknowledged on and
as of the date set forth above.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By
-------------------------
Title:
2
<PAGE> 101
EXHIBIT H
FORM OF ELECTION TO TERMINATE
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
for the Banks named in the Credit Agreement dated
as of April 30, 1998 among The Timberland Company,
such Banks and such Agent (the "Credit Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to terminate its status as an Eligible
Subsidiary for purposes of the Credit Agreement, effective as of the date
hereof. The undersigned hereby represents and warrants that all principal and
interest on all Notes of the undersigned and all other amounts payable by the
undersigned pursuant to the Credit Agreement have been paid in full on or prior
to the date hereof. Notwithstanding the foregoing, this Election to Terminate
shall not affect any obligation of the undersigned under the Credit Agreement or
under any Note heretofore incurred.
1
<PAGE> 102
This instrument shall be construed in accordance with and governed by the
laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
--------------------------
Title:
The undersigned hereby confirms that the status of [name of Eligible
Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement
described above is terminated as of the date hereof.
THE TIMBERLAND COMPANY
By
--------------------------
Title:
Receipt of the above Election to Terminate is hereby acknowledged on and as
of the date set forth above.
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By
--------------------------
Title:
2
<PAGE> 103
EXHIBIT I
OPINION OF
COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[Dated as provided in
Section 3.03 of the
Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
9 West 57th Street
New York, New York 10019
Ladies and Gentlemen:
I am counsel to [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation (the "Borrower"), and give this opinion pursuant to
Section 3.03(b) of the Credit Agreement (the "Credit Agreement") dated as of
April 30, 1998 among The Timberland Company (the "Company"), the banks listed on
the signature pages thereof and Morgan Guaranty Trust Company of New York, as
Agent. Terms defined in the Credit Agreement are used herein as therein defined.
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing and in
good standing under the laws of [jurisdiction of incorporation], and is a
Wholly-Owned Consolidated Subsidiary of the Company.
1
<PAGE> 104
2. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or the Borrower or result in the creation or imposition
of any Lien on any asset of the Company or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of the
Borrower and its Notes constitute valid and binding obligations of the Borrower.
4. Except as disclosed in the Borrower's Election to Participate, there is
no income, stamp or other tax of [jurisdiction of incorporation and, if
different, principal place of business], or any taxing authority thereof or
therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by the Borrower pursuant to the Credit
Agreement or its Notes, or is imposed on or by virtue of the execution, delivery
or enforcement of its Election to Participate or of its Notes.
Very truly yours,
2
<PAGE> 105
EXHIBIT J
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"),
[ASSIGNEE] (the "Assignee"), THE TIMBERLAND COMPANY (the "Company") and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
WITNESSETH
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Credit Agreement dated as of April 30, 1998 among the Company, the
Assignor and the other Banks party thereto, as Banks, and the Agent (the "Credit
Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans and participate in Letters of Credit in an aggregate
amount at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in
the aggregate principal amount of $__________ are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"),
together with a corresponding portion of its outstanding Committed Loans and
participations in outstanding Letters of Credit, and the Assignee proposes to
accept assignment of such rights and assume the corresponding obligations from
the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
1
<PAGE> 106
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof and the
assumption by the Assignee of a corresponding portion of the Assignor's
participation in Letters of Credit outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Company, the
Issuing Bank and the Agent and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds an amount heretofore agreed between them.(1) It is
understood that facility fees with respect to the Assigned Amount accrued to the
date hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under the
Credit Agreement which is for the account of the other party hereto, it shall
receive the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
SECTION 4. CONSENT OF THE COMPANY AND THE AGENT. This Agreement is
conditioned upon the consent of the Company, the Issuing Bank and the Agent
pursuant to Section 11.06(c) of the Credit Agreement. The execution of this
Agreement by the Company, the Issuing Bank and the Agent is evidence of this
consent. Pursuant to Section 11.06(c) the Company agrees to execute and deliver
a Note, and to cause each Eligible Subsidiary, if any, to execute and deliver a
Note, payable to the order of the Assignee to evidence the assignment and
assumption provided for herein.
- ----------
(1) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
2
<PAGE> 107
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of any Borrower, or the
validity and enforceability of the obligations of any Borrower in respect of the
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By
---------------------------
Title:
[ASSIGNEE]
By
---------------------------
Title:
3
<PAGE> 108
THE TIMBERLAND COMPANY
By
-------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Agent
By
-------------------------
Title:
BANKBOSTON, as Issuing Bank
By
-------------------------
Title:
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 26, 1998 AND THE
CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 26,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-26-1998
<CASH> 24,757
<SECURITIES> 0
<RECEIVABLES> 98,716
<ALLOWANCES> 3,901
<INVENTORY> 199,956
<CURRENT-ASSETS> 343,683
<PP&E> 123,224
<DEPRECIATION> 69,565
<TOTAL-ASSETS> 421,487
<CURRENT-LIABILITIES> 88,481
<BONDS> 100,000
0
0
<COMMON> 114
<OTHER-SE> 266,779
<TOTAL-LIABILITY-AND-EQUITY> 421,487
<SALES> 307,798
<TOTAL-REVENUES> 307,798
<CGS> 183,422
<TOTAL-COSTS> 183,422
<OTHER-EXPENSES> 842
<LOSS-PROVISION> 592
<INTEREST-EXPENSE> 4,571
<INCOME-PRETAX> 13,627
<INCOME-TAX> 4,361
<INCOME-CONTINUING> 9,266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,266
<EPS-PRIMARY> .81
<EPS-DILUTED> .78
</TABLE>
