SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-Q
(MARK ONE)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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: 0-5860
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RECOTON CORPORATION
(Exact name of Registrant as Specified in its Charter)
NEW YORK 11-1771737
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
2950 LAKE EMMA ROAD, LAKE MARY, FLORIDA
32746 (Address of principal executive offices,
including zip code)
(407) 333-8900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
reporting requirements for the past 90 days. Yes /x/ No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 11,696,037 Common Shares, par
value $.20 per share, as of August 5, 1998.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
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RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(TABULAR AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31,
-------------- -------------
ASSETS 1998 1997
------ -------------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,464 $ 17,247
Accounts receivable (less allowance for doubtful accounts
of $3,743,000 in 1998 and $3,797,000 in 1997) 114,222 129,852
Inventories 189,818 142,362
Prepaid, refundable and deferred income taxes 21,864 18,220
Prepaid expenses and other current assets 8,392 9,484
---------- -----------
TOTAL CURRENT ASSETS 347,760 317,165
PROPERTY AND EQUIPMENT (at cost, less accumulated
depreciation and amortization) 38,935 36,184
TRADEMARKS AND PATENTS (less accumulated amortization) 4,923 5,126
GOODWILL (less accumulated amortization) 37,514 38,554
DEFERRED INCOME TAXES 6,753 6,724
OTHER ASSETS 4,845 3,509
----------- -----------
T O T A L $440,730 $407,262
======== ========
LIABILITIES
CURRENT LIABILITIES:
Bank loans $ 5,500 $ 5,000
Current portion of long-term debt 9,499 9,570
Accounts payable 67,352 53,231
Accrued expenses 24,143 26,588
Income taxes payable 4,813 388
----------- ------------
TOTAL CURRENT LIABILITIES 111,307 94,777
LONG-TERM DEBT (less current portion above) 180,319 161,427
OTHER NONCURRENT LIABILITIES 2,587 11,775
----------- -----------
TOTAL LIABILITIES 294,213 267,979
----------- -----------
SHAREHOLDERS' EQUITY
PREFERRED STOCK - $1.00 par value each - authorized
10,000,000 shares; none issued -- --
COMMON STOCK - $.20 par value each - authorized
40,000,000 shares; issued 12,927,381 shares in
1998 and 12,797,601 shares in 1997 2,585 2,560
ADDITIONAL PAID-IN CAPITAL 80,301 78,376
RETAINED EARNINGS 77,534 70,758
CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT (7,469) (6,295)
----------- -----------
TOTAL 152,951 145,399
TREASURY STOCK - 1,234,642 shares in 1998 and
1,225,167 shares in 1997, at cost (6,434) (6,116)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 146,517 139,283
--------- ---------
T O T A L $440,730 $407,262
======== ========
The attached notes are made a part hereof.
</TABLE>
<PAGE>
<TABLE>
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RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT INCOME PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ----------------------
1998 1997 1998 1997
---------------- ------------- ----------- -------
<S> <C> <C> <C> <C>
NET SALES $134,104 $108,538 $278,821 $204,299
COST OF SALES 79,925 65,854 169,532 124,779
---------- ---------- --------- ---------
GROSS PROFIT 54,179 42,684 109,289 79,520
---------- ---------- --------- ----------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 46,680 40,318 94,129 75,661
INTEREST EXPENSE 3,893 2,930 7,393 5,504
INVESTMENT INCOME (126) (172) (205) (320)
------------ ------------ ------------ ------------
T O T A L 50,447 43,076 101,317 80,845
---------- ---------- --------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 3,732 (392) 7,972 (1,325)
INCOME TAX (PROVISION) CREDIT (560) 1,475 (1,196) 2,940
------------ ----------- ----------- -----------
NET INCOME $ 3,172 $ 1,083 $ 6,776 $ 1,615
========== ========== ========== ==========
INCOME PER SHARE:
Basic $.27 $.10 $.58 $.14
==== ==== ==== ====
Diluted $.26 $.09 $.56 $.14
==== ==== ==== ====
NUMBER OF SHARES USED IN
COMPUTING PER SHARE AMOUNTS:
Basic 11,645 11,394 11,614 11,385
====== ====== ====== ======
Diluted 12,392 11,514 12,138 11,520
====== ====== ====== ======
Dividends NONE NONE NONE NONE
The attached notes are made a part hereof.
</TABLE>
<PAGE>
<TABLE>
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RECOTON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(TABULAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
---------------------------
JUNE 30,
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1998 1997
------------------ -------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,776 $ 1,615
--------- --------
Adjustments to reconcile results of operations to net cash provided by
operating activities:
Depreciation 4,192 3,673
Amortization of intangibles 1,558 1,579
Provision for losses on accounts receivable 1,063 1,037
Deferred income taxes (3,378) (111)
Expense applicable to stock options granted at
prices less than fair market value 55
Change in asset and liability accounts
(net of effects of acquisitions):
Accounts receivable 14,304 15,987
Inventory (47,675) (11,199)
Prepaid and refundable income taxes (28) (3,896)
Prepaid expenses and other current assets 1,201 (975)
Other assets (1,587) (817)
Accounts payable and accrued expenses 2,330 (4,378)
Income taxes payable 3,759 727
Other noncurrent liabilities (14) 2,667
------------ ---------
TOTAL ADJUSTMENTS (24,220) 4,294
-------- ---------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (17,444) 5,909
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions (net of cash acquired of
approximately $97,000) (327)
Expenditures for trademarks, patents and
intellectual property (71) (86)
Expenditures for property and equipment (7,015) (5,084)
-------- --------
NET CASH USED FOR INVESTING ACTIVITIES (7,086) (5,497)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under credit
agreements and other bank debt $24,000 $(11,587)
Repayment of bridge loans (75,000)
Net proceeds from sale of senior notes 75,000
Repayments of bank loans assumed upon
acquisition of businesses (2,767)
Repayment of long-term bank borrowings (4,672) (2,490)
Proceeds from exercise of stock options 1,558 22
Purchase of treasury stock (105) (1)
---------- -------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 20,781 (16,823)
------ -------------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON CASH OF FOREIGN SUBSIDIARIES (34) (733)
----------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,783) (17,144)
CASH AND CASH EQUIVALENTS - January 1 17,247 29,130
-------- ---------
CASH AND CASH EQUIVALENTS - JUNE 30 $13,464 $ 11,986
======= ========
SUPPLEMENTAL DISCLOSURES:
Interest paid $ 7,789 $ 4,722
======== =========
Income taxes paid $ 483 $ 59
========= ===========
NONCASH ACTIVITIES:
In connection with the exercise of stock options in 1998, 15,500 shares of
common stock were issued in exchange for 6,000 shares of previously issued
common stock with a market value of $213,000, plus cash of $14,965.
In 1997, equipment with an aggregate cost of approximately $345,000 was
financed by capital lease obligations.
The attached notes are made a part hereof.
</TABLE>
<PAGE>
RECOTON CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE A - The attached summarized financial information does not include
all disclosures required to be included in a complete set of financial
statements prepared in conformity with generally accepted accounting
principles. Such disclosures were included with the consolidated
financial statements of the Company at December 31, 1997, included in
its annual report on Form 10-K. Such statements should be read in
conjunction with the data herein.
NOTE B - The financial information reflects all normal recurring
adjustments which, in the opinion of management, are deemed necessary
for a fair presentation of the results for the interim periods. The
results for the interim periods are not necessarily indicative of the
results to be expected for the year. Historically, the Company's sales
and earnings have been higher in the second half of each year.
NOTE C - Inventory at June 30, 1998 is comprised of:
Raw materials and work-in-process $ 43,591
Finished goods 138,696
Merchandise in-transit 7,531
-----------
T O T A L $189,818
===========
NOTE D - Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", became effective on January 1, 1998. This
statement requires that all items recognized under accounting
standards as components of comprehensive income be reported in an
annual financial statement that is displayed with the same prominence
as other annual financial statements. This statement also requires
that an entity classify items of other comprehensive income by their
nature in an annual financial statement. For the Company, other
comprehensive income will comprise the total of net income and foreign
currency translation adjustments. Annual financial statements for
prior periods will be reclassified, as required. For the three and six
months ended June 30, 1998 and 1997, total comprehensive income was as
follows:
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THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------------------------ ----------------------
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net income $3,172 $1,083 $ 6,776 $ 1,615
Foreign currency
translation adjustments 128 (545) (1,174) (3,784)
-------- ------- -------- --------
Net comprehensive
income (loss) $3,300 $ 538 $ 5,602 $(2,169)
====== ======= ======= =======
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NOTE E - In July 1994, the U.S. Customs Service and U.S. Attorney's office
obtained certain property and business records from the Company's
Florida facility pursuant to a search warrant and commenced a criminal
and civil investigation. The Company is in communication with the
government regarding such investigation, which the Company has been
advised has focused on country of origin marking requirements,
duty-free import status under the Caribbean Basin Initiative, duties
with respect to dies, molds and tooling used overseas, commissions
paid to agents, importation of merchandise subject to textile quotas,
other instances of undervaluation and other miscellaneous matters.
Management is hopeful of reaching a settlement of this matter.
However, based on the current status of the Company's communication
with the government, the Company is unable to make a realistic
estimate of the probable amount or probable range of amounts for the
ultimate outcome, which could be material in relation to the Company's
current operations and/or financial condition. Accordingly, the
Company has not made any provision for loss in connection with this
matter.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Comparison for the Quarters Ended June 30, 1998 and
1997 And the Six Months Ended June 30, 1998
and 1997
RESULTS OF OPERATIONS
Net sales for the quarter ended June 30, 1998 totaled $134.1 million,
an increase of $25.6 million or 23.6% from the quarter ended June 30, 1997 of
$108.5 million. Net sales for the six months ended June 30, 1998 totaled $278.8
million, up $74.5 million or 36.5% from the $204.3 million reported for the six
months ended June 30, 1997. Sales increases were primarily the result of
continued strong growth in the sales of the Company's INTERACT video game and
multimedia accessory products and mobile electronic and speaker products,
increased international distribution and improved automotive accessory sales due
to the inclusion of the results of AAMP of Florida, Inc. ("AAMP"), which was
acquired in the fourth quarter of 1997. Sales of the Company's multimedia, home
and automotive loudspeakers and car stereo electronic products showed strong
increases as compared to the prior year due to the introduction of new products,
global brand repositioning and expanded distribution.
Gross profit for the quarter ended June 30, 1998 was $54.2 million or
40.4% of sales. In comparison, for the quarter ended June 30, 1997 the Company's
gross profit was $42.7 million or 39.3% of sales. For the six months ended June
30, 1998, gross profit was $109.3 million or 39.2% of sales as compared with
$79.5 million or 38.9% of sales for the six months ended June 30, 1997. The
dollar increases in gross profit was primarily reflective of strong growth in
the sales of video game, multimedia and mobile electronic products and the
additional sales due to the inclusion of AAMP. The increase in the gross margin
percentage was attributable to a higher margin product mix.
Selling, general and administrative expenses for the quarter ended
June 30, 1998 totaled $46.7 million or 34.8% of sales. For the quarter ended
June 30, 1997, these expenses totaled $40.3 million or 37.1% of sales. Selling,
general and administrative expenses totaled $94.1 million or 33.8% of sales for
the six months ended June 30, 1998 as compared to $75.7 million or 37.0% for the
same period in 1997. The percentage decrease was primarily attributable to
increased efficiencies from the absorption of fixed costs across a higher sales
volume and to the realization of savings from the integration of RAC (formerly
International Jensen Incorporated, which was acquired in August 1996) into the
Company. The major portion of the dollar increase was attributable to the
increased sales volume.
Interest expense (net of investment income) totaled $3.8 million for
the quarter ended June 30, 1998 and $7.2 million for the six month period. At
June 30, 1997, interest expense (net of investment income) totaled $2.8 million
for the quarter and $5.2 million for the six month period. The increase was
primarily attributable to increased borrowings to support the Company's sales
growth.
In recent years, the Company's income taxes and effective consolidated
income tax rate have been materially affected by changes in the proportion of
domestic and foreign earnings. While earnings from operations in North America
and Western Europe are primarily taxed at or above United States income tax
rates, earnings from the Company's Asian operations are taxed at a current
maximum rate of 16.0% (16.5% in 1997). However, the actual tax rate from Asian
operations is dependent upon the proportion of earnings from mainland China,
which have been subject to a "tax holiday." This tax rate is higher in 1998
because of the expiration of a portion of the "tax holiday." The Company's
income tax expense for the quarter and six month periods ended June 30, 1998 is
based upon a 15% estimated effective annual income tax rate for 1998. This rate
is estimated by management based upon its forecast of the Company's
profitability in each of its various foreign and domestic tax jurisdictions.
Management will continue to review this estimated rate throughout the year in
comparison to actual results of operations. In 1997, the net income tax credits
exceeded the consolidated pretax loss for both the three and six month periods
because tax credits attributable to domestic losses were at higher rates than
income taxes attributable to foreign earnings.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." This statement, effective for fiscal years beginning after December 15,
1997, requires the Company to report components of comprehensive income in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. To date, the Company's comprehensive income has been comprised of the
Company's net income and foreign currency translation adjustments (which
adjustments were $1.2 million in 1998 and $3.8 million in 1997) included in the
consolidated statements of shareholders' equity. As a result of significant
increases in the value of the U.S. dollar in relation to currencies in Western
Europe in the six months ended June 30, 1998 and 1997 and the related foreign
currency translation adjustments recorded by the Company, comprehensive income
for the period ended June 30, 1998 was $5.6 million, as compared to a loss of
$2.2 million for the six months ended June 30, 1997. Comprehensive income for
the quarter ended June 30, 1998 was $3.3 million as compared to $0.5 million for
the quarter ended June 30, 1997. (See Note D to the Condensed Consolidated
Financial Statements.)
In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," which establishes revised standards for
computing and presenting earnings per share ("EPS"). In accordance with this
standard, all prior period EPS data has been restated. For the quarter ended
June 30, 1997, basic EPS was restated from $.09/share to $.10/share as a result
of the adoption of this standard. There was no change to EPS for the six months
ended June 30, 1997. For the quarter ended June 30, 1998, basic EPS was
$.27/share and diluted EPS was $.26/share based on average shares of 11,645,000
(basic) and 12,392,000 (diluted). For the quarter ended June 30, 1997, basic EPS
was $.10/share and diluted EPS was .09/share based on average shares of
11,394,000 (basic) and 11,514,000 (diluted). For the six months ended June 30,
1998, basic EPS was $.58/share and diluted EPS was $.56/share based on average
shares of 11,614,000 (basic) and 12,138,000 (diluted). In 1997, basic and
diluted EPS for the six months ended June 30, 1997 were $.14/share based on
average shares of 11,385,000 (basic) and 11,520,000 (diluted).
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." This statement, also effective for financial statements for
periods beginning after December 15, 1997, requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Generally, financial information is required to be reported
on the basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments. Management has evaluated the
provisions of SFAS No. 131 in the context of its present and planned operating
structure and believes that segment reporting is not applicable to its business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of funds have historically been, and
are expected to continue to be, cash flow from operations, borrowings under
credit facilities provided by banks in the United States and abroad and proceeds
from the private placement of the Company's notes. At June 30, 1998, the Company
had cash and cash equivalents of $13.5 million compared with $17.2 million at
December 31, 1997.
The Company currently has a multibank credit facility (the "Credit
Facility"), entered into in June 1998, consisting of a committed revolving line
of credit of $101.5 million through November 30, 1998, which will be
automatically reduced to $86.5 million on November 30, 1998 through December
1999 and a $15.0 million term loan, repayable in 12 quarterly installments with
the last installment due in May 2001. The outstanding borrowings and letters of
credit under the revolving facility were approximately $94.3 million at June 30,
1998 as compared to $65.5 million at December 31, 1997 under a previous version
of such facility. The revolving credit loans bear interest at various rates
depending on elections made by the Company. The applicable rates include rates
tied to the London Inter Bank Offering Rate (LIBOR) and rates tied to the
greater of the prime rate or a federal funds-based rate. As of June 30, 1998
loans tied to the LIBOR rate bore interest at approximately 8.4% per annum,
loans tied to the prime rate bore interest at approximately 9.0% and loans tied
to the federal funds-based rate bore interest at approximately 9.8%. The bulk of
the Company's borrowings under the revolver and the term loan are at the
LIBOR-based rate.
In January 1997, the Company issued $75.0 million in principal amount
of Adjustable Rate Senior Notes due January 6, 2007 (the "Senior Notes"), which
bear interest at 8.75% per annum. The Senior Notes require interest-only
payments for the first four years, then seven equal installments of principal on
each anniversary date, beginning January 2001. As noted below, the proceeds of
the Senior Notes were utilized to reduce a previous version of the Credit
Facility. The Company is currently in discussions regarding the issuance of an
additional $25.0 million in principal amount of 10-year senior notes on terms
substantially identical to the Senior Notes. The proceeds from the sale of any
such notes will be used by the Company to repay a portion of the outstanding
borrowings under the Credit Facility, a portion of which were used for certain
fixed asset acquisitions. It is expected that such additional notes would be
issued in the third quarter of 1998.
The Company also has outstanding borrowings from one member of the
multibank credit lenders aggregating approximately $13.0 million at June 30,
1998 which are due at various times through August 2001. Covenants similar to
those applicable to the multibank credit facility apply to these loans. The
Company has granted two mortgages on Florida property which it owns to secure
repayment of $2.8 million of such indebtedness. Interest rates on such loans
ranged between 6.6% and 8.4%.
The Company's Hong Kong subsidiaries have lines of credit of
approximately $15.0 million with two overseas banks for letter of credit and
trust receipt financing. These banks have a security interest to the extent of
merchandise purchased using trust receipt loans. As of June 30, 1998, there were
approximately $3.8 million in trust receipt loans and $9.0 million of letters of
credit outstanding.
The previous versions of the Credit Facility initially commenced in
August 1996, when the Company entered into a multibank $120 million bridge
facility (which was subsequently increased to $135 million) to accommodate the
acquisition of RAC and to finance the Company's on-going operations. In 1997,
the Company completed the placement of the Senior Notes, the proceeds of which
were utilized to reduce the former version of the Credit Facility, which was
then converted to a four-year $15 million term loan and a three-year $71.5
million committed revolving line of credit. The four-year term loan refinanced
at more favorable interest rates $15 million of indebtedness assumed on RAC's
acquisition. In January 1998, the $71.5 million committed revolving line of
credit was restructured to a $66.5 million committed revolving line of credit
through December 1999 and a $5.0 million four-year term loan amortized on a
straight line basis. In June 1998 the Credit Facility was again amended to its
current terms as noted above.
At December 31, 1997 and at various times prior to such date, the
Company was not in compliance with certain covenants, including those involving
the maintenance of financial ratios and minimum tangible net worth, under the
Senior Notes and the Credit Facility. Both the Senior Note holders and bank
lenders waived the Company's non-compliance with such covenants at December 31,
1997, and at such other times, and temporarily relaxed such covenants until such
time as terms of the Credit Facility and Senior Notes were amended to include
less restrictive covenants, but not later than June 29, 1998. The Credit
Facility was amended in June 1998 and in August 1998 to include certain less
restrictive requirements through December 30, 1998 and the holders of the Senior
Notes extended their prior waiver of noncompliance through December 30, 1998 (or
such time as the Company has received certain minimum net proceeds from an
offering of equity securities or is otherwise in compliance with the original
provisions of such covenants, if earlier).
The current Credit Facility contemplates that the Company will be
making an offering of equity securities or subordinated debt. If the Company is
unable to raise a net minimum of $75.0 million in additional equity or
subordinated debt by November 30, 1998, it will be obligated to pay the lenders
under the Credit Facility an increased commitment fee of $.5 million. At that
time, under the terms of the Credit Facility, the amount of the revolving credit
portion of the Credit Facility is reduced by $15.0 million. In addition, if the
Company does not raise such additional funds by the end of 1998 it will likely
be in default of certain covenants under the Credit Facility and the Senior
Notes, since at that time the waivers of noncompliance granted to the Company
will have expired.
In November 1997, the Company borrowed $5.0 million under a demand
note agreement to finance the acquisition of AAMP. The note was paid in January
1998. In May 1998, the Company borrowed an additional $10 million, under a
demand note agreement due no later than July 31, 1998, to provide additional
working capital. Such demand note was repaid with the proceeds of the increased
Credit Facility.
At June 30, 1998, the Company had working capital of approximately
$236.5 million as compared to approximately $222.4 million at December 31, 1997.
The Company's ratio of current assets to current liabilities was 3.1 to 1 at
June 30, 1998 and 3.3 to 1 at December 31, 1997. Trade receivables declined
$15.7 million to $114.2 million at June 30, 1998 as compared to December 31,
1997. Inventories increased from December 31, 1997 levels by $47.5 million to
$189.8 million at June 30, 1998. The increase in the inventory levels was
substantially attributable to Company's INTERACT product line. In anticipation
of strong demand for such products in the third and fourth quarter of 1998, such
products were manufactured in advance. Due to capacity constraints at the
Company's Chinese manufacturing facility, which is the primary supplier of
INTERACT products, the Company acquired such inventory earlier than it normally
would. Accounts payable and accrued expenses increased $11.7 million to $91.5
million at June 30, 1998, which increase consists primarily of the
reclassification of certain accrued performance bonuses payable in March 1999
which were reported as Other Noncurrent Liabilities at December 31, 1997
In August 1994, the Board of Directors authorized the repurchase by
the Company of up to 500,000 outstanding Common Shares. In 1995, 42,366 shares
were purchased for approximately $0.7 million; no shares were repurchased
pursuant to such authorization in 1996, 1997 or 1998. In June 1996, the Board of
Directors authorized, under certain circumstances, the purchase from time to
time of additional shares from certain officers. In July 1996, the Company
purchased 65,000 shares from an officer for approximately $1.2 million. Any
future repurchases may be limited by the terms of the Company's loan agreements.
In August 1996, Recoton acquired the branded product lines of RAC
(then known as International Jensen Incorporated), a leading marketer of home
and automotive loudspeakers and automotive electronics, for a total cost of
approximately $61.6 million. In connection with the acquisition, Recoton assumed
approximately $34.0 million in notes and loans payable. In December 1996, the
Company acquired selected assets of Heco GmbH and Heco Electronics GmbH (both in
Germany) for a cost of approximately $1.3 million. HECO is a leading brand of
home speakers in Germany.
In February 1997, Recoton acquired the outstanding stock of Tambalan
Limited ("Tambalan") at a cost of approximately $285,000 plus closing costs and
assumed certain outstanding debt of approximately $2.9 million. Tambalan markets
headphones and other consumer electronics products in the United Kingdom and
other European countries under the brand name ROSS and has a branch operation in
Hong Kong. In November 1997, the Company acquired AAMP at a cost of
approximately $2.4 million paid by the issuance of 169,706 Common Shares. In
conjunction with the acquisition, the Company assumed approximately $4.5 million
in debt, which was repaid in November 1997 from the proceeds of the $5.0 million
loan referred to above, which loan was repaid in January 1998. AAMP is a leading
car audio accessories company based in Clearwater, Florida whose business
includes the STINGER and PERIPHERAL brands. In December 1997, the Company
acquired, out of bankruptcy, selected assets of Capa Industries, Inc. at a cost
of approximately $1.1 million. The acquisition provided expanded manufacturing
and electronic engineering capacity to enhance the home and car audio products
line.
The Company completed construction, in January 1998, of an
approximately 318,000 square foot expansion of its warehouse on its Lake Mary,
Florida property. The cost of the building construction was approximately $5.0
million.
To date there has been limited exposure to loss due to foreign
currency risks in the Company's Asian subsidiaries, because the Hong Kong dollar
has been pegged to the U.S. dollar at an official exchange rate of HK $7.75 to
US $1.00. Additionally, in recent years there have been no material fluctuations
in the Hong Kong/Chinese exchange rates. Also, the Company maintains the
majority of its currency in Asia in U.S. dollar accounts. However, as a result
of recent turmoil in the Asian currency markets, there can be no assurance that
these relationships will continue.
The Company's operations, which are currently being transacted on a
global basis, are exposed to variations in foreign exchange rates. Due to the
strengthening of the U.S. dollar against the German mark, Italian lira and
Canadian dollar during 1998, the Company's shareholders' equity was reduced by a
foreign currency translation adjustment of approximately $1.2 million in the six
months ended June 30, 1998. During the six months ended June 30,1997, the
Company's shareholders' equity was reduced by a foreign currency translation
adjustment of approximately $3.8 million, of which approximately $3.2 million
occurred in the first quarter of 1997. The declines in the German and Italian
currencies had no material impact on the Company's results of operations.
If there are any further material adverse changes in the relationships
between the European and/or Canadian currencies with the United States dollar or
if the Hong Kong or Chinese currencies should no longer be tied to the U.S.
dollar, such changes could adversely affect the results of the Company's
European, Canadian and/or Asian operations included in the consolidated
financial statements and could cause further increases in the amount of foreign
currency translation adjustments which are charged directly to shareholders'
equity.
As further described in Note E to the Notes to Condensed Consolidated
Financial Statements, the financial impact of the pending criminal and civil
customs investigation cannot be determined at this time, but could be material
to the Company. Accordingly, the Company has at this time made no provision for
any estimated loss related to this matter.
The Company has leased expanded facilities for sales and warehousing
in Germany and the U.K. and is considering enlarging its manufacturing
facilities in mainland China. In addition, the Company is considering the
acquisition of additional computer hardware and software to be used both in the
United States and in its foreign locations. The Company will also continue to
evaluate possible acquisitions that may be attractive to the growth of the
Company.
YEAR 2000
The Company has addressed what has become known as the year 2000
issue. This issue has arisen because many existing computer programs use only
two digits to identify a year in the date field. These programs were designed
and developed without considering the impact of the upcoming change in the
century. The failure of such application or systems to properly recognize the
dates beginning in the year 2000 could result in miscalculations or system
failures. The Company believes that all of its domestic and substantially all of
its foreign computer hardware and software (including imbedded technology) are
year 2000 compliant. The Company anticipates that all of its systems will be
year 2000 compliant by the end of fiscal 1998. The Company is contacting its
customer and vendor base to ascertain their compliance to the extent that their
problems could affect the Company. The Company at this time cannot make any
predictions as to the degree of compliance by such vendors and customers or the
consequences of their noncompliance. Management, based on preliminary
information, does not anticipate that any expenses of achieving year 2000
compliance will have a material impact on the Company's results of operations or
financial condition during the next two years.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Company's foreign borrowings are denominated in U.S.
dollars, its functional currency. As of June 30, 1998, a substantial portion
(over 75%) of the Company's borrowings bear fixed interest rates. However,
borrowings under the revolving credit portion of the Company's Credit Facility
are made at rates in effect when the loans are made and remain in effect until
they are "rolled-over" (typically 30 to 60 days later) unless the Company has
elected to borrow at the prime rate or other floating interest rate under one of
the several interest rate options available to it when each loan is made. A $15
million term loan, which is due in installments through May 2001, bears interest
which varies on a quarterly basis with changes in the Company's financial ratios
and changes in LIBOR.
The Company and two of its subsidiaries have intercompany loans, which
are not denominated in their home country currency, which exposes the Company to
exchange rate fluctuations. The Company has not entered into any foreign
currency or derivative contracts to hedge these potential exchange adjustments,
which are initially recorded as cumulative foreign currency translation
adjustments, a component of shareholders' equity, but will ultimately be
reflected in operations when the debt is repaid. Exclusive of intercompany
receivables and payables for current transactions, the principal outstanding
exposure at June 30, 1998 (expressed in U.S. dollars at current exchange rates)
for foreign currency loans made by the Company and its subsidiaries to
subsidiaries is $24,583,000 in Germany and $6,795,000 in Italy. These loans have
no fixed due dates.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
CUSTOMS INVESTIGATION. In July 1994, agents of the United States
Customs Service, working in conjunction with the United States Attorney's office
in Orlando, Florida, seized property and business records from the Company's
Lake Mary, Florida facility pursuant to a search warrant and commenced a
criminal and civil investigation. The Company is in communication with the
government regarding such investigation, which the Company has been advised has
focused on country of origin marking, duty-free import status under the
Caribbean Basin Initiative, duties with respect to dies, molds and tooling used
overseas, commissions paid to agents, importation of merchandise subject to
textile quota, other instances of undervaluation and other miscellaneous
matters. Management is hopeful of reaching a settlement of this matter. However,
based on the current status of the Company's communication with the government,
the Company is unable to make a realistic estimate of the probable amount or
probable range of amounts for its ultimate outcome, which could be material in
relation to the Company's results of operations and/or financial condition.
Accordingly, the Company has at this time made no provision for any estimated
loss related to this matter.
STOCKHOLDER SUITS. The litigation with certain former stockholders of
International Jensen Incorporated in Delaware described in the Company's Form
10-K for the year ended December 31, 1997 was settled in June 1998 with the
payment by the Company of $75,000 in legal fees and expenses incurred by the
plaintiffs' counsel.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
The Annual Meeting of the Shareholders of the Corporation was held on
June 10, 1998. Each of the three candidates for the position of director,
Messrs. Irwin Friedman, Joseph M. Idy and Joseph H. Massot, were elected. The
directors whose term of office continued after the meeting were Messrs. Herbert
Borchardt, Robert Borchardt, George Calvi, Stephen Chu, Paul Feffer, Ronald
McPherson, Stuart Mont and Peter Wish.
The matters voted upon at the meeting and the number of votes cast
for, against or withheld (including abstentions and broker non-votes) as to each
matter, including nominees for office, are as follows:
1. Director election:
Irwin Friedman
For: 9,732,725
Withhold Authority: 743,088
Joseph Idy
For: 9,733,823
Withhold Authority: 741,990
Joseph Massot
For: 9,737,772
Withhold Authority: 738,041
2. Approval of an amendment to the Restated Certificate of
Incorporation to increase the number of authorized common shares:
For: 9.876.785
Against: 272,233
Abstain: 245,457
Nonvote: 81,338
3. Approval of the 1998 Stock Option Plan
For: 5,474.684
Against: 2,601,382
Abstain: 274,150
Nonvote: 2,125,597
4. Ratification of the appointment of Cornick, Garber & Sandler, LLP
as Independent Auditors for the Fiscal Year Ending December 31, 1997:
For: 10,438,814
Against: 13,315
Abstain: 23,684
Nonvote: 0
ITEM 5. OTHER INFORMATION.
When used in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission, in the Company's press releases and in
oral statements made with the approval of an authorized executive officer, the
words or phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," "expect," "believe," "hope" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
such forward-looking statements, which speak only as of the date made.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.3 Certificate of Amendment to Restated Certificate of Amendment,
as filed June 25, 1998
10.31 Waiver of Certain Terms of the Note Purchase Agreement dated
January 6, 1997 between Recoton Corporation and the several
purchasers (filed as Exhibit 10.25 to the Registrant's Form 10-K
for the year ended December 31, 1997), dated June 29, 1998
10.32 Second Amended and Restated Credit Agreement among Recoton
Corporation, The Chase Manhattan Bank and the lenders made party
thereto dated as of June 18, 1998 [replaces Exhibit 10.23 as
listed in the Registrant's Form 10-K for the year ended December
31, 1997]
10.33 Amendment and Waiver dated as of June 29, 1998 to Second Amended
and Restated Credit Agreement among Recoton Corporation, The
Chase Manhattan Bank and the lenders made party thereto dated as
of June 18, 1998
10.34 Common Stock Purchase Option, as of April 7, 1998, with the
Equity Group, Inc. [replaces Exhibit 10.14 as listed in the
Registrant's Form 10-K for the year ended December 31, 1997]
27 Financial Data Schedule
(b) Reports on Form 8-K: none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RECOTON CORPORATION
/S/ STUART MONT
Stuart Mont
Executive V.P.-Operations
Chief Operating Officer
/S/ JOSEPH H. MASSOT
Joseph H. Massot
Vice President, Treasurer and Principal
Accounting Officer
Dated: August 14, 1998
<PAGE>
EXHIBIT INDEX
3.3 Certificate of Amendment to Restated Certificate of Amendment,
as filed June 25, 1998
10.31 Waiver of Certain Terms of the Note Purchase Agreement dated
January 6, 1997 between Recoton Corporation and the several
purchasers (filed as Exhibit 10.25 to the Registrant's Form 10-K
for the year ended December 31, 1997), dated June 29, 1998
10.32 Second Amended and Restated Credit Agreement among Recoton
Corporation, The Chase Manhattan Bank and the lenders made party
thereto dated as of June 18, 1998 [replaces Exhibit 10.23 as
listed in the Registrant's Form 10-K for the year ended December
31, 1997]
10.33 Amendment and Waiver dated as of June 29, 1998 to Second Amended
and Restated Credit Agreement among Recoton Corporation, The
Chase Manhattan Bank and the lenders made party thereto dated as
of June 18, 1998
10.34 Common Stock Purchase Option, as of April 7, 1998, with the
Equity Group, Inc. [replaces Exhibit 10.14 as listed in the
Registrant's Form 10-K for the year ended December 31, 1997]
27 Financial Data Schedule
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RECOTON CORPORATION
Under Section 805 of the Business Corporation Law
We, the undersigned, Robert L. Borchardt and Stuart Mont, being
respectively the President and the Secretary of Recoton Corporation (hereinafter
called the "Corporation"), hereby certify:
FIRST: The name of the Corporation is Recoton Corporation.
SECOND: The Certificate of Incorporation of the Corporation was filed
in the office of the Secretary of State on the 30th day of December 1936 under
the name Recotone Co. Inc. A Restated Certificate of Incorporation was filed in
the office of the Secretary of State on the 24th day of January 1997.
THIRD: The amendment of the Certificate of Incorporation of the
Corporation effected by this Certificate of Amendment is to increase the number
of authorized shares from 25,000,000 common shares with a par value of $.20 to
40,000,000 common shares with a par value of $.20.
FOURTH: To accomplish the foregoing amendment, Article 3 of the
Certificate of Incorporation of the Corporation, relating to shares, is hereby
amended to read as follows:
"3.THE AGGREGATE NUMBER OF SHARES WHICH THE CORPORATION SHALL
HAVE THE AUTHORITY TO ISSUE IS FIFTY MILLION (50,000,000), WHICH ARE
DIVIDED INTO TEN MILLION (10,000,000) PREFERRED SHARES OF A PAR VALUE
OF $1.00 PER SHARE AND FORTY MILLION (40,000,000) COMMON SHARES OF A
PAR VALUE OF $.20 PER SHARE. THE RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS ARE AS FOLLOWS:
(A) THE PREFERRED SHARES AUTHORIZED HEREBY MAY BE ISSUED (I)
IN SUCH SERIES AND WITH SUCH VOTING POWERS, FULL OR LIMITED, OR
NO VOTING POWERS, AND SUCH DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND WITH SUCH
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREON, AS THE BOARD
OF DIRECTORS SHALL FIX BY RESOLUTION, AND (II) IN SUCH NUMBER OF
SHARES IN EACH SERIES AS THE BOARD OF DIRECTORS SHALL FIX BY
RESOLUTION PROVIDED THAT THE AGGREGATE NUMBER OF ALL PREFERRED
SHARES ISSUED DOES NOT EXCEED THE NUMBER OF PREFERRED SHARES
AUTHORIZED HEREBY.
(B) HOLDERS OF COMMON SHARES SHALL BE ENTITLED TO SUCH
DIVIDEND, LIQUIDATION AND VOTING RIGHTS AND PRIVILEGES AS ARE
PROVIDED BY THE BUSINESS CORPORATION LAW, SUBJECT TO THE RIGHTS
OF HOLDERS OF PREFERRED SHARES ISSUED PURSUANT TO PARAGRAPH (A)
ABOVE."
FIFTH: The manner in which the forgoing Amendment of the Certificate
of Incorporation was authorized was by vote of the Board of Directors followed
by vote of the holders of a majority of all outstanding shares entitled to vote
thereon at a meeting of shareholders.
IN WITNESS WHEREOF, we have subscribed this document on the date set
opposite each of our names below and do hereby affirm, under the penalties of
perjury, that the statements contained therein have been examined by us and are
true and correct.
Date: June 10, 1998.
/S/ ROBERT L. BORCHARDT
----------------------------------
Name: Robert L. Borchardt
Title: President
/S/ STUART MONT
----------------------------------
Name: Stuart Mont
Title: Secretary
EXHIBIT 10.31
RECOTON CORPORATION
2950 LAKE EMMA ROAD
LAKE MARY, FL 32746
As of June 29, 1998
To the holders of the Notes
Listed as Noteholders on the
signature page hereto
RE: ADJUSTABLE RATE SENIOR NOTES (THE "NOTE") OF RECOTON CORPORATION
DUE JANUARY 6, 2007 ISSUED PURSUANT TO THE NOTE PURCHASE
AGREEMENT DATED AS OF JANUARY 6, 1997
Ladies and Gentlemen:
The purpose of this letter is to provide notice to each of the holders
of the Notes (the "NOTEHOLDER") of the noncompliance of Recoton Corporation (the
"COMPANY" with certain of the negative covenants of the Note Purchase Agreement
referred to below and to request from the Noteholders a waiver of such
noncompliance. The "NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement,
dated as of January 6, 1997, among the Noteholders and the Company, as amended
by that certain Amendment Agreement dated as of May 13, 1997, the Second
Amendment Agreement dated as of August 13, 1997, and the letter dated March 25,
1998 from the Company to the Noteholders. All terms used herein and not
otherwise defined herein have the meanings specified in the Note Purchase
Agreement.
1. WAIVER OF EVENTS OF DEFAULT
1.1 DEBT TO NET WORTH - SECTION 6C. As of the date hereof, the Company
is not in compliance with Section 6C of the Note Purchase Agreement which
requires that sum of Consolidated Funded Debt plus Excess Current Debt of the
Company not exceed 50% of the Consolidated Tangible Gross Worth of the Company
(the "Capitalization Ratio") as of the end of each fiscal quarter of the
Company. Consequently, the Company requests a waiver of its obligation to comply
with Section 6C until the earliest to occur of (i) December 31, 1998, (ii) such
time as the Capitalization Ratio is greater than 65% (regardless of whether such
time is at the end of a fiscal quarter of the Company or at any other time), and
(ii) such time as the Company has received not less than $75 million of net
proceeds from the public or private sale of its common or preferred shares. At
such time any such date or event shall occur, such waiver shall terminate and
Section 6C shall be in full force and effect to the same extent as it was
immediately prior to the effectiveness of this letter.
1.2 CASH FLOW TO INTEREST - SECTION 6D. As of the date hereof, the
Company is not in compliance with Section 6D of the Note Purchase Agreement
which requires that the ratio (the "Interest Coverage Rate") of Consolidated
Adjusted Cash Flow for each period of four fiscal quarters of the Company to the
Consolidated Interest Expense of the Company for the same period not be less
than 3.50 to 1.00. Consequently , the Company requests a waiver of its
obligation to comply with Section 6D until the earlier to occur of (i) December
31, 1998, unless the Company has received not less than $75 million of net
proceeds from the public or private sale of its common or preferred shares on or
prior to such date, in which event June 30, 1999 shall be the applicable date
and (ii) such time as the Interest Coverage Ratio is lower than 2.50 to 1.00 for
any period of four fiscal quarters of the Company ending after the date hereof.
At such time any such date or event shall occur, such waiver shall terminate and
Section 6D shall be in full force and effect to the same extent as it was
immediately prior to the effectiveness of this letter.
1.3 AGREEMENT TO WAIVERS. By your execution below, you hereby agree to
the waivers requested by the Company in Section 1.1 and Section 1.2 on the terms
and conditions set forth therein.
2. EFFECTIVENESS OF WAIVER; FEE; NO OTHER WAIVER OR AMENDMENT
The waivers set forth herein shall become effective as of the date
hereof upon (i) the full execution and delivery of this letter by the Company
and the Required Holders and (ii) payment by the Company to each Noteholder, in
the manner prescribed in the Note Purchase Agreement for the payment of amounts
owing in respect of the Notes, of a fee equal to .20% of the principal amount of
the Notes held by such Noteholder. The execution, delivery and effectiveness of
this letter shall not be deemed, except as expressly provided herein.
(a) to operate as a waiver of any right, power or remedy of the
Noteholders under the Note Purchase Agreement.
(b) to constitute a waiver of any other present or future Event
of Default,
(c) to constitute a waiver or amendment of any provision of the
Note Purchase Agreement, or
(d) to prejudice any rights which any Noteholder now has or may
have in the future under or in connection with the Note Purchase
Agreement or any other documents referred to therein.
Except for the waivers herein contained, all terms and conditions of the Note
Purchase Agreement shall remain unchanged and in full force and effect.
This letter and all acceptances hereof may be executed simultaneously
in any number of counterparts, each of which shall be deemed an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
[Remainder of page intentionally blank. Next page is the signature page.]
If you are in agreement with the foregoing, please sign both copies of
this letter and return each copy to your special counsel, Hebb & Gitlin, a
Professional Corporation, One State Street, Hartford, Connecticut 06103,
Attention: Chester E. Fisher III.
Very truly yours,
RECOTON CORPORATION
By: /S/ ARNOLD KEZSBOM
--------------------------------
Name: Arnold Kezsbom
Title: Vice President
NOTEHOLDERS:
ACCEPTED AND AGREED:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /S/ KEVIN KRASKA
-----------------------
Name: Kevin Kraska
Title: Vice President
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By: /S/ DANIEL C. BUDDE
-----------------------
Name: Daniel C. Budde
Title: Senior Investment Officer
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By: /S/ DANIEL C. BUDDE
-----------------------
Name: Daniel C. Budde
Title: Senior Investment Officer
INVESTOR PARTNER LIFE INSURANCE COMPANY, F/K/A JOHN HANCOCK LIFE
INSURANCE COMPANY OF AMERICA
By: /S/ DANIEL C. BUDDE
-----------------------
Name: Daniel C. Budde
Title: Senior Investment Officer
<PAGE>
MELLON BANK, N.A., SOLELY IN ITS The decision to participate in this
CAPACITY AS TRUSTEE FOR THE LONG investment, any representations made
TERM INVESTMENT TRUST (AS herein by the participant, and any
DIRECTED BY JOHN HANCOCK MUTUAL LIFE actions taken hereunder by the
INSURANCE COMPANY), AND NOT IN ITS at the discretion of the investment
INDIVIDUAL CAPACITY fiduciary who has sole investment
discretion with respect to this
investment.
By: /S/ CAROLE BRUNO [SEAL]
-------------------------------
Name: Carole Bruno
Title: Authorized Signatory
MELLON BANK, N.A., SOLELY IN ITS The decision to participate in this
CAPACITY AS TRUSTEE FOR THE BELL investment, any representations made
ATLANTIC MASTER TRUST, (AS herein by the participant, and any
DIRECTED BY JOHN HANCOCK MUTUAL LIFE actions taken hereunder by the
INSURANCE COMPANY), AND NOT IN ITS participant, has/have been made
INDIVIDUAL CAPACITY solely at the direction of the
investment fiduciary who has sole
investment discretion with respect
to this investment.
By: /S/ CAROLE BRUNO [SEAL]
-------------------------------
Name: Carole Bruno
Title: Authorized Signatory
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
RECOTON CORPORATION,
The Several Lenders
from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
DATED AS OF JUNE 18, 1998
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................. 1
1.1 Defined Terms.................................................... 1
1.2 Other Definitional Provisions.................................... 18
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.............................. 18
2.1 Revolving Credit Commitments..................................... 18
2.2 Procedure for Revolving Credit Borrowing......................... 19
2.3 Commitment Fee................................................... 19
2.4 Termination or Reduction of Revolving Credit Commitments;
Mandatory Prepayments............................................ 19
2.5 Term Loans....................................................... 20
2.6 Repayment of Loans; Evidence of Debt............................. 20
2.7 Optional Prepayments............................................. 21
2.8 Conversion and Continuation Options.............................. 22
2.9 Minimum Amounts and Maximum Number of Tranches................... 22
2.10 Interest Rates and Payment Dates................................. 23
2.11 Computation of Interest and Fees................................. 23
2.12 Inability to Determine Interest Rate............................. 23
2.13 Pro Rata Treatment and Payments.................................. 24
2.14 Illegality....................................................... 25
2.15 Requirements of Law.............................................. 25
2.16 Taxes............................................................ 26
2.17 Indemnity........................................................ 28
2.18 Change of Lending Office......................................... 28
2.19 Swing Line Commitments........................................... 28
SECTION 3. LETTERS OF CREDIT............................................. 30
3.1 L/C Commitment................................................... 30
3.2 Procedure for Issuance of Letters of Credit...................... 31
3.3 Fees, Commissions and Other Charges.............................. 31
3.4 L/C Participations............................................... 32
3.5 Reimbursement Obligation of the Borrower......................... 33
3.6 Obligations Absolute............................................. 33
3.7 Letter of Credit Payments........................................ 34
3.8 Application...................................................... 34
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 34
4.1 Organization, Corporate Powers, etc.............................. 34
4.2 Authorization of Borrowing, etc.................................. 34
4.3 Financial Condition.............................................. 34
4.4 Taxes............................................................ 35
4.5 Title to Properties.............................................. 35
4.6 Litigation....................................................... 35
4.7 Agreements....................................................... 35
4.8 Employee Benefit Plans........................................... 35
4.9 Federal Reserve Regulations...................................... 36
4.10 Governmental Approval; Licenses.................................. 36
4.11 Affiliates; Subsidiaries; Shareholders........................... 36
4.12 Compliance with Applicable Laws.................................. 36
4.13 Environmental Matters............................................ 36
4.14 Intellectual Property............................................ 37
4.15 Schedules........................................................ 37
4.16 Purpose of Loans................................................. 37
4.17 Certain Subsidiaries............................................. 38
SECTION 5. CONDITIONS PRECEDENT.......................................... 38
5.1 Conditions to Effectiveness...................................... 38
5.2 Conditions to Each Extension of Credit........................... 39
SECTION 6. AFFIRMATIVE COVENANTS......................................... 39
6.1 Financial Statements............................................. 39
6.2 Certificates; Other Information.................................. 40
6.3 Payment of Obligations........................................... 41
6.4 Conduct of Business and Maintenance of Existence................. 41
6.5 Maintenance of Property; Insurance............................... 41
6.6 Inspection of Property; Books and Records; Discussions........... 41
6.7 Notices.......................................................... 42
6.8 Environmental Laws............................................... 42
6.9 Additional Guarantors............................................ 43
6.10 Entel Limited.................................................... 43
SECTION 7. NEGATIVE COVENANTS............................................ 43
7.1 Financial Condition Covenants.................................... 43
7.2 Limitation on Indebtedness....................................... 45
7.3 Limitation on Liens.............................................. 46
7.4 Limitation on Guarantee Obligations.............................. 47
7.5 Limitation on Fundamental Changes and Sales of Assets.............48
7.6 PRC Subsidiaries................................................. 49
7.7 Limitation on Investments, Loans and Advances.................... 49
7.8 Limitation on Transactions with Affiliates....................... 49
7.9 Limitation on Changes in Fiscal Year............................. 50
7.10 Limitation on Lines of Business.................................. 50
7.11 Limitation on RAC-FSC Assets..................................... 50
7.12 Limitation on Recoton (UK) Assets................................ 50
SECTION 8. EVENTS OF DEFAULT............................................. 50
SECTION 9. THE ADMINISTRATIVE AGENT...................................... 54
9.1 Appointment...................................................... 54
9.2 Delegation of Duties............................................. 54
9.3 Exculpatory Provisions........................................... 54
9.4 Reliance by Administrative Agent................................. 54
9.5 Notice of Default................................................ 55
9.6 Non-Reliance on Administrative Agent and Other Lenders........... 55
9.7 Indemnification.................................................. 56
9.8 Administrative Agent in Its Individual Capacity.................. 56
9.9 Successor Administrative Agent................................... 56
SECTION 10. MISCELLANEOUS................................................ 57
10.1 Amendments and Waivers........................................... 57
10.2 Notices.......................................................... 57
10.3 No Waiver; Cumulative Remedies................................... 58
10.4 Survival of Representations and Warranties....................... 58
10.5 Payment of Expenses and Taxes.................................... 59
10.6 Successors and Assigns; Participations and Assignments........... 59
10.7 Adjustments; Set-off............................................. 62
10.8 Counterparts..................................................... 62
10.9 Severability..................................................... 63
10.10 Integration...................................................... 63
10.11 GOVERNING LAW.................................................... 63
10.12 Submission To Jurisdiction; Waivers.............................. 63
10.13 Acknowledgements................................................. 64
10.14 WAIVERS OF JURY TRIAL............................................ 64
SCHEDULES
Schedule I Original Revolving Credit Commitments
Schedule II Subsequent Revolving Credit Commitments
Schedule III Term Loan Commitments
Schedule IV Applicable Margin and Commitment Fee Rate
Schedule 4.11 Subsidiaries of Recoton Corporation
Schedule 7.2 Recoton Corporation Debt
Schedule 7.3 Liens Against Recoton Corporation
Schedule 7.4 Recoton Corporation Guarantees
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Term Note
Exhibit C Form of Swing Line Note
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Affirmation and Consent
Exhibit F Form of Borrower's Counsel's Opinion
<PAGE>
EXHIBIT 10.32
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 18,
1998, among RECOTON CORPORATION, a New York corporation (the "BORROWER"), the
several banks and other financial institutions from time to time parties to this
Agreement (the "LENDERS"), and the Administrative Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, certain of the Lenders (the "EXISTING
LENDERS"), and the Administrative Agent are parties to the Amended and Restated
Credit Agreement, dated as of September 9, 1997 (as heretofore amended,
supplemented or otherwise modified prior to the date hereof, the "EXISTING
CREDIT AGREEMENT");
WHEREAS, certain of the Existing Lenders (the "CONTINUING LENDERS")
and the Administrative Agent have so agreed to amend and restate the Existing
Credit Agreement, and a certain bank (the "NEW LENDER") has agreed to become a
party hereto; and
WHEREAS, the Borrower has requested that the Existing Credit Agreement
be amended and restated to (a) increase the aggregate amount of the Revolving
Credit Commitments (as hereinafter defined) to $101,500,000 and (b) otherwise
amend the Existing Credit Agreement and restate it in its entirety as more fully
set forth herein, and the Lenders and the Administrative Agent are willing, upon
and subject to the terms and conditions hereof, so to amend and restate the
Existing Credit Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree that on the Closing Date (as hereinafter
defined) the Existing Credit Agreement shall be amended and restated to read in
its entirety as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "PRIME
RATE" shall mean the rate of interest per annum publicly announced
from time to time by the Administrative Agent as its prime rate in
effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by the
Administrative Agent in connection with extensions of credit to
debtors); and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day,
the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not
so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the ABR due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective as
of the opening of business on the effective day of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is
based upon the ABR.
"ADJUSTMENT DATE": each date on or after the date that is the
second Business Day following receipt by the Lenders of both (i) the
financial statements required to be delivered pursuant to subsection
6.1(a) or 6.1(b), as applicable, for the most recently completed
fiscal period and (ii) the related Compliance Certificate required to
be delivered pursuant to subsection 6.2(b) with respect to such fiscal
period.
"ADMINISTRATIVE AGENT": The Chase Manhattan Bank, together with
its affiliates, as the arranger of the Commitments and as the agent
for the Lenders under this Agreement and the other Loan Documents.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in Control of, is
Controlled by, or is under common Control with, such Person.
"AGGREGATE OUTSTANDING EXTENSIONS OF REVOLVING CREDIT": as to any
Lender at any time, an amount equal to the sum of (a) the aggregate
principal amount of all Revolving Credit Loans made by such Lender
then outstanding and (b) such Lender's Revolving Credit Commitment
Percentage of the L/C Obligations and (other than for purposes of
computation of commitment fees pursuant to subsection 2.3) Swing Line
Loans then outstanding.
"AGREEMENT": this Second Amended and Restated Credit Agreement,
as amended, supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN": as applied to a given Type of Loan, the rate
per annum determined as follows: (a) during the period from the
Closing Date until the first Adjustment Date to occur after the
Closing Date, the Applicable Margin shall equal (i) with respect to
ABR Loans, .50% per annum and (ii) with respect to Eurodollar Loans,
2.75% per annum; and (b) on the first Adjustment Date and on each
Adjustment Date to occur thereafter, the Applicable Margin will be
adjusted to the applicable rate per annum set forth under the heading
"ABR Loans Applicable Margin" or "Eurodollar Loans Applicable Margin"
on Schedule IV which corresponds to the Leverage Ratio determined from
the financial statements and Compliance Certificate relating to the
end of the fiscal quarter immediately preceding such Adjustment Date,
and PROVIDED FURTHER, that in the event that the financial statements
required to be delivered pursuant to subsection 6.1(a) or 6.1(b), as
applicable, and the related Compliance Certificate required to be
delivered pursuant to subsection 6.2(b), are not delivered when due,
then
(1) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered (without
giving effect to any applicable cure period) and the Applicable
Margin increases from that previously in effect as a result of
the delivery of such financial statements and Compliance
Certificate, then the Applicable Margin in respect of Revolving
Credit Loans during the period from the date upon which such
financial statements and Compliance Certificate were required to
be delivered (without giving effect to any applicable cure
period) until the date upon which they actually are delivered
shall, except as otherwise provided in clause (3) below, be the
Applicable Margin as so increased;
(2) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered and the
Applicable Margin decreases from that previously in effect as a
result of the delivery of such financial statements and
Compliance Certificate, then such decrease in the Applicable
Margin shall not become applicable until the date upon which such
financial statements and Compliance Certificate actually are
delivered; and
(3) if such financial statements and Compliance Certificate
are not delivered prior to the expiration of the applicable cure
period, then, effective upon such expiration, for the period from
the date upon which such financial statements and Compliance
Certificate were required to be delivered (after the expiration
of the applicable cure period) until two Business Days following
the date upon which such financial statements and Compliance
Certificate actually are delivered, the Applicable Margin in
respect of Revolving Credit Loans shall be the highest applicable
rate per annum specified on Schedule IV.
"APPLICATION": an application, in such form as the Issuing Bank
may specify from time to time, requesting the Issuing Bank to open a
Letter of Credit.
"ASSIGNEE": as defined in subsection 10.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Lender, at any
time, an amount equal to the excess, if any, of (a) such Lender's
Revolving Credit Commitment over (b) such Lender's Aggregate
Outstanding Extensions of Revolving Credit.
"BORROWING DATE": any Business Day specified in a notice pursuant
to subsection 2.2, 2.6 or 2.19 as a date on which the Borrower
requests the Lenders to make Loans hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day
on which commercial banks in New York City are authorized or required
by law to close.
"CAPITAL EXPENDITURE": any expenditure in respect of the purchase
or acquisition of fixed or capital assets.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person
(other than a corporation) and any and all warrants or options to
purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or
insured by the United States Government or any agency thereof, (b)
certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition and overnight bank
deposits of any Lender or of any commercial bank having capital and
surplus in excess of $500,000,000, (c) repurchase obligations of any
Lender or of any commercial bank satisfying the requirements of clause
(b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the
United States Government, (d) commercial paper of a domestic issuer
rated at least A-2 by Standard and Poor's Ratings Services ("S&P") or
P-2 by Moody's Investors Service, Inc. ("MOODY'S"), (e) securities
with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of
the United States, by any political subdivision or taxing authority of
any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory,
political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f)
securities with maturities of one year or less from the date of
acquisition backed by standby letters of credit issued by any Lender
or any commercial bank satisfying the requirements of clause (b) of
this definition or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
"CHASE": The Chase Manhattan Bank.
"CLOSING DATE": the date on which the conditions precedent set
forth in subsection 5.1 shall be satisfied.
"CODE": the Internal Revenue Code of 1986, as amended from time
to time.
"COMMERCIAL LETTER OF CREDIT": as defined in subsection
3.1(b)(i)(B).
"COMMITMENT FEE RATE": the rate per annum determined as follows:
(a) during the period from the Closing Date until the first Adjustment
Date, the Commitment Fee Rate shall equal .50% per annum; and (b) on
the first Adjustment Date and on each Adjustment Date to occur
thereafter, the Commitment Fee Rate will be adjusted to the applicable
rate per annum set forth under the heading "Commitment Fee Rate" on
Schedule IV which corresponds to the Leverage Ratio determined from
the financial statements and Compliance Certificate relating to the
end of the complete fiscal quarter immediately preceding such
Adjustment Date, and PROVIDED FURTHER, that in the event that the
financial statements required to be delivered pursuant to subsection
6.1(a) or 6.1(b), as applicable, and the related Compliance
Certificate required to be delivered pursuant to subsection 6.2(b) are
not delivered when due, then
(1) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered (without
giving effect to any applicable cure period) and the Commitment
Fee Rate increases from that previously in effect as a result of
the delivery of such financial statements and Compliance
Certificate, then the Commitment Fee Rate during the period from
the date upon which such financial statements and Compliance
Certificate were required to be delivered (without giving effect
to any applicable cure period) until the date upon which they
actually are delivered shall, except as otherwise provided in
clause (3) below, be the Commitment Fee Rate as so increased;
(2) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered and the
Commitment Fee Rate decreases from that previously in effect as a
result of the delivery of such financial statements and
Compliance Certificate, then such decrease in the Commitment Fee
Rate shall not become applicable until the date upon which such
financial statements and Compliance Certificate actually are
delivered; and
(3) if such financial statements and Compliance Certificate
are not delivered prior to the expiration of the applicable cure
period, then, effective upon such expiration, for the period from
the date upon which such financial statements and Compliance
Certificate were required to be delivered (after the expiration
of the applicable cure period) until two Business Days following
the date upon which such financial statements and Compliance
Certificate actually are delivered, the Commitment Fee Rate shall
be the highest applicable rate per annum specified on Schedule
IV.
"COMMITMENT PERCENTAGE": as to any Lender, a percentage
representing a fraction the numerator of which is the sum of (i) the
aggregate principal amount of such Lender's Term Loans then
outstanding PLUS (ii) the Revolving Credit Commitment of such Lender
(or, following the termination or expiration of the Revolving Credit
Commitments, the sum of (x) the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding PLUS (y) such
Lender's Revolving Credit Commitment Percentage of all L/C Obligations
and Swing Line Loans then outstanding), and the denominator of which
is the sum of (i) the aggregate principal amount of Term Loans of all
Lenders then outstanding PLUS (ii) the aggregate Revolving Credit
Commitments of all Lenders (or, following the termination or
expiration of the Revolving Credit Commitments, the sum of (x) the
aggregate principal amount of all Revolving Credit Loans then
outstanding PLUS (y) the aggregate principal amount of all L/C
Obligations and Swing Line Loans then outstanding).
"COMMONLY CONTROLLED ENTITY": an entity, whether or not
incorporated, which is under common control with the Borrower within
the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under
Section 414 of the Code.
"COMPLIANCE CERTIFICATE": as defined in subsection 6.2(b).
"CONSOLIDATED": when used in connection with any defined term,
and not otherwise defined, means such term as it applies to the
Borrower and its Subsidiaries on a consolidated basis, after
eliminating all intercompany items.
"CONSOLIDATED INTANGIBLES": at a particular date, all assets of
the Borrower and its Subsidiaries, determined on a consolidated basis
at such date, that would be classified as intangible assets in
accordance with GAAP, but in any event including, without limitation,
unamortized debt discount and expense, unamortized organization and
reorganization expense, costs in excess of the net book value of
acquired companies, patents, trade or service marks, franchises, trade
names, goodwill and the amount of any write- up in the book value of
any assets resulting from any revaluation (other than revaluation
arising out of foreign currency valuations in accordance with GAAP).
"CONSOLIDATED NET WORTH": at a particular date, all amounts which
would be included under shareholders' equity on a consolidated balance
sheet of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as at such date.
"CONSOLIDATED TANGIBLE NET WORTH": at a particular date, the
excess, if any, of Consolidated Net Worth over Consolidated
Intangibles as at such date.
"CONTINUING LENDERS": as defined in the recitals hereto.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or
any of its property is bound.
"CONTROL": of a Person means the power, directly or indirectly,
either to (a) vote more than 50% of the securities having ordinary
voting power for the election of directors of such Person or (b)
direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise. Among other things, Control
of any Person can be understood to mean that, in the good faith
judgment of the Required Lenders, management of the Borrower is
substantially the same as the management of such Person.
"CURRENT LIABILITIES": of any Person, at the date of
determination, an amount equal to the sum of (a) all liabilities of
such Person which, in accordance with GAAP, would be classified on a
consolidated balance sheet of such Person as current liabilities, plus
(b) all then outstanding Revolving Credit Loans of such Person whether
or not the Revolving Credit Loans would be so classified.
"DEFAULT": any of the events specified in Section 8, whether or
not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY": any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.
"EBITDA": for any period, Net Income for such period PLUS,
without duplication and to the extent reflected as a charge in the
statement of such Net Income for such period, the sum of (a) income
tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other
fees and charges associated with Indebtedness (including the Loans),
(c) depreciation and amortization expense and (d) amortization of
intangibles (including, but not limited to, goodwill) and organization
costs, and MINUS, to the extent included in the statement of such Net
Income for such period, the sum of (a) interest income and (b) income
tax credits, all as determined on a consolidated basis.
"ENTEL LIMITED": Entel Limited, a United Kingdom corporation.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority or other
Requirements of Law (including common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of
human health or the environment, as now or may at any time hereafter
be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board of Governors
of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained
by a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
equal to the rate at which Chase is offered Dollar deposits at or
about 10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in
respect of its Eurodollar Loans are then being conducted for delivery
on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Interest Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined
for such day in accordance with the following formula (rounded upward
to the nearest 1/100th of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 8,
PROVIDED that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"EXISTING LENDERS": as defined in the recitals hereto.
"EXISTING TERM LOANS": term loans made by the Existing Lenders to
the Borrower pursuant to the Existing Credit Agreement.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"FIXED CHARGE TOTAL DEBT COVERAGE RATIO": as of the end of each
fiscal quarter of the Borrower, for the twelve month period ending on
such date, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) EBITDA for such period minus an
amount equal to the excess, if any, of Capital Expenditures by the
Borrower and its Subsidiaries during such period over the amount by
which Funded Indebtedness (excluding Funded Indebtedness in respect of
Revolving Credit Loans) shall have increased during such period to (b)
Consolidated Fixed Charges for such period.
"FIXED CHARGES": for any Person for any period, the sum of (i)
Interest Expense for such period plus (ii) Lease Expense for such
period plus required amortization of Indebtedness for such period and
discount or premium relating to any such Indebtedness for such period,
whether expensed or capitalized.
"FOREIGN SUBSIDIARY": any Subsidiary of the Borrower organized
under the laws of any jurisdiction outside the United States of
America.
"FUNDED INDEBTEDNESS": of any Person, as of any date of
determination, the sum of all Indebtedness of such Person which by its
terms matures more than one year after the date of calculation,
including, in any event, the current portion of such Indebtedness, and
any such Indebtedness maturing within one year from such date which is
renewable or extendable at the option of such Person to a date more
than one year from such date, including, without limitation, in the
case of the Borrower, the Revolving Credit Loans.
"GAAP": generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the
audited financial statements referred to in subsection 4.1.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEE": the Guarantee executed and delivered by certain
Subsidiaries (other than RAC-FSC, Entel Limited and the PRC
Subsidiaries), substantially in the form of Exhibit A to the Credit
Agreement, dated as of August 27, 1996, among the Borrower, the
several banks and other financial institutions from time to time
parties thereto, and Chase, as administrative agent, as the same has
been and may be amended, supplemented or otherwise modified from time
to time.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING
PERSON"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in
either case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "PRIMARY OBLIGATIONS") of
any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase
any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for
the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary
obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the lower of (a) an amount
equal to the stated or determinable amount of the primary obligation
in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for
which such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated
liability in respect thereof as determined by the Borrower in good
faith.
"GUARANTOR": any Person which is a party to the Guarantee.
"HAZARDOUS SUBSTANCES": any gasoline or petroleum (including
crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price
of property or services (other than current trade liabilities incurred
in the ordinary course of business and payable in accordance with
customary practices), (b) any other indebtedness of such Person which
is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Financing Leases, (d) all obligations
of such Person in respect of acceptances issued or created for the
account of such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not
assumed or otherwise become liable for the payment thereof.
"INSOLVENCY": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST EXPENSE": of any Person for any period, the amount of
interest expense, both expense and capitalized, of such Person,
determined on a consolidated basis in accordance with GAAP, for such
period on the aggregate principal amount of its Indebtedness.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of
each March, June, September and December, (b) as to any Eurodollar
Loan having an Interest Period of three months or less, the last day
of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three
months, or a whole multiple thereof, after the first day of such
Interest Period and the last day of such Interest Period, and (d) as
to any Negotiated Rate Loan, the last day of each Interest Period
applicable thereto.
"INTEREST PERIOD": (a) with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter (but in the case of Term Loans, only three or six
months thereafter), as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with
respect thereto; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months thereafter (but in
the case of Term Loans, only three or six months thereafter), as
selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect
thereto;
(b) with respect to any Negotiated Rate Loan, the period
commencing on the Borrowing Date with respect to such Negotiated Rate
Loan and ending on the date which is such number of days or weeks
thereafter as shall be agreed to by the Swing Line Lender and the
Borrower;
PROVIDED that all of the foregoing provisions relating to
Interest Periods are subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business
Day;
(2) any Interest Period that would otherwise extend beyond
the Termination Date or beyond the date final payment is due on
the Term Loans shall end on the Termination Date or such date of
final payment, as the case may be;
(3) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"ISSUING BANK": Chase, in its capacity as issuer of any Letter of
Credit.
"L/C COMMITMENT": $20,000,000.
"L/C FEE PAYMENT DATE": the last day of each March, June,
September and December.
"L/C FEE RATE": the rate per annum determined as follows: (a)
during the period from the Closing Date until the first Adjustment
Date to occur after the Closing Date, the L/C Fee Rate shall equal
.75% per annum; and (b) on the first Adjustment Date and on each
Adjustment Date to occur thereafter, the L/C Fee Rate will be adjusted
to the applicable rate per annum set forth under the heading "L/C Fee
Rate" on Schedule IV which corresponds to the Total Debt Leverage
Ratio determined from the financial statements and Compliance
Certificate relating to the end of the complete fiscal quarter
immediately preceding such L/C Fee Payment Date, and PROVIDED FURTHER,
that in the event that the financial statements required to be
delivered pursuant to subsection 6.1(a) or 6.1(b), as applicable, and
the related Compliance Certificate required to be delivered pursuant
to subsection 6.2(b) are not delivered when due, then
(1) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered (without
giving effect to any applicable cure period) and the L/C Fee Rate
increases from that previously in effect as a result of the
delivery of such financial statements and Compliance Certificate,
then the L/C Fee Rate during the period from the date upon which
such financial statements and Compliance Certificate were
required to be delivered (without giving effect to any applicable
cure period) until the date upon which they actually are
delivered shall, except as otherwise provided in clause (3)
below, be the L/C Fee Rate as so increased;
(2) if such financial statements and Compliance Certificate
are delivered after the date such financial statements and
Compliance Certificate were required to be delivered and the L/C
Fee Rate decreases from that previously in effect as a result of
the delivery of such financial statements and Compliance
Certificate, then such decrease in the L/C Fee Rate shall not
become applicable until the date upon which such financial
statements and Compliance Certificate actually are delivered; and
(3) if such financial statements and Compliance Certificate
are not delivered prior to the expiration of the applicable cure
period, then, effective upon such expiration, for the period from
the date upon which such financial statements and Compliance
Certificate were required to be delivered (after the expiration
of the applicable cure period) until two Business Days following
the date upon which such financial statements and Compliance
Certificate actually are delivered, the L/C Fee Rate shall be the
highest applicable rate per annum specified on Schedule IV.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant
to subsection 0.
"L/C PARTICIPANTS": the collective reference to all the Lenders
which have Revolving Credit Commitments other than the Issuing Bank.
"LEASE EXPENSE": for any Person for any period, the aggregate
amount of fixed and contingent rentals payable by such Person for such
period with respect to leases of real and personal property (other
than Financing Leases).
"LETTERS OF CREDIT": as defined in paragraph 0.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the
same economic effect as any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Applications and
the Guarantee.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
"MAJORITY LENDERS": at any time, Lenders the Commitment
Percentages of which aggregate more than 50%.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or
prospects of the Borrower and its Subsidiaries taken as a whole or (b)
the validity or enforceability of this or any of the other Loan
Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including,
without limitation, asbestos, polychlorinated biphenyls and
urea-formaldehyde insulation.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NEGOTIATED RATE LOAN": a Loan that bears interest for the
Interest Period applicable thereto at a rate and in an amount and
subject to the terms agreed to by the Swing Line Lender and the
Borrower.
"NET CASH PROCEEDS": in connection with any issuance or sale of
equity securities (other than the issuance or sale of securities
pursuant to the exercise of stock options issued to employees or
consultants of the Borrower or any of its Subsidiaries) or debt
securities or instruments or the incurrence of loans (other than the
Revolving Credit Loans, Term Loans and Swing Line Loans), the cash
proceeds received from such issuance or incurrence, net of attorneys'
fees, investment banking fees, accountants' fees, underwriting
discounts and commissions and other customary fees and expenses
actually incurred in connection therewith.
"NET INCOME" OR "NET LOSS": of any Person for any period, net
income (or net loss) of such Person, determined on a consolidated
basis in accordance with GAAP.
"NEW LENDER": as defined in the recitals hereto.
"NON-EXCLUDED TAXES": as defined in subsection 2.16.
"NOTES": the collective reference to the Revolving Credit Notes,
the Swing Line Note and the Term Notes.
"PARTICIPANT": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERMITTED ACQUISITION": any acquisition made by the Borrower or
any of its Subsidiaries, whether through a purchase of Capital Stock
or assets or through a merger or consolidation, of another Person or
the assets constituting an operating business unit of another Person,
PROVIDED that (a) any such purchase of stock shall be of a sufficient
number of shares to cause the acquired Person to become a Subsidiary
and (b) no Default or Event of Default shall occur as a result
thereof.
"PERSON": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"PRC SUBSIDIARY": any Subsidiary of the Borrower that is
organized under the laws of the People's Republic of China (other than
Hong Kong).
"PROPERTIES": the facilities and properties owned, leased or
operated by the Borrower or any of its Subsidiaries.
"RAC-FSC": RAC-FSC, a Virgin Islands corporation.
"REGISTER": as defined in subsection 10.6(d).
"REGULATION U": Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 0 for amounts drawn
under Letters of Credit.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day
notice period is waived under subsections .21, .22, .23, .24, .25,
.26, .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. ' 4043.
"REQUIRED LENDERS": at any time, Lenders the Commitment
Percentages of which aggregate at least 66-2/3%.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or
any of its property or to which such Person or any of its property is
subject.
"RESPONSIBLE OFFICER": the chief executive officer and the
president of the Borrower or, with respect to financial matters, the
chief financial officer of the Borrower.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation
of such Lender to make Revolving Credit Loans to and/or issue or
participate in Letters of Credit issued on behalf of the Borrower
hereunder in an aggregate principal and/or face amount at any one time
outstanding not to exceed the amount set forth opposite such Lender's
name on Schedule I (as such amount may be adjusted from time to time
in accordance with the provisions of this Agreement, including,
without limitation, subsections 2.4(a), 2.4(b) and 10.6(c)).
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at any
time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the aggregate Revolving Credit Commitments (or, at
any time after the Revolving Credit Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of
such Lender's Revolving Credit Loans then outstanding constitutes of
the aggregate principal amount of the Revolving Credit Loans then
outstanding).
"REVOLVING CREDIT COMMITMENT PERIOD": the period from and
including the date hereof to but not including the Termination Date or
such earlier date on which the Revolving Credit Commitments shall
terminate as provided herein.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.6(e).
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SENIOR DEBT LEVERAGE RATIO": at any time, the ratio of (a) all
Senior Indebtedness of the Borrower and its Subsidiaries outstanding
on such date plus all Senior Guarantee Obligations of the Borrower and
its Subsidiaries in respect of Indebtedness of other Persons then
outstanding to (b) EBITDA for the then most recently ended period of
four consecutive fiscal quarters for which financial statements shall
have been delivered to the Lenders pursuant to subsection 4.1 or 6.1.
"SENIOR GUARANTEE OBLIGATIONS": all Guarantee Obligations in
respect of Indebtedness other than Subordinated Guarantee Obligations.
"SENIOR INDEBTEDNESS": all Indebtedness other than Subordinated
Indebtedness.
"SENIOR NOTES": the Adjustable Rate Senior Notes of the Borrower
due January 6, 2007.
"SUBORDINATED GUARANTEE OBLIGATIONS": (a) Guarantee Obligations
of the Borrower in respect of Indebtedness all the terms and
conditions of which are satisfactory to the Required Lenders as
evidenced by their prior written approval and (b) Guarantee
Obligations of Subsidiaries that are Guarantors in respect of
Indebtedness all the terms and conditions of which are satisfactory to
the Required Lenders as evidenced by their prior written approval,
PROVIDED that such Guarantee Obligations described in this clause (b)
are subordinated to the obligations of such Guarantors under the
Guarantee in a manner acceptable to the Required Lenders as evidenced
by their prior written approval.
"SUBORDINATED INDEBTEDNESS": Indebtedness of the Borrower which
is subordinated to the prior payment in full of the obligations
hereunder in a manner acceptable to the Required Lenders as evidenced
by their prior written approval, and all other terms and conditions of
which are satisfactory to the Required Lenders as evidenced by their
prior written approval.
"STANDBY LETTER OF CREDIT": as defined in paragraph 3.1(b)(i)(A).
"SUBSIDIARY": as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the
time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"SWING LINE COMMITMENT": the Swing Line Lender's obligation to
make Swing Line Loans pursuant to subsection 2.19.
"SWING LINE LENDER": Chase, in its capacity as provider of the
Swing Line Loans.
"SWING LINE LOANS": as defined in subsection 2.19(a).
"SWING LINE NOTE": as defined in subsection 2.19(b).
"TERMINATION DATE": December 26, 1999 (or, if such date is not a
Business Day, the next succeeding Business Day).
"TERM LOAN COMMITMENT": as to any Lender, the obligation of such
Lender to make Term Loans to the Borrower hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount
set forth opposite such Lender's name on Schedule III (as such amount
may be adjusted from time to time in accordance with the provisions of
this Agreement, including, without limitation, subsection 10.6(c)).
"TERM LOANS": as defined in subsection 2.5.
"TERM NOTE": as defined in subsection 2.6(e).
"TOTAL ASSETS": of any Person, as of any date of determination,
all assets of such Person determined in conformity with GAAP.
"TOTAL DEBT LEVERAGE RATIO": at any time, the ratio of (a) all
Indebtedness of the Borrower and its Subsidiaries outstanding on such
date plus all Guarantee Obligations of the Borrower and its
Subsidiaries in respect of Indebtedness of other Persons then
outstanding to (b) EBITDA for the then most recently ended period of
four consecutive fiscal quarters for which financial statements shall
have been delivered to the Lenders pursuant to subsection 4.1 or 6.1.
"TOTAL LIABILITIES": of any Person, as of any date of
determination, (a) all liabilities of such Person determined in
conformity with GAAP and (b) all Guarantee Obligations of such Person
in respect of liabilities of other Persons.
"TRANCHE": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day).
"TRANSFEREE": as defined in subsection 10.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("REVOLVING CREDIT LOANS") to the Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate principal amount at any one
time outstanding which, when added to such Lender's Revolving Credit Commitment
Percentage of the then outstanding L/C Obligations and Swing Line Loans, does
not exceed the amount of such Lender's Revolving Credit Commitment. During the
Revolving Credit Commitment Period the Borrower may use the Revolving Credit
Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof,
PROVIDED that no Revolving Credit Loans may be made hereunder in an aggregate
amount greater than the then aggregate amount of the Available Revolving Credit
Commitments.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with subsections
2.2 and 2.8, PROVIDED that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, PROVIDED that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (a) three Business
Days prior to the requested Borrowing Date, if all or any part of the requested
Revolving Credit Loans are to be initially Eurodollar Loans or (b) one Business
Day prior to the requested Borrowing Date otherwise, specifying (i) the amount
to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing
is to be of Eurodollar Loans, ABR Loans or a combination thereof, (iv) whether
and to what extent the proceeds of the borrowing will be used to finance an
acquisition and (v) if the borrowing is to be entirely or partly of Eurodollar
Loans, the amount of such Type of Loan and the length of the initial Interest
Period therefor. Each borrowing under the Revolving Credit Commitments shall be
in an amount equal to (x) in the case of ABR Loans, $1,000,000 or a whole
multiple thereof (or, if the then Available Revolving Credit Commitments are
less than $1,000,000, such lesser amount) and (y) in the case of Eurodollar
Loans, $5,000,000 or a whole multiple of $100,000 in excess thereof. Upon
receipt of any such notice from the Borrower, the Administrative Agent shall
promptly notify each Lender thereof. Each Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the office of the Administrative Agent specified in
subsection 10.2 prior to 11:00 A.M., New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Lenders and in like funds as received by the Administrative Agent.
2.3 COMMITMENT FEE. The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee for the period from and
including the first day of the Revolving Credit Commitment Period to the
Termination Date, computed at the Commitment Fee Rate on the average daily
amount of the Available Revolving Credit Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Termination Date or such
earlier date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the date hereof.
2.4 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS;
MANDATORY PREPAYMENTS. (a) The Borrower shall have the right, upon not less than
five Business Days' notice to the Administrative Agent, to terminate the
Revolving Credit Commitments or, from time to time, to reduce the amount of the
Revolving Credit Commitments PROVIDED that no such termination or reduction
shall be permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans made on the effective date thereof, the Aggregate
Outstanding Extensions of Revolving Credit would exceed the Revolving Credit
Commitments then in effect. Any such reduction shall be in an amount equal to
$1,000,000 or a whole multiple thereof and shall reduce permanently the
Revolving Credit Commitments then in effect. Termination of the Revolving Credit
Commitments shall also terminate the obligation of the Lenders to make the Term
Loans pursuant to subsection 2.5.
(b) (i) On November 30, 1998: (x) the Revolving Credit Commitments
shall be automatically reduced to an amount equal to $86,500,000, (y) the
respective Revolving Credit Commitments of each Lender shall be rearranged to
the amounts set forth on Schedule II, and (z) all then outstanding Revolving
Credit Loans shall be prepaid. Revolving Credit Loans shall then be reborrowed
on such date in an aggregate amount not to exceed the Revolving Credit
Commitments set forth on Schedule II.
(ii) Unless and until the aggregate Revolving Credit Commitments are
$86,500,000 or less, if any Capital Stock or Subordinated Indebtedness shall be
issued or incurred by the Borrower or any of its Subsidiaries (other than
Capital Stock or Subordinated Indebtedness that is issued solely to the Borrower
or any of its Subsidiaries), an amount equal to 100% of the Net Cash Proceeds
thereof shall be applied on the date of such issuance or incurrence toward the
PRO RATA reduction of the Revolving Credit Commitments of Chase and Sun Trust
Bank until the Revolving Credit Commitments of such Lenders shall equal those
set forth on Schedule II.
2.5 TERM LOANS. Subject to the terms and conditions hereof, each
Lender having a Term Loan Commitment severally agrees that on the Closing Date
it will, (i) in the case of each Continuing Lender, continue as a Term Loan all
or a portion of its Existing Term Loan and/or make a new Term Loan or, (ii) in
the case of the New Lender, make a new Term Loan to the Borrower (a "TERM LOAN";
collectively, the "TERM LOANS") in an amount or amounts, as the case may be,
such that, after giving effect thereto, the Term Loan of such Lender outstanding
on the Closing Date will equal the amount set forth opposite such Lender's name
in Schedule III under the heading "Term Loan Commitment". The Term Loans
continued or made on the Closing Date shall be in an aggregate amount equal to
the aggregate principal amount of the Existing Term Loans on such date. The Term
Loans may from time to time be (a) Eurodollar Loans, (b) ABR Loans or (c) a
combination thereof, as determined by the Borrower and notified to the
Administrative Agent in accordance with subsections 2.2 and 2.8.
2.6 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender (i) the then unpaid principal amount of each Revolving Credit Loan
of such Lender on the Termination Date (or such earlier date on which the
Revolving Credit Loans become due and payable pursuant to Section 8) and (ii)
the principal amount of the Term Loans of each Lender in 12 equal consecutive
quarterly installments, payable on the first day of each February, May, August
and November commencing August 1, 1998 (or the then unpaid principal amount of
such Term Loans, on the date that the Term Loans become due and payable pursuant
to Section 8). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans from time to time outstanding from the date hereof
until payment in full thereof at the rates per annum, and on the dates, set
forth in subsection 2.10.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 10.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan and Term Loan made
hereunder, the Type thereof and each Interest Period applicable thereto, (ii)
the amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the Borrower and
each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.6(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender (i) a
promissory note of the Borrower evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A with appropriate insertions as to
date and principal amount (a "REVOLVING CREDIT NOTE"), and/or (ii) promissory
notes of the Borrower evidencing the Term Loans of such Lender, substantially in
the form of Exhibit B with appropriate insertions as to date and principal
amount (a "TERM NOTE").
2.7 OPTIONAL PREPAYMENTS. The Borrower may on the last day of any
Interest Period with respect thereto, in the case of Eurodollar Loans, or at any
time and from time to time, in the case of ABR Loans, prepay the Loans, in whole
or in part, without premium or penalty, upon at least four Business Days'
irrevocable notice, in the case of Eurodollar Loans, or at least one Business
Day's irrevocable notice, in the case of ABR Loans, to the Administrative Agent,
specifying (i) the date and amount of prepayment, (ii) whether the prepayment is
of Eurodollar Loans, ABR Loans or a combination thereof, and, if of a
combination thereof, the amount allocable to each and (iii) whether the
prepayment is of Revolving Credit Loans, Term Loans or a combination thereof,
and, if a combination thereof, the amount allocable to each. The Borrower may
not prepay Negotiated Rate Loans unless agreed to by the Swing Line Lender. Upon
receipt of any such notice, the Administrative Agent shall promptly notify each
Lender thereof. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein, together with any
amounts payable pursuant to subsection 2.17 and, in the case of prepayments of
the Term Loans only, accrued interest to such date on the amount prepaid.
Partial prepayments of the Term Loans shall be applied to the installments of
principal thereof in the inverse order of their scheduled maturities. Amounts
prepaid on account of the Term Loans may not be reborrowed. Partial prepayments
shall be in an aggregate principal amount of $1,000,000 or a whole multiple
thereof.
2.8 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans, by giving the
Administrative Agent at least one Business Days' prior irrevocable notice of
such election PROVIDED that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert ABR Loans to Eurodollar Loans by giving
the Administrative Agent at least three Business Days' prior irrevocable notice
of such election. Any such notice of conversion to Eurodollar Loans shall
specify the length of the initial Interest Period or Interest Periods therefor.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof. All or any part of outstanding Eurodollar Loans and ABR
Loans may be converted as provided herein, PROVIDED that (i) no Loan may be
converted into a Eurodollar Loan when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a conversion is not appropriate and (ii) no Loan may be
converted into a Eurodollar Loan after the date that is one month prior to the
Termination Date (in the case of conversions of Revolving Credit Loans) or the
date of the final installment of principal of the Term Loans.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in subsection 1.1, of the length of the
next Interest Period to be applicable to such Loans, PROVIDED that no Eurodollar
Loan may be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Required Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Termination Date (in the case of continuations of
Revolving Credit Loans) or the date of the final installment of principal of the
Term Loans and PROVIDED, FURTHER, that if the Borrower shall fail to give such
notice or if such continuation is not permitted such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
2.9 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of Interest
Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Tranche shall be equal to $5,000,000 or a whole
multiple of $100,000 in excess thereof. In no event shall there be more than 5
Tranches outstanding at any time.
2.10 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) Each Negotiated Rate Loan shall bear interest at a rate per annum
established by the mutual agreement of the Borrower and the Swing Line Lender.
(d) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid after the expiration of any applicable grace
period (whether at the stated maturity, by acceleration or otherwise), the
principal of the Loans and any such overdue interest, commitment fee or other
amount shall bear interest at a rate per annum which is (x) in the case of
principal, the rate that would otherwise be applicable thereto pursuant to the
foregoing provisions of this subsection plus 2% or (y) in the case of any such
overdue interest, commitment fee or other amount, the rate described in
paragraph (b) of this subsection plus 2%, in each case from the date of such
non-payment until such overdue principal, interest, commitment fee or other
amount is paid in full (as well after as before judgment).
(e) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
2.11 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees and,
whenever it is calculated on the basis of the Prime Rate, interest shall be
calculated on the basis of a 365- (or 366-, as the case may be) day year for the
actual days elapsed, and, otherwise, interest shall be calculated on the basis
of a 360-day year for the actual days elapsed. The Administrative Agent shall as
soon as practicable notify the Borrower and the Lenders of each determination of
a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Applicable Margin, the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 2.10(a) or (b).
2.12 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that,
by reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have been
converted on the first day of such Interest Period to Eurodollar Loans shall be
converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to ABR Loans.
Until such notice has been withdrawn by the Administrative Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Loans to Eurodollar Loans.
2.13 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing of Revolving
Credit Loans by the Borrower from the Lenders hereunder shall be made, each
payment by the Borrower on account of any commitment fee in respect of the
Revolving Credit Commitments hereunder shall be allocated by the Administrative
Agent, and any reduction of the Revolving Credit Commitments of the Lenders
shall be allocated by the Administrative Agent, PRO RATA according to the
Revolving Credit Commitment Percentages of the Lenders. Each payment (including
each prepayment) by the Borrower on account of principal of and interest on any
Revolving Credit Loan shall be allocated by the Administrative Agent PRO RATA
according to the respective outstanding principal amounts of such Revolving
Credit Loans then held by the Lenders. Each payment (including each prepayment)
by the Borrower on account of principal of and interest on any Term Loans shall
be allocated by the Administrative Agent PRO RATA according to the respective
outstanding principal amounts of such Term Loans then held by the Lenders. All
payments (including prepayments) to be made by the Borrower hereunder, whether
on account of principal, interest, fees or otherwise, shall be made without set
off or counterclaim and shall be made prior to 2:00 P.M., New York City time, on
the due date thereof to the Administrative Agent, for the account of the
Lenders, at the Administrative Agent's office specified in subsection 10.2, in
Dollars and in immediately available funds. The Administrative Agent shall
distribute such payments to the Lenders promptly upon receipt in like funds as
received. If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its Revolving Commitment Percentage of such
borrowing available to the Administrative Agent, the Administrative Agent may
assume that such Lender is making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not made
available to the Administrative Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Administrative Agent, on demand, such
amount with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's Revolving
Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon at the rate per annum applicable to ABR Loans hereunder,
on demand, from the Borrower.
2.14 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period as
required by law. If any such conversion of a Eurodollar Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 2.17.
2.15 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 2.16 and changes in the rate
of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of
funds by, any office of such Lender which is not otherwise included in
the determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender
such additional amount or amounts as will compensate such Lender for such
increased cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a copy
to the Administrative Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to this
subsection submitted by such Lender to the Borrower (with a copy to the
Administrative Agent) shall constitute prima facie evidence of such additional
amounts. The agreements in this subsection shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
2.16 TAXES. (a) All payments made by the Borrower under this Agreement
and any Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any Note). If any such non-
excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under any Note,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, PROVIDED, HOWEVER, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by the Administrative Agent or any
Lender as a result of any such failure. The agreements in this subsection shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the case may be, and
(B) an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most
recent form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower
or the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 10.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
2.17 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans or a borrowing of
Negotiated Rate Loans after the Borrower has given a notice requesting the same
in accordance with the provisions of this Agreement, (b) default by the Borrower
in making any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans or Negotiated Rate Loans on a day which is not
the last day of an Interest Period with respect thereto. Such indemnification
may include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of such Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
2.18 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes any
demand for payment under subsection 2.15 or 2.16(a), or if any adoption or
change of the type described in subsection 2.14 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 2.15 or
2.16(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 2.14.
2.19 SWING LINE COMMITMENTS. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"SWING LINE LOAN"; collectively, the "SWING LINE LOANS") to the Borrower from
time to time during the Revolving Credit Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed $10,000,000, PROVIDED
that at no time may the sum of the then outstanding Revolving Credit Loans,
Swing Line Loans and L/C Obligations exceed the Revolving Credit Commitments
then in effect. Amounts borrowed by the Borrower under this subsection 2.19 may
be repaid and, through but excluding the Termination Date, reborrowed. Swing
Line Loans may not be prepaid without the consent of the Swing Line Lender. All
Swing Line Loans shall be made as Negotiated Rate Loans and shall not be
entitled to be converted into Eurodollar Loans or ABR Loans. The Borrower shall
give the Swing Line Lender irrevocable notice (which notice must be received by
the Swing Line Lender prior to 12:00 Noon, New York City time) on the requested
Borrowing Date specifying the amount of the requested Swing Line Loan. The
proceeds of the Swing Line Loan will be made available by the Swing Line Lender
to the Borrower at the office of the Swing Line Lender by crediting the account
of the Borrower at such office with such proceeds in Dollars. Each Negotiated
Rate Loan shall mature and be payable at the end of the Interest Period
applicable thereto.
(b) The Swing Line Loans shall, if requested by the Swing Line Lender,
be evidenced by a promissory note of the Borrower substantially in the form of
Exhibit C, with appropriate insertions (as the same may be amended,
supplemented, replaced or otherwise modified from time to time, the "SWING LINE
NOTE"), payable to the order of the Swing Line Lender and representing the
obligation of the Borrower to pay the amount of the Swing Line Commitment or, if
less, the unpaid principal amount of the Swing Line Loans, with interest thereon
as prescribed in subsection 2.19(a). The Swing Line Lender is hereby authorized
to record the Borrowing Date, the amount of each Swing Line Loan and the date
and amount of each payment or prepayment of principal thereof, on its internal
books and records and/or on the schedule annexed to and constituting a part of
the Swing Line Note and any such recordation on such schedule shall constitute
PRIMA FACIE evidence of the accuracy of the information so recorded, PROVIDED
that the failure by the Swing Line Lender to make any such recordation or any
error in any such recordation shall not affect the obligations of the Borrower
under this Agreement or the Swing Line Note. The Swing Line Note shall (a) be
dated the Closing Date, (b) be stated to mature on the Termination Date and (c)
provide for the payment of interest in accordance with subsection 2.10.
(c) The Swing Line Lender, at any time in its sole and absolute
discretion may, on behalf of the Borrower (which hereby irrevocably directs and
authorizes the Swing Line Lender to act on its behalf), request each Lender to
make a Revolving Credit Loan in an amount equal to such Lender's Revolving
Credit Commitment Percentage of the principal amount of the Swing Line Loans
(the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is given.
Unless the Revolving Credit Commitments shall have expired or terminated (in
which event the procedures of paragraph (d) of this subsection 2.19 shall
apply), each Lender will make the proceeds of the Revolving Credit Loan made by
it pursuant to the immediately preceding sentence available to the
Administrative Agent for the account of the Swing Line Lender at the office of
the Administrative Agent prior to 12:00 Noon, New York City time, in funds
immediately available on the Business Day next succeeding the date such notice
is given. The proceeds of such Revolving Credit Loans shall be immediately
applied to repay the Refunded Swing Line Loans.
(d) If the Revolving Credit Commitments shall expire or terminate at
any time while Swing Line Loans are outstanding, each Lender shall, at the
option of the Swing Line Lender exercised reasonably, either (i) notwithstanding
the expiration or termination of the Revolving Credit Commitments, make a
Revolving Credit Loan or (ii) purchase an undivided participating interest in
such Swing Line Loans, in either case in an amount equal to such Lender's
Revolving Credit Commitment Percentage (determined on the date of, and
immediately prior to, expiration or termination of the Revolving Credit
Commitments) of the aggregate principal amount of such Swing Line Loans. Each
Lender will make the proceeds of any Revolving Credit Loan made by it pursuant
to the immediately preceding sentence available to the Administrative Agent for
the account of the Swing Line Lender at the office of the Administrative Agent
prior to 12:00 Noon, New York City time, in funds immediately available on the
Business Day next succeeding the date on which the Revolving Credit Commitments
expire or terminate. The proceeds of such Revolving Credit Loans shall be
immediately applied to repay the Swing Line Loans outstanding on the date of
termination or expiration of the Revolving Credit Commitments. In the event that
the Lenders purchase undivided participating interests pursuant to the first
sentence of this paragraph, each Lender shall immediately transfer to the Swing
Line Lender, in immediately available funds, the amount of its participation,
and upon receipt thereof the Swing Line Lender will deliver to any such Lender
that so requests a confirmation of such Lender's undivided participating
interest in the Swing Line Loans dated the date of receipt of such funds and in
such amount.
(e) Whenever, at any time after the Swing Line Lender has received
from any Lender such Lender's participating interest in a Swing Line Loan, the
Swing Line Lender receives any payment on account thereof, the Swing Line Lender
will distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded); PROVIDED, HOWEVER, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Lender will return to the
Swing Line Lender any portion thereof previously distributed by the Swing Line
Lender to it.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT.
(a) Subject to the terms and conditions hereof, the Issuing Bank, in
reliance on the agreements of the other Lenders set forth in subsection 0,
agrees to issue letters of credit ("LETTERS OF CREDIT") for the account of the
Borrower on any Business Day during the Revolving Credit Commitment Period in
such form as may be approved from time to time by the Issuing Bank; PROVIDED
that the Issuing Bank shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (i) the L/C Obligations would exceed the
L/C Commitment or (ii) the Available Revolving Credit Commitments would be less
than zero.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (A) a standby
letter of credit issued to support obligations of the Borrower,
contingent or otherwise, the terms and conditions of which are
satisfactory to the Required Lenders, as evidenced by their prior
written approval (a "STANDBY LETTER OF CREDIT"), or (B) a commercial
letter of credit issued in respect of the purchase of goods or
services by the Borrower and its Subsidiaries in the ordinary course
of business (a "COMMERCIAL LETTER OF CREDIT"); and
(ii) expire no later than the Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto) by issuing the original of such Letter of Credit
to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and
the Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to
the Borrower promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES.
(a) The Borrower shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit fee with respect to
each Commercial Letter of Credit, computed at the rate per annum equal to the
L/C Fee Rate, calculated on the basis of a 365 (or 366-, as the case may be)
year, of the aggregate amount available to be drawn under such Standby Letter of
Credit on the date on which such fee is calculated. Such fee shall be payable in
arrears on each L/C Fee Payment Date and shall be nonrefundable. Such fee shall
be payable to the Administrative Agent to be shared ratably among the Lenders in
accordance with their respective Revolving Credit Commitment Percentages in
effect from time to time during the period for which payment of such fee is
being made.
(b) The Borrower shall pay to the Agent, for the account of the
Issuing Bank and the L/C Participants, a letter of credit fee with respect to
each Standby Letter of Credit, computed at the rate per annum equal to the
Applicable Margin for Eurodollar Loans, calculated on the basis of a 365 (or
366-, as the case may be) year, of the aggregate amount available to be drawn
under such Standby Letter of Credit on the date on which such fee is calculated.
Such fee shall be payable in arrears on each L/C Fee Payment Date and shall be
nonrefundable. Such fee shall be payable to the Administrative Agent to be
shared ratably among the Lenders in accordance with their respective Revolving
Credit Commitment Percentages in effect from time to time during the period for
which payment of such fee is being made.
(c) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Bank for such normal and customary costs and expenses as
are incurred or charged by the Issuing Bank in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, not more often than quarterly,
distribute to the Issuing Bank and the L/C Participants all fees and commissions
received by the Administrative Agent for their respective accounts pursuant to
this subsection.
3.4 L/C PARTICIPATIONS.
(a) The Issuing Bank irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit
hereunder, each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such L/C Participant's own account and risk an undivided
interest equal to such L/C Participant's Revolving Credit Commitment Percentage
in the Issuing Bank's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Bank thereunder. Each
L/C Participant unconditionally and irrevocably agrees with the Issuing Bank
that, if a draft is paid under any Letter of Credit for which the Issuing Bank
is not reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to paragraph 0 in respect of any unreimbursed portion of
any payment made by the Issuing Bank under any Letter of Credit is paid to the
Issuing Bank within three Business Days after the date such payment is due, such
L/C Participant shall pay to the Issuing Bank on demand an amount equal to the
product of (i) such amount, times (ii) the daily average Federal funds rate, as
quoted by the Issuing Bank, during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Bank, times (iii) a fraction the numerator of which is the number
of days that elapse during such period and the denominator of which is 360. If
any such amount required to be paid by any L/C Participant pursuant to paragraph
0 is not in fact made available to the Issuing Bank by such L/C Participant
within three Business Days after the date such payment is due, the Issuing Bank
shall be entitled to recover from such L/C Participant, on demand, such amount
with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans hereunder. A certificate of the Issuing Bank submitted
to any L/C Participant with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 0, the Issuing Bank
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise, including proceeds of collateral applied thereto by the
Issuing Bank), or any payment of interest on account thereof, the Issuing Bank
will distribute to such L/C Participant its pro rata share thereof; PROVIDED,
HOWEVER, that in the event that any such payment received by the Issuing Bank
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER.
(a) The Borrower agrees to reimburse the Issuing Bank on each date on
which the Issuing Bank notifies the Borrower of the date and amount of a draft
presented under any Letter of Credit and paid by the Issuing Bank for the amount
of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each such
payment shall be made to the Issuing Bank at its address for notices specified
herein in lawful money of the United States of America and in immediately
available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding ABR Loans which were then
overdue.
(c) Each drawing under any Letter of Credit which is not reimbursed
pursuant to subsection 3.5(a) on the same day it is drawn shall constitute a
request by the Borrower to the Administrative Agent for a borrowing (pursuant to
subsection 2.2) of ABR Loans in the amount of such drawing. The Borrowing Date
with respect to such borrowing shall be the date of such drawing.
3.6 OBLIGATIONS ABSOLUTE.
(a) The Borrower's obligations under this Section 0 shall be absolute
and unconditional under any and all circumstances and irrespective of any
set-off, counterclaim or defense to payment which the Borrower may have or have
had against the Issuing Bank or any beneficiary of a Letter of Credit.
(b) The Borrower also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Borrower's Reimbursement Obligations
under subsection 0 shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, or (ii)
any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
(iii) any claims whatsoever of the Borrower against any beneficiary of such
Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing Bank
to the Borrower in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
3.8 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 0, the provisions of this Section 0 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans and issue or participate in the Letters of Credit, the Borrower hereby
represents and warrants to the Administrative Agent and each Lender that:
4.1 ORGANIZATION, CORPORATE POWERS, ETC. (a) It is a corporation duly
incorporated, validly existing and in good standing (or equivalent) under the
laws of its state or country of incorporation (as applicable), (b) has the
corporate power and authority to own its properties and to carry on its business
as now being conducted, (c) is duly qualified to do business in every
jurisdiction wherein the conduct of its business or the ownership of its
properties is such as to require such qualification in all cases where failure
to do so would be reasonably likely to have a Material Adverse Effect, (d) has
the corporate power to execute and perform this Agreement and all other Loan
Documents to which it is a party, and (e) with respect to the Borrower only, has
the corporate power to borrow the Loans.
4.2 AUTHORIZATION OF BORROWING, ETC. Its execution, delivery and
performance of this Agreement and the other Loan Documents to which it is a
party, (a) have been duly authorized by all requisite corporate action, (b) will
not violate (i) any provision of law applicable to it, any applicable
governmental rule or regulation, or its respective charter or by-laws, or (ii)
any order of any court or other agency of government binding on it, or any
indenture, agreement or other instrument to which it is a party or by which it
or any of its property is bound, and (c) will not be in conflict with, result in
a breach of or constitute (with due notice and/or lapse of time) a default
under, any such indenture, agreement or other instrument, or result in the
creation or imposition of any Lien upon any of its property or assets.
4.3 FINANCIAL CONDITION. The Borrower has heretofore furnished to each
Lender consolidated financial statements, including a balance sheet and
statements of income and of cash flows, for the fiscal year ended December 31,
1997, prepared and audited by Cornick, Garber & Sandler LLP, as well as
unaudited statements for the quarter ending March 31, 1998. Such financial
statements present fairly the financial condition of the Borrower and its
Subsidiaries on a consolidated basis as of such date and their consolidated
results of operations and cash flows for the periods covered thereby in
conformity with GAAP. Since March 31, 1998, no material adverse change in the
financial condition, the business or the operations of the Borrower or any of
its Subsidiaries, on a consolidated basis, has occurred. There is no obligation
or liability, contingent or otherwise, of the Borrower or any of its
Subsidiaries, which is material in amount and which is not reflected in such
financial statements.
4.4 TAXES. It has not received any notice of deficiencies from any
taxing authority having jurisdiction over it or any of its property other than
those that could not reasonably be expected to have a Material Adverse Effect.
It has filed or caused to be filed all Federal, state and local tax returns
which are required to be filed, and has paid or caused to be paid all taxes as
shown on said returns or on any assessment received by it to the extent that
such taxes have become due.
4.5 TITLE TO PROPERTIES. It has good and marketable title to its
properties and assets. There are no Liens on any of its properties and assets,
except for those in favor of each Lender or as may otherwise be disclosed in
Schedule 7.3 or as are allowed under subsection 7.3.
4.6 LITIGATION. Except as set forth in the Borrower's Form 10-K for
the year ended December 31, 1997 or any subsequent Forms 10-Q or 8-K filed with
the Securities and Exchange Commission and delivered to the Lenders prior to the
date hereof, (a) there are no actions, suits or proceedings (whether or not
purportedly on behalf of the Borrower or any Guarantor) pending or, to its
knowledge, threatened against it at law or in equity or before or by any
Federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, domestic or foreign, which could reasonably
be expected to have a Material Adverse Effect; and (b) it is not in default with
respect to any judgment, writ, injunction, decree, rule, or regulation of any
court or Federal, state, municipal, or other governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign in
any respect which could reasonably be expected to have a Material Adverse
Effect.
4.7 AGREEMENTS. It is not a party to any agreement or instrument or
subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree or regulation which would be reasonably likely to
materially and adversely affect its business, properties, assets, operations, or
condition (financial or otherwise) as currently existing. It is not in material
default in its performance, observance, or fulfillment of any material
obligation, covenant, or condition contained in any other agreement or
instrument to which it is a party, including, without limitation, those
involving the Lenders (including this Agreement).
4.8 EMPLOYEE BENEFIT PLANS. If applicable, it is in compliance in all
material respects with the applicable provisions of ERISA and the regulations
and published interpretations thereunder. No Reportable Event has occurred with
respect to a Plan, if any, administered by it or an administrator designated by
it. The present value of all accrued benefits under each Single Employer Plan
(based on those assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this representation is made or
deemed made, exceed the value of the assets of such Plan allocable to such
accrued benefits by an amount which could reasonably be expected to have a
Material Adverse Effect.
4.9 FEDERAL RESERVE REGULATIONS.
(a) It is not engaged principally in, and does not have as one of its
important activities, the business of extending credit for the purpose of
purchasing or carrying any "margin stock" (within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System of the United States, as
amended to the date hereof). If requested by any Lender, it will furnish to each
Lender a statement on Federal Reserve Form U-1.
(b) No part of the proceeds of the Loans will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock, or to refund Indebtedness originally
incurred for such purpose, or (ii) for any purpose which violates or is
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
4.10 GOVERNMENTAL APPROVAL; LICENSES. No license, permit or
certificate, registration with or consent or approval of, or other action by,
any Federal, state, municipal or other Governmental Authority is required in
connection with its execution, delivery, and performance of this Agreement or
any of the other Loan Documents. It possesses all licenses, permits,
certificates, approvals and the like ("LICENSES") necessary for the lawful
operation of its business, to the extent that failure to possess such Licenses
would have a Material Adverse Effect on the business of the Borrower. All such
Licenses are in full force and effect, and there exists no threat of a
revocation or suspension of any Licenses, except as could not reasonably be
expected to have a Material Adverse Effect.
4.11 AFFILIATES; SUBSIDIARIES; SHAREHOLDERS. As of the date hereof,
and except for the Guarantors, the Borrower has no Affiliates or Subsidiaries
except as set forth on Schedule 4.11.
4.12 COMPLIANCE WITH APPLICABLE LAWS. It is in compliance with the
material requirements of all applicable laws, rules, regulations, and orders of
any Governmental Authority applicable to it, except as could not reasonably be
expected to have a Material Adverse Effect.
4.13 ENVIRONMENTAL MATTERS. In the ordinary course of its business,
the Borrower conducts an ongoing review of the effect of Environmental Laws on
the business, operations and properties of the Borrower and its Subsidiaries
(not, however, necessarily including PRC 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 Borrower has
reasonably concluded that such associated liabilities and costs, including the
costs of compliance with Environmental Laws, could not reasonably be expected to
exceed $1,500,000.
4.14 INTELLECTUAL PROPERTY. It owns, or is taking appropriate actions
to secure the ownership of (and believes in good faith that, prior to obtaining
such ownership, it is entitled to use) or is licensed to use, all trademarks,
trade names, patents, copyrights, technology, know-how and processes necessary
for the conduct of its business as currently conducted, except for those where
the failure to own or license the same could not have a Material Adverse Effect
(the "INTELLECTUAL PROPERTY"). To the best of its knowledge, no claim is pending
by any Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property
except as otherwise disclosed to the Administrative Agent and each Lender in
writing prior to the date hereof, nor does it know of any valid basis for any
such claim other than claims which could reasonably be expected to have a
Material Adverse Effect. The use of such Intellectual Property does not infringe
on the rights of any Person, except for such claims and infringements that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
4.15 SCHEDULES. All of the information which is required to be
scheduled pursuant to this Agreement is correct and accurate on the date hereof.
4.16 PURPOSE OF LOANS. The proceeds of the Loans shall be used by the
Borrower: (a) to the extent of not more than $101,500,000 (or, at any time on or
after November 30, 1998, $86,500,000) at any one time outstanding (less any
amounts then outstanding borrowed for the purposes described in clause (b) of
this sentence) for working capital purposes in the ordinary course of business
and (b) to the extent of not more than $20,000,000 at any one time outstanding,
to finance Permitted Acquisitions and transactions permitted by subsection
7.5(c). No proceeds of the Loans shall be used to finance any Permitted
Acquisition or any transaction permitted by subsection 7.5(c) unless (i)
following the Closing Date, the Borrower shall have received $100,000,000 or
more in Net Cash Proceeds from the issuance and sale of equity securities or
subordinated debt securities and (ii) the board of directors of such corporation
shall have approved such acquisition, and in no event may more than $20,000,000
of the proceeds of the Loans be used to finance Permitted Acquisitions and
transactions permitted by subsection 7.5(c). For purposes of determinations
pursuant to this subsection, no prepayment of the Loans shall be deemed to have
been applied to reduce any of the Loans made for the purposes described in
clause (b) of the first sentence of this subsection unless all Loans made for
the other purposes described in such sentence shall have been reduced to zero.
4.17 CERTAIN SUBSIDIARIES. RAC-FSC has no material assets, and the
assets of Entel Limited do not materially exceed the value of its liabilities
and such corporation is in the process of being liquidated.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO EFFECTIVENESS. The agreement of each Lender to make
Loans hereunder shall not become effective unless and until the following
conditions precedent shall have been satisfied on or before July 1, 1998.
(a) LOAN DOCUMENTS. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized
officer of the Borrower, with a counterpart for each Lender and (ii)
an Affirmation and Consent, substantially in the form of Exhibit E,
executed and delivered by a duly authorized officer of each Guarantor,
with a counterpart or a conformed copy for each Lender.
(b) CORPORATE PROCEEDINGS OF THE BORROWER. The Administrative
Agent shall have received, with a counterpart for each Lender, a copy
of the resolutions, in form and substance satisfactory to the
Administrative Agent, of the Board of Directors of the Borrower
authorizing (i) the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party and (ii)
the borrowings contemplated hereunder, certified by the Secretary or
an Assistant Secretary of the Borrower as of the Closing Date, which
certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(c) BORROWER INCUMBENCY CERTIFICATE. The Administrative Agent
shall have received, with a counterpart for each Lender, a Certificate
of the Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of the Borrower executing any Loan Document
satisfactory in form and substance to the Administrative Agent,
executed by the President or any Vice President and the Secretary or
any Assistant Secretary of the Borrower.
(d) FEES. The Administrative Agent shall have received all fees
that the Borrower has agreed to pay to it on or before the Closing
Date.
(e) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinion of
Stroock & Stroock & Lavan LLP, counsel to the Borrower and the other
Loan Parties, substantially in the form of Exhibit F, PROVIDED that
such legal opinion shall also cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative
Agent may reasonably require.
(f) Existing Term Loans in excess of $15,000,000 shall have been
prepaid by the Borrower.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by the Borrower and each Subsidiary in or pursuant
to the Loan Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) ADDITIONAL MATTERS. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with
the transactions contemplated by this Agreement and the other Loan
Documents shall be satisfactory in form and substance to the
Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such Loan or issuance that the conditions contained
in this subsection have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving Credit
Commitments remain in effect, any Note or any Letter of Credit remains
outstanding and unpaid or any other amount is owing to any Lender or the
Administrative Agent hereunder, the Borrower shall and (except in the case of
delivery of financial information, reports and notices) shall cause each of its
Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within (x) 95 days, in
the case of consolidated financial statements and the related
accountants report, or (y) 105 days, in the case of consolidating
financial statements and the related certificate of a Responsible
Officer after the end of each fiscal year of the Borrower, copies of
the consolidated and consolidating balance sheets of the Borrower and
its consolidated Subsidiaries as at the end of such year and the
related consolidated and consolidating statements of income and
retained earnings and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year, (i)
in the case of such consolidated financial statements, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Cornick,
Garber & Sandler, LLP or other independent certified public
accountants of nationally recognized standing and (ii) in the case of
such consolidating financial statements, certified by a Responsible
Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments); and
(b) as soon as available, but in any event not later than (x) 50
days, in the case of consolidated financial statements, or (y) 65
days, in the case of consolidating financial statements, after the end
of each of the first three quarterly periods of each fiscal year of
the Borrower, the unaudited consolidated and consolidating balance
sheets of the Borrower and its consolidated Subsidiaries as at the end
of such quarter and the related unaudited consolidated and
consolidating statements of income and retained earnings and of cash
flows of the Borrower and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through the end of such
quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end
audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 6.1(a), a certificate of the
independent certified public accountants reporting on such financial
statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and (b), a certificate of a
Responsible Officer ("COMPLIANCE CERTIFICATE") stating that, to the
best of such Officer's knowledge, during such period (i) no Subsidiary
has been formed or acquired (or, if any such Subsidiary has been
formed or acquired, the Borrower has complied with the requirements of
subsection 6.9 with respect thereto), (ii) the Borrower has observed
or performed all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan
Documents to be observed, performed or satisfied by it, (iii) the
Borrower has set forth in reasonable detail any and all calculations
necessary to show compliance with all of the financial condition
covenants set forth in subsections 7.1, including, without limitation,
calculations and reconciliations, if any, necessary to show compliance
with such financial condition covenants on the basis of GAAP
consistent with those utilized in preparing the audited financial
statements referred to in subsection 6.1, and (iv) that such Officer
has obtained no knowledge of any Default or Event of Default except as
specified in such certificate;
(c) prior to the end of each fiscal year of the Borrower, a copy
of the projections by the Borrower of the operating budget and cash
flow budget of the Borrower and its Subsidiaries for the succeeding
fiscal year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such Officer has no reason to believe they are incorrect or misleading
in any material respect;
(d) within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its
stockholders, and within five days after the same are filed, copies of
all financial statements and reports which the Borrower may make to,
or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority; and
(e) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 7.5; and comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, be reasonably expected to have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to each Lender at the Borrower's
expense, upon written request, full information as to the insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants.
6.7 NOTICES. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default of which it
is aware;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries of which it is
aware or (ii) litigation, investigation or proceeding of which it is
aware which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority, which in either case, if
not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding of which it is aware affecting
the Borrower or any of its Subsidiaries in which the amount involved
is $1,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with
respect to any Plan, a failure to make any required contribution to a
Plan where such failure could reasonably be expected to have a
Material Adverse Effect or to result in the creation of a Lien, the
creation of any Lien in favor of the PBGC or a Plan or the
Reorganization or Insolvency of, any Multiemployer Plan or any
withdrawal from, or termination of, any Multiemployer Plan where such
withdrawal or termination could reasonably be expected to have a
Material Adverse Effect, or (ii) the institution of proceedings or the
taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
Reorganization or Insolvency of any Plan or any withdrawal from, or
termination of, any Multiemployer Plan where such withdrawal or
termination could reasonably be expected to have a Material Adverse
Effect; and
(e) Any development or event of which it is aware which has had
or could reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply in all material respects with and maintain, and ensure that
all tenants and subtenants obtain and comply in all material respects with and
maintain, any and all licenses, approvals, notifications, registrations or
permits required by applicable Environmental Laws except to the extent that
failure to do so could not be reasonably expected to have a Material Adverse
Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceeds and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
6.9 ADDITIONAL GUARANTORS. With respect to any Person that, subsequent
to the Closing Date, becomes a Subsidiary, promptly notify the Administrative
Agent of the existence of such Subsidiary and, unless otherwise agreed by the
Administrative Agent, promptly (i) cause such new Subsidiary to become a
Guarantor under the Guarantee pursuant to documentation which is in form and
substance satisfactory to the Administrative Agent, (ii) cause such new
Subsidiary to deliver to the Administrative Agent the certificates and documents
relating thereto, and (iii) if requested by the Administrative Agent, deliver to
the Administrative Agent legal opinions relating to the matters described in
clause (i) above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
6.10 ENTEL LIMITED. Exercise best efforts to cause Entel Limited to be
liquidated as soon as practicable.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Revolving Credit
Commitments remain in effect, any Note or any Letter of Credit remains
outstanding and unpaid or any other amount is owing to any Lender or the
Administrative Agent hereunder, the Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANTS.
(a) QUICK ASSETS RATIO. Permit at any time during any fiscal
quarter set forth below, the ratio of (x) the sum of (i) cash and Cash
Equivalents of the Borrower and its Subsidiaries at such time plus
(ii) the amount shown on a consolidated balance sheet of the Borrower
and its Subsidiaries at such time as accounts receivable (less
provision for doubtful accounts) at such time to (y) Consolidated
Current Liabilities to be less than the ratio set forth opposite such
period below:
FISCAL QUARTERS ENDING
DURING THE FOLLOWING PERIODS: RATIO
March 31, 1998 through December 30, 1998 0.80 to 1.00
December 31, 1998 through December 30, 1999 1.00 to 1.00
December 31, 1999 through December 30, 2000 1.00 to 1.00
December 31, 2000 through December 30, 2001 1.00 to 1.00
(b) MAINTENANCE OF TANGIBLE NET WORTH. Permit Consolidated
Tangible Net Worth (i) on the Closing Date to be less than
$94,000,000, (ii) on December 31, 1998 to be less than the sum of (x)
an amount equal to 50% of the Borrower's Net Income (but only if
positive) for the Borrower's 1998 fiscal year plus (y) Consolidated
Tangible Net Worth as at December 31, 1997 plus (z) the amount by
which Consolidated Tangible Net Worth shall have increased during such
fiscal year as a result of the Net Cash Proceeds from the issuance of
Capital Stock of the Borrower during such fiscal year or (iii) on the
last day of any fiscal year thereafter to be less than an amount equal
to the sum of (x) an amount equal to 50% of the Borrower's Net Income
(but only if positive) for such fiscal year plus (y) Consolidated
Tangible Net Worth as at the last day of the immediately preceding
fiscal year.
(c) FIXED CHARGE COVERAGE. Permit the Fixed Charge Total Debt
Coverage Ratio as of the end of any fiscal quarter set forth below to
be less than the ratio set forth opposite such fiscal quarter set
forth below:
FISCAL QUARTERS ENDING
DURING THE FOLLOWING PERIODS: RATIO
March 31, 1998 through September 29, 1998 0.65 to 1.00
September 30, 1998 through December 30, 1998 1.00 to 1.00
December 31, 1998 through December 30, 1999 1.25 to 1.00
December 31, 1999 through December 30, 2000 1.25 to 1.00
December 31, 2000 through December 30, 2001 1.25 to 1.00
(d) TOTAL DEBT LEVERAGE RATIO. Permit the Total Debt Leverage
Ratio at any time during any fiscal quarter set forth below to be
greater than the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING
DURING THE FOLLOWING PERIODS: RATIO
March 31, 1998 through December 30, 1998 6.00 to 1.00
December 31, 1998 through December 30, 1999 5.00 to 1.00
December 31, 1999 through December 30, 2000 5.00 to 1.00
December 31, 2000 through December 30, 2001 5.00 to 1.00
(e) SENIOR DEBT LEVERAGE RATIO. Permit the Senior Debt Leverage
Ratio at any time during any fiscal quarter set forth below to be
greater than the amount set forth opposite such fiscal quarter below:
FISCAL QUARTERS ENDING
DURING THE FOLLOWING PERIODS: RATIO
March 31, 1998 through December 30, 1998 6.00 to 1.00
December 31, 1998 through December 30, 1999 3.50 to 1.00
December 31, 1999 through December 30, 2000 3.50 to 1.00
December 31, 2000 through December 30, 2001 3.50 to 1.00
December 31, 2001 through December 30, 2002 3.50 to 1.00
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness of the Borrower and any of its Subsidiaries
incurred to finance the acquisition of real property or fixed or
capital assets (whether pursuant to a loan, a Financing Lease or
otherwise) in a principal amount not exceeding 100% of the purchase
price of such asset;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2, PROVIDED that on the date of the initial borrowing
hereunder all then outstanding borrowings under lines of credit
currently being made available to the Borrower by the Lenders shall be
paid in full;
(e) Indebtedness of a corporation which becomes a Subsidiary
after the date hereof, PROVIDED that (i) such indebtedness existed at
the time such corporation became a Subsidiary and was not created in
anticipation thereof and (ii) immediately after giving effect to the
acquisition of such corporation by the Borrower no Default or Event of
Default shall have occurred and be continuing;
(f) Indebtedness constituting amounts owing in respect of goods
and services purchased pursuant to corporate credit cards in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$500,000 at any one time outstanding;
(g) Indebtedness of the Borrower and its Subsidiaries in respect
of unreimbursed drawings under letters of credit issued in connection
with their Hong Kong operations and/or in respect of trust receipt
financing obtained in connection with such Hong Kong operations;
PROVIDED that (i) no such Indebtedness shall have a tenor of more than
120 days and (ii) the aggregate amount of all such Indebtedness of the
Borrower and its Subsidiaries shall not at any time exceed the
equivalent of US$12,000,000;
(h) Indebtedness of the Borrower and its Subsidiaries in an
aggregate amount for the Borrower and its Subsidiaries not to exceed
$1,000,000 at any one time outstanding in respect of overdrafts
outstanding for not more than 15 days; and
(i) Subordinated Indebtedness of the Borrower, the Net Cash
Proceeds of which are applied in accordance with subsection
2.4(b)(ii).
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments and governmental charges or
levies not yet due or which are being contested in good faith by
appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) landlords', carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than 20
days or which are being contested in good faith by appropriate
proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and
deposits securing liability to insurance carriers under insurance or
self-insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(f) Liens in existence on the date hereof listed on Schedule 7.3,
securing Indebtedness permitted by subsection 7.2(d), PROVIDED that
such Liens are not to be renewed, extended, amended or refinanced and
PROVIDED FURTHER that no such Lien is spread to cover any additional
property after the Closing Date and that the amount of Indebtedness
secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 7.2(c) incurred to finance the
acquisition of fixed or capital assets, PROVIDED that (i) such Liens
shall be created in the ordinary course of business and substantially
simultaneously with the acquisition of such fixed or capital assets,
(ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness, (iii) the amount of
Indebtedness secured thereby is not increased and (iv) the principal
amount of Indebtedness secured by any such Lien shall at no time
exceed 100% of the original purchase price of such property at the
time it was acquired; and
(h) Liens on the property or assets of a Person which becomes a
Subsidiary after the date of this Agreement or on property or assets
acquired by the Borrower or any Subsidiary after the date of this
Agreement, in each case securing Indebtedness permitted by subsection
7.2(c) or (e), PROVIDED that (i) such Liens exist at the time such
Person becomes a Subsidiary or such property or assets are acquired,
as the case may be, and are not created in anticipation thereof and
(ii) any such Lien is not extended to cover any property or assets of
such Person or any other property or assets of the Borrower or such
Subsidiary, as the case may be, after the time such Person becomes a
Subsidiary or such property or assets are acquired, as the case may
be;
(i) Liens arising from judgments in amounts less than $5,000,000
in circumstances not constituting a Default or Event of Default;
(j) attachments, judgments, or other similar Liens arising in
connection with court proceedings, provided that the execution or
other enforcement of such Liens is effectively stayed by being
contested in good faith by appropriate proceedings;
(k) Liens on goods (and the documents of title related thereto)
the purchase price of which is financed by a Letter of Credit issued
for the account of the Borrower or its Subsidiaries, PROVIDED that
such Lien secures only the obligations of the Borrower or such
Subsidiaries in respect of such Letter of Credit; and
(l) any other security interests granted to the Administrative
Agent to secure the obligations and liabilities of the Borrower
hereunder.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations of the Borrower in existence on the
date hereof and listed on Schedule 7.4;
(b) guarantees made in the ordinary course of its business by the
Borrower of obligations of any of its Subsidiaries, and guarantees
made in the ordinary course of its business by any Guarantor of
obligations of the Borrower or any Subsidiary of the Borrower, which
obligations are not prohibited by this Agreement;
(c) the Guarantee;
(d) Guarantee Obligations of the Borrower and its Subsidiaries in
respect of drafts received from customers that are discounted on a
full recourse basis by the Borrower or any Subsidiaries, PROVIDED that
(i) no such discounted draft shall have a maturity of more than 120
days and (ii) the aggregate amount of all such Guarantee Obligations
in respect of discounted drafts shall not at any time exceed 6,000,000
Deutsche Marks;
(e) Subordinated Guarantee Obligations; and
(f) Guarantee Obligations in respect of the Senior Notes.
7.5 LIMITATION ON FUNDAMENTAL CHANGES AND SALES OF ASSETS. Enter into
any merger, consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or, except if such
transaction is in the ordinary course of business, convey, sell, lease, assign,
transfer or otherwise dispose of its property, business or assets, or make any
material change in its present method of conducting business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into the Borrower (PROVIDED that the Borrower shall be the
continuing or surviving corporation) or with or into any one or more
wholly owned Subsidiaries of the Borrower (PROVIDED that the wholly
owned Subsidiary or Subsidiaries shall be the continuing or surviving
corporation);
(b) any wholly owned Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other wholly owned
Subsidiary of the Borrower;
(c) the Borrower or any of its Subsidiaries may (provided that
the requirements of subsection 7.7(c) shall be complied with in
connection therewith) consolidate with or merge into any other
corporation or organization of any kind, or permit another corporation
or organization of any kind to merge into it, so long as either (i)
the Borrower or a Guarantor is the surviving entity, or (ii) if the
surviving entity is not the Borrower or a Guarantor, then (A) the
surviving entity shall have assumed all obligations to the Lenders
with respect to any Indebtedness of the Borrower or such Guarantor
(including, without limitation, the covenants and agreements contained
herein), (B) shares having at least 51% of the aggregate voting power
of all Capital Stock of the surviving entity must be held by the
Borrower or by a Guarantor or by Robert L. Borchardt, and must be
ultimately beneficially owned by Robert L. Borchardt, (C) Robert L.
Borchardt must continue to be primarily involved in the management of
the surviving entity, (D) no other covenant contained in this
Agreement shall be violated by such merger or consolidation and no
Default or Event of Default shall have occurred and be continuing
after giving effect thereto, and (E) all documentation pertaining to
the said assumption of obligations must be satisfactory to the
Required Lenders in their reasonable discretion;
(d) the sale or other disposition of any property in the ordinary
course of business; and
(e) the sale or discount without recourse, in the ordinary course
of business, of accounts receivable arising in the ordinary course of
business in connection with the compromise or collection thereof.
7.6 PRC SUBSIDIARIES. Permit on the last day of any fiscal quarter the
aggregate net book value of the assets (as reported on the consolidating
financial statements referred to in subsections 4.1 and 6.1) of the PRC
Subsidiaries to be greater than an amount equal to 20% of Consolidated Tangible
Net Worth.
7.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any other Person, except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) Permitted Acquisitions, PROVIDED that no such acquisition,
and no transaction described in subsection 7.5(c), shall be permitted
that would cause the Consolidated Total Liabilities to increase by
more than 75% over the Consolidated Total Liabilities outstanding
immediately prior to the completion of such acquisition or other
transaction unless, after giving effect thereto, the ratio of Total
Liabilities to Total Assets would be less than .50 to 1.0.;
(d) loans and advances to (i) employees of the Borrower or its
Subsidiaries and (ii) companies to be acquired by the Borrower with
whom the Borrower has entered into a binding, written agreement
entitling the Borrower to merge with or acquire such company or
substantially all of its assets in exchange for specified
consideration or a letter of intent for the same, PROVIDED that the
amount of all loans and advances pursuant to clauses (i) and (ii)
shall not, in the aggregate, exceed $5,000,000 at any one time
outstanding and PROVIDED, FURTHER, that no loan or advance made
pursuant to clause (ii) shall be outstanding for more than 180 days;
(e) investments by the Borrower in its Subsidiaries and
investments by such Subsidiaries in the Borrower and in other
Subsidiaries; and
(f) loans and advances to suppliers in the ordinary course of
business not to exceed $2,000,000 of any one time outstanding,
PROVIDED that no such loan or advance shall be outstanding for more
than 180 days.
7.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) not prohibited by this Agreement, (b) in the ordinary
course of the Borrower's or such Subsidiary's business and (c) upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate.
7.9 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than December 31.
7.10 LIMITATION ON LINES OF BUSINESS. Engage in any material business
other than those in or directly related to the consumer electronics industry.
7.11 LIMITATION ON RAC-FSC ASSETS. Permit RAC-FSC to have any material
assets.
7.12 LIMITATION ON RECOTON (UK) ASSETS. Permit Recoton (UK), a United
Kingdom corporation, to have an aggregate book value for its total assets that
exceeds the equivalent of US$25,000,000, until such time as it shall become a
Guarantor. The Borrower shall exercise its best efforts to undertake the
necessary procedures which under United Kingdom law will enable Recoton (UK)
Limited to become a Guarantor and a guarantor of the Senior Notes.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note or
any Reimbursement Obligation when due in accordance with the terms
thereof or hereof; or the Borrower shall fail to pay any interest on
any Note, or any other amount payable hereunder, within five days
after any such interest or other amount becomes due in accordance with
the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in any certificate, document or financial or
other statement furnished by it at any time under or in connection
with this Agreement or any such other Loan Document shall prove to
have been incorrect in any material respect on or as of the date made
or deemed made; or
(c) The Borrower shall default in the observance or performance
of any agreement contained in Section 7 (except any such default
caused by the incurrence of Indebtedness in an amount less than
$1,000,000 by any Subsidiary of the Borrower provided that such
default is cured within 15 days after the date of such incurrence); or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days after notice from the
Administrative Agent or any Lender of such default is given to the
Borrower; or
(e) The Borrower or any of its Subsidiaries shall (i) default in
any payment of principal of or interest of any Indebtedness (other
than the Loans) or in the payment of any Guarantee Obligation, beyond
the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders
or beneficiary or beneficiaries) to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become payable; PROVIDED,
HOWEVER, that no Default or Event of Default shall exist under this
paragraph unless the aggregate amount of Indebtedness and/or Guarantee
Obligations in respect of which any default or other event or
condition referred to in this paragraph shall have occurred shall be
equal to at least $1,000,000; or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against the
Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief
which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the
Borrower or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) the Borrower or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist
with respect to any Plan or any Lien in favor of the PBGC or a Plan
shall arise on the assets of the Borrower or any Commonly Controlled
Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer
Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate
for purposes of Title IV of ERISA, (v) the Borrower or any Commonly
Controlled Entity shall, or in the reasonable opinion of the Required
Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through
(vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a
Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $5,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 60 days from the
entry thereof; or
(i) The Guarantee shall cease, for any reason, to be in full
force and effect or any Guarantor shall so assert; or
(j) (i) Any natural person other than Robert L. Borchardt, his
estate, any trust established by him or his heirs, or any Person or
"group" (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) not controlled by Robert
L. Borchardt, his estate, any trust established by him or his heirs
(other than a Permitted Holder, as defined below) (A) shall have
acquired beneficial ownership of 20% or more of any outstanding class
of Capital Stock having ordinary voting power in the election of
directors of the Borrower or (B) shall obtain the power (whether or
not exercised) to elect a majority of the Borrower's directors or (ii)
the Board of Directors of the Borrower shall not consist of a majority
of Continuing Directors; "CONTINUING DIRECTORS" shall mean the
directors of the Borrower on the Closing Date and each other director,
if such other director's nomination for election to the Board of
Directors of the Borrower is recommended by a majority of the then
Continuing Directors; as used in this paragraph the term "Permitted
Holder" shall mean any holder of shares of any outstanding class of
the Capital Stock of the Borrower that shall have been designated as a
Permitted Holder in a resolution duly adopted by the Board of
Directors of the Borrower and that shall have been approved in writing
by the Required Lenders;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower
automatically the Revolving Credit Commitments shall immediately terminate and
the Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Revolving Credit Commitments to be terminated
forthwith, whereupon the Revolving Credit Commitments shall immediately
terminate; and (ii) with the consent of the Required Lenders, the Administrative
Agent may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice of default to the Borrower, declare the Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) and the Notes to be due and payable
forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After all
such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to the
Borrower. The Borrower shall execute and deliver to the Administrative Agent,
for the account of the Issuing Bank and the L/C Participants, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of the security interest in such cash collateral
account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
9.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of its Subsidiaries.
9.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of its
Subsidiaries), accountants of the Borrower, independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem
and treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected held harmless and
indemnified in acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the Required Lenders,
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all the Lenders and all future holders of the Loans.
9.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower, referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
9.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and its Subsidiaries and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder (including
matters with respect to which the Borrower is required to deliver to the
Administrative Agent a sufficient number of copies of counterparts for each
Lender), the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of the Borrower or any of its Subsidiaries which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought (or, if indemnification is sought after the date upon
which the Revolving Credit Commitments shall have terminated and the Loans and
Reimbursement Obligations shall have been paid in full, ratably in accordance
with their Commitment Percentages immediately prior to such date), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Revolving Credit Commitments, this Agreement, any of the other Loan Documents or
any documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Loans, the termination of the
Revolving Credit Commitments, and all other amounts payable hereunder.
9.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
(a) The Administrative Agent and its Affiliates may make loans to,
accept deposits from and generally engage in any kind of business with the
Borrower as though the Administrative Agent were not the Administrative Agent
hereunder and under the other Loan Documents.
(b) With respect to its Loans made or renewed by it and any Note
issued to it and with respect to any Letter of Credit issued or participated in
by it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
9.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Loan Documents, then the Borrower shall appoint
from among the Lenders a successor agent for the Lenders, whereupon such
successor agent (provided that it shall have been approved by the Required
Lenders), shall succeed to the rights, powers and duties of the Administrative
Agent hereunder. Effective upon such appointment and approval, the term
"Administrative Agent" shall mean such successor agent, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. The
Required Lenders may, or, with the written consent of the Required Lenders, the
Administrative Agent may, from time to time, (a) enter into with the Borrower
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Borrower hereunder or thereunder or (b) waive, on such terms and conditions
as the Required Lenders or the Administrative Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default or Event of Default and its consequences;
PROVIDED, HOWEVER, that no such waiver and no such amendment, supplement or
modification shall (i) reduce the amount or extend the scheduled date of
maturity of any Loan or of any installment thereof, or reduce the stated rate of
any interest or fee payable hereunder or extend the scheduled date of any
payment thereof or increase the amount or extend the expiration date of any
Lender's Revolving Credit Commitment or modify the provisions of subsection 2.13
with regard to pro rata treatment of the Lenders, in each case without the
consent of each Lender affected thereby, or (ii) amend, modify or waive any
provision of this subsection or reduce the percentage specified in the
definition of Required Lenders or Majority Lenders, or consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement and the other Loan Documents, in each case without the written consent
of all the Lenders, or (iii) amend, modify or waive any provision of Section 9
without the written consent of the then Administrative Agent. Any such waiver
and any such amendment, supplement or modification shall apply equally to each
of the Lenders and shall be binding upon the Borrower, the Lenders, the
Administrative Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Administrative Agent shall be restored
to their former positions and rights hereunder and under the other Loan
Documents, and any Default or Event of Default waived shall be deemed to be
cured and not continuing, but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by registered or certified mail,
five days (or ten days, in the case of mailings between locations inside and
outside of the United States) days after being deposited in the mails, postage
prepaid (airmail, in the case of mailings between locations inside and outside
of the United States), or (c) in the case of delivery by facsimile transmission,
when sent and receipt has been confirmed, addressed as follows in the case of
the Borrower and the Administrative Agent, and as set forth in Schedule I in the
case of the other parties hereto, or to such other address as may be hereafter
notified by the respective parties hereto:
The Borrower: Recoton Corporation
2950 Lake Emma Road
Lake Mary, Florida 32746
Attention: Stuart Mont
Fax: 407-444-0559
With a copy to:
Mr. Theodore Lynn, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Fax: 212-806-6006
The Administrative
Agent: The Chase Manhattan Bank
92-25 Queens Boulevard, 11th Floor
Rego Park, New York 11374
Attention: Recoton Account Officer
Fax: 718-830-5892
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 2.4, 2.7, 2.8, 2.13 or 2.19 shall not
be effective until received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
10.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby and the syndication by the Administrative Agent of the Revolving
Credit Commitments, including, without limitation, the reasonable fees and
disbursements of counsel to the Administrative Agent, (b) to pay or reimburse
each Lender and the Administrative Agent for all its costs and expenses incurred
in connection with the enforcement or preservation of any rights under this
Agreement, any amendment, supplement or modification to this Agreement the other
Loan Documents and any such other documents, including, without limitation, the
fees and disbursements of counsel (including the allocated fees and expenses of
in-house counsel) to each Lender and to the Administrative Agent, (c) to pay,
indemnify, and hold each Lender and the Administrative Agent harmless from, any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender and the Administrative Agent harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever with respect
to the execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents or the use of the proceeds of the Loans,
including, without limitation, any of the foregoing relating to the violation
of, noncompliance with or liability under, any Environmental Law applicable to
the operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "indemnified
liabilities"), PROVIDED that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of such Person. The
agreements in this subsection shall survive repayment of the Loans and all other
amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("PARTICIPANTS") participating interests in any portion
of any Loan or Reimbursement Obligation owing to such Lender, any Note held by
such Lender, any Revolving Credit Commitment of such Lender or any other
interest of such Lender hereunder and under such Lender's Notes or any other
Loan Documents provided that the aggregate principal amount of the portion of
the Loans or Reimbursement Obligations or the aggregate amount of the Revolving
Credit Commitments, as the case may be, in which any such participating interest
is sold shall not be less than US$1,000,000. In the event of any such sale by a
Lender of a participating interest to a Participant, such Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Loan for all purposes
under this Agreement and the other Loan Documents, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. No Lender shall be entitled to create in favor of any
Participant, in the participation agreement pursuant to which such Participant's
participating interest shall be created or otherwise, any right to vote on,
consent to or approve any matter relating to this Agreement or any other Loan
Document except for those specified in clauses (i) and (ii) of the proviso to
subsection 10.1. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this
Agreement or any Note, PROVIDED that, in purchasing such participating interest,
such Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in subsection 10.7(a) as fully as if it were a
Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of subsections 2.15, 2.16 and 2.17 with respect to its
participation in the Revolving Credit Commitments and the Loans outstanding from
time to time as if it was a Lender; PROVIDED that, in the case of subsection
2.16, such Participant shall have complied with the requirements of said
subsection and PROVIDED, FURTHER, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any affiliate thereof or, with the consent of the
Administrative Agent (which shall not be unreasonably withheld), to an
additional bank or financial institution (an "ASSIGNEE") all or any part of its
rights and obligations under this Agreement and the other Loan Documents
pursuant to an Assignment and Acceptance, substantially in the form of Exhibit
D, executed by such Assignee, such assigning Lender (and, in the case of an
Assignee that is not then a Lender or an affiliate thereof, by the
Administrative Agent) and delivered to the Administrative Agent for its
acceptance and recording in the Register, PROVIDED that, in the case of any such
assignment to an additional bank or financial institution, the sum of the
aggregate principal amount of the Loans, the aggregate amount of the L/C
Obligations and the aggregate amount of the Available Revolving Credit
Commitment being assigned is equal to at least $5,000,000 (or such lesser amount
as may be agreed to by the Borrower and the Administrative Agent). Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Revolving Credit Commitment as set forth therein, and (y) the assigning
Lender thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto). Notwithstanding any provision of this
paragraph (c) and paragraph (e) of this subsection, the consent of the Borrower
shall not be required, and, unless requested by the Assignee and/or the
assigning Lender, new Notes shall not be required to be executed and delivered
by the Borrower, for any assignment which occurs at any time when any of the
events described in Section 8(f) shall have occurred and be continuing.
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the Lenders
and the Revolving Credit Commitments of, and principal amounts of the Loans
owing to, each Lender from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the
Administrative Agent and the Lenders may (and, in the case of any Loan or other
obligation hereunder not evidenced by a Note, shall) treat each Person whose
name is recorded in the Register as the owner of a Loan or other obligation
hereunder as the owner thereof for all purposes of this Agreement and the other
Loan Documents, notwithstanding any notice to the contrary. Any assignment of
any Loan or other obligation hereunder not evidenced by a Note shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Administrative Agent) together
with payment by the Assignee to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any Participant
or Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Lender's possession concerning the Borrower and
its Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law or Federal Reserve Bank requirement.
10.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "benefitted Lender")
at any time shall receive any payment of all or part of its Loans or the
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 8(f), or
otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans or
the Reimbursement Obligations owing to it, or interest thereon, such benefitted
Lender shall purchase for cash from the other Lenders a participating interest
in such portion of each such other Lender's Loan or the Reimbursement
Obligations owing to it, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; and if after taking
into account such sharing the benefitted Lender continues to have access to
addition funds of or collateral granted by the Borrower for application on
account of its debt, then the benefitted Lender shall use such funds or
collateral to reduce indebtedness of the Borrower held by it and share such
payments and the benefits of such collateral with the other Lenders; PROVIDED,
HOWEVER, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Lender so
purchasing a portion of another Lender's Loan may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such
set-off and application made by such Lender, PROVIDED that the failure to give
such notice shall not affect the validity of such set-off and application.
10.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 10.2
or at such other address of which the Administrative Agent shall have
been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
10.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
RECOTON CORPORATION
By: /s/ Stuart Mont
------------------------------------
Title: Executive Vice President-
Operations
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: Christian Matthiessen
------------------------------------
Title: Vice President
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION, as a Lender
By: Ronald K. Rueve
------------------------------------
Title: Vice President
HARRIS TRUST AND SAVINGS BANK, as a Lender
By: Richard F. Wokoun
------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK, as a Lender
By: Roger Coleman
-----------------------------------
Title: Vice President
MARINE MIDLAND BANK, as a Lender
By: Mary Doonan
------------------------------------
Title: Vice President
<PAGE>
SCHEDULE I
ORIGINAL REVOLVING CREDIT COMMITMENTS
LENDER COMMITMENT
The Chase Manhattan Bank $33,350,000
SunTrust Bank, Central Florida, National Association $22,000,000
Harris Trust and Savings Bank $11,800,000
Marine Midland Bank $17,300,000
First Union National Bank $17,050,000
------------
$101,500,000
<PAGE>
SCHEDULE II
SUBSEQUENT REVOLVING CREDIT COMMITMENTS
LENDER COMMITMENT
The Chase Manhattan Bank $23,650,000
SunTrust Bank, Central Florida, National Association $17,000,000
Harris Trust and Savings Bank $11,800,000
Marine Midland Bank $17,000,000
First Union National Bank $17,050,000
-----------
$86,500,000
<PAGE>
SCHEDULE III
TERM LOAN COMMITMENTS
LENDER COMMITMENT
The Chase Manhattan Bank $4,000,000
SunTrust Bank, Central Florida, National Association $3,000,000
Harris Trust and Savings Bank $2,050,000
Marine Midland Bank $3,000,000
First Union National Bank $2,950,000
-----------
$15,000,000
<PAGE>
Schedule IV
APPLICABLE MARGIN, L/C FEE RATE
AND COMMITMENT FEE RATE
<TABLE>
<CAPTION>
TOTAL DEBT ABR LOANS EURODOLLAR LOANS COMMITMENT L/C
LEVERAGE RATIO APPLICABLE MARGIN APPLICABLE MARGIN FEE RATE FEE RATE
-------------- ----------------- ----------------- ---------- --------
<S> <C> <C> <C> <C>
Greater than 5.50 to 1.00 0.50% 3.50% 0.50% 1.25%
Less than or equal to 5.50 to 1.00 but 0.50% 2.75% 0.50% 0.75%
greater than or equal to 4.75 to 1.00
Less than 4.75 to 1.00 but greater than 0.25% 2.25% 0.375% 0.50%
or equal to 4.00 to 1.00
Less than 4.00 to 1.00 but greater than 0.25% 2.00% 0.375% 0.50%
or equal to 3.50 to 1.00
Less than 3.50 to 1.00 but greater than 0.25% 1.50% 0.25% 0.50%
or equal to 2.50 to 1.00
Less than 2.50 to 1.00 but greater than 0.00% 1.25% 0.25% 0.50%
or equal to 2.00 to 1.00
Less than 2.00 to 1.00 but greater than 0.00% 0.75% 0.185% 0.40%
or equal to 1.00 to 1.00
Less than 1.00 to 1.00 0.00% 0.50% 0.125% 0.40%
</TABLE>
<PAGE>
EXHIBIT A
FORM OF
REVOLVING CREDIT NOTE
$__________ New York, New York
June ___, 1998
FOR VALUE RECEIVED, the undersigned, Recoton Corporation, a New York
corporation (the "BORROWER"), hereby unconditionally promises to pay to the
order of _____________ (the "LENDER") at the office of The Chase Manhattan Bank
located at 92-25 Queens Boulevard, 11th Floor, Rego Park, NY 11374, in lawful
money of the United States of America and in immediately available funds, on the
Termination Date (as defined in the Credit Agreement referred to below) the
principal amount of (a) DOLLARS ($ ), or, if less, (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by the Lender to the
Borrower pursuant to subsection 2.1 of the Credit Agreement, as hereinafter
defined. The Borrower further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time outstanding at
the rates and on the dates specified in subsection 2.10 of such Credit
Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute PRIMA FACIE evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
shall not affect the obligations of the Borrower in respect of such Revolving
Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Second Amended and Restated Credit Agreement dated as of June ___, 1998 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, the Lender, the other banks and financial
institutions from time to time parties thereto and The Chase Manhattan Bank, as
agent, (b) is subject to the provisions of the Credit Agreement and (c) is
subject to optional and mandatory prepayment in whole or in part as provided in
the Credit Agreement. This Note is guaranteed as provided in the Loan Documents.
Reference is hereby made to the Loan Documents for a description of the nature
and extent of the Guarantee, the terms and conditions upon which the Guarantee
was granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
RECOTON CORPORATION
By:
Name:
Title:
<PAGE>
Schedule A
TO REVOLVING CREDIT NOTE
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal Balance
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans of ABR Loans Notation Made By
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
TO REVOLVING CREDIT NOTE
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of Amount Converted Eurodollar Rate with
Date Eurodollar Loans to Eurodollar Loans Respect Thereto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Period and Amount of Principal of Amount of Eurodollar Unpaid Principal
Eurodollar Loans Loans Converted to Balance of Eurodollar Notation
Date Repaid ABR Loans Loans Made By
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
TO REVOLVING CREDIT NOTE
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Amount of Amount Converted Eurodollar Rate with
Date Eurodollar Loans to Eurodollar Loans Respect Thereto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Period and Amount of Principal of Amount of Eurodollar Unpaid Principal
Eurodollar Loans Loans Converted to Balance of Eurodollar Notation
Date Repaid ABR Loans Loans Made By
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B
FORM OF
TERM NOTE
$______________ New York, New York
June ___, 1998
FOR VALUE RECEIVED, the undersigned, Recoton Corporation, a New York
corporation (the "BORROWER"), hereby unconditionally promises to pay to the
order of _______________ (the "LENDER") at the office of The Chase Manhattan
Bank located at 92-25 Queens Boulevard, 11th Floor, Rego Park, NY 11374, in
lawful money of the United States of America and in immediately available funds,
the principal amount of DOLLARS ($ ). The principal amount shall be paid in the
amounts and on the dates specified in subsections 2.4 and 2.6 of the Credit
Agreement, as hereinafter defined. The Borrower further agrees to pay interest
in like money at such office on the unpaid principal amount hereof from time to
time outstanding at the rates and on the dates specified in subsection 2.10 of
such Credit Agreement.
This Note (a) is one of the Term Notes referred to in the Second
Amended and Restated Credit Agreement dated as of June ___, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Lender, the other banks and financial institutions from
time to time parties thereto and The Chase Manhattan Bank, as agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to optional
and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is guaranteed as provided in the Loan Documents. Reference
is hereby made to the Loan Documents for a description of the nature and extent
of the Guarantee, the terms and conditions upon which the Guarantee was granted
and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
RECOTON CORPORATION
By:
Name:
Title:
<PAGE>
EXHIBIT C
FORM OF
SWING LINE NOTE
$10,000,000 New York, New York
June ___, 1998
FOR VALUE RECEIVED, the undersigned, Recoton Corporation, a New York
corporation (the "BORROWER"), hereby unconditionally promises to pay to the
order of The Chase Manhattan Bank, a New York banking corporation, as swing line
lender (in such capacity, the "SWING LINE LENDER") at the office of The Chase
Manhattan Bank located at 92-25 Queens Boulevard, 11th Floor, Rego Park, NY
11374, in lawful money of the United States of America and in immediately
available funds, on the date specified in subsection 2.19 of the Credit
Agreement (as hereinafter defined) the principal amount of (a) TEN MILLION
DOLLARS ($10,000,000), or, if less, (b) the aggregate unpaid principal amount of
Swing Line Loans made by the Swing Line Lender to the Borrower pursuant to
subsection 2.19 of the Credit Agreement. The Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof from
time to time outstanding at the rate and on the date specified in subsection
2.19 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedule
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, the amount of each Swing
Line Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof, each continuation thereof. Each such
endorsement shall constitute PRIMA FACIE evidence of the accuracy of the
information endorsed. The failure to make any such endorsement shall not affect
the obligations of the Borrower in respect of such Swing Line Loan.
This Note (a) is one of the Swing Line Note referred to in the Second
Amended and Restated Credit Agreement dated as of June ___, 1998 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Borrower, the Lender, the other banks and financial institutions from
time to time parties thereto and The Chase Manhattan Bank, as agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to optional
and mandatory prepayment in whole or in part as provided in the Credit
Agreement. This Note is guaranteed as provided in the Loan Documents. Reference
is hereby made to the Loan Documents for a description of the nature and extent
of the Guarantee, the terms and conditions upon which the Guarantee was granted
and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
RECOTON CORPORATION
By:
Name:
Title:
<PAGE>
Schedule A
TO SWING LINE NOTE
LOANS AND REPAYMENTS OF SWING LINE LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Amount of Unpaid Principal
Amount of Swing Principal of Swing Balance of Swing Notation
Date Line Loan Line Loans Repaid Line Loans Made By
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT D
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Second Amended and Restated Credit Agreement,
dated as of June ___, 1998 (as amended, supplemented or otherwise modified from
time to time, the "CREDIT AGREEMENT"), among Recoton Corporation (the
"BORROWER"), the Lenders named therein and The Chase Manhattan Bank, as
administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE
AGENT" or "AGENT"). Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
The Assignor identified on Schedule l hereto (the "ASSIGNOR") and the
Assignee identified on Schedule l hereto (the "ASSIGNEE") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "ASSIGNED INTEREST") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"ASSIGNED FACILITY"; collectively, the "ASSIGNED FACILITIES"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower, any of its Subsidiaries or any other
obligor or the performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the Agent, upon
request by the Assignee, exchange the attached Notes for a new Note or Notes
payable to the Assignee and (ii) if the Assignor has retained any interest in
the Assigned Facility, requests that the Agent exchange the attached Notes for a
new Note or Notes payable to the Assignor, in each case in amounts which reflect
the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subsection 4.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (d) appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Agent by the terms thereof, together with such
powers as are incidental thereto; and (e) agrees that it will be bound by the
provisions of the Credit Agreement and will perform in accordance with its terms
all the obligations which by the terms of the Credit Agreement are required to
be performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
2.16(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "EFFECTIVE
DATE"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance by it and recording by the Agent pursuant
to the Credit Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Agent, be earlier than five Business Days
after the date of such acceptance and recording by the Agent).
5. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to the Effective Date and to the
Assignee for amounts which have accrued subsequent to the Effective Date. The
Assignor and the Assignee shall make all appropriate adjustments in payments by
the Agent for periods prior to the Effective Date or with respect to the making
of this assignment directly between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor: ______________________
Name of Assignee: ______________________
Effective Date of Assignment: ______________________
Credit Principal Revolving Credit Commitment
Facility Assigned Amount Assigned Percentage Assigned /1/
- ----------------- --------$-------- ---------__.________%--------
[Name of Assignee] [Name of Assignee]
By: By:
Title: Title:
- ---------------------------------- ------------------------------------
Accepted: [Consented To:
THE CHASE MANHATTAN BANK, as RECOTON CORPORATION
Administrative Agent
By: By:
Title: Title:]
- ---------------------------------- ------------------------------------
- --------------------
/1/ Calculate the Revolving Credit Commitment Percentage that is assigned to at
least 15 decimal places and show as a percentage of the aggregate
Revolving Credit Commitments of all Lenders.
<PAGE>
EXHIBIT E
FORM OF
AFFIRMATION AND CONSENT
June __, 1998
The Chase Manhattan Bank
as Administrative Agent
under the Credit Agreement
referred to below
and
Each of the Lenders parties
to the Credit Agreement
referred to below
Ladies and Gentlemen:
This Affirmation and Consent is being delivered to the Administrative
Agent and the Lenders in connection with the Second Amended and Restated Credit
Agreement, dated as of June __, 1998 (the "CREDIT AGREEMENT"), among Recoton
Corporation (the "BORROWER"), the banks and other financial institutions or
entities from time to time parties thereto (the "LENDERS") and The Chase
Manhattan Bank, as administrative agent (as amended or otherwise modified prior
to the Closing Date, the "EXISTING CREDIT AGREEMENT"). All capitalized terms not
defined herein shall have the meanings ascribed to them in the Credit Agreement.
By its signature below, each of the undersigned hereby acknowledges,
consents and agrees to the amendment and restatement of the Existing Credit
Agreement pursuant to the terms and provisions set forth in the Credit Agreement
and further acknowledges that the Credit Agreement provides for, among other
things, an increase in the aggregate Revolving Credit Commitments to
$101,500,000.
Each of the undersigned hereby reaffirms, as of the Closing Date, (i)
the covenants and agreements contained in each Loan Document to which it is a
party, including, in each case, as such covenants and agreements may be modified
by the Credit Agreement and the transactions contemplated thereby and (ii) in
the case of each Guarantor, its guarantee of payment of the Obligations (as
defined in the Guarantee) pursuant to the Guarantee.
Each of the undersigned hereby certifies that, as of the date hereof
(both before and after giving effect to the occurrence of the Closing Date and
the effectiveness of the Credit Agreement), the representations and warranties
made by it contained in the Loan Documents to which it is a party are true and
correct in all material respects with the same effect as if made on the date
hereof, except to the extent any such representation or warranty refers or
pertains solely to a date prior to the date hereof (in which case such
representation and warranty was true and correct in all material respects as of
such earlier date).
Each of the undersigned further confirms that each Loan Document to
which it is a party is and shall continue to be in full force and effect and the
same are hereby ratified and confirmed in all respects, except that upon the
occurrence of the Closing Date, all references in such Loan Documents to the
"Credit Agreement," "Loan Documents," "thereunder," "thereof," or words of
similar import shall mean the Credit Agreement and the Loan Documents, as the
case may be, in each case after giving effect to the amendments and other
modifications provided for in the Credit Agreement.
Each of the undersigned hereby acknowledges and agrees that the
acceptance by the Administrative Agent and each Lender of this Affirmation and
Consent shall not be construed in any manner to establish any course of dealing
on the Administrative Agent's or any Lender's part, including the providing of
any notice or requesting of any acknowledgement not otherwise expressly provided
for in any Loan Document with respect to any future amendment, waiver,
supplement or other modification to any Loan Document or any arrangement
contemplated by any Loan Document.
THIS AFFIRMATION AND CONSENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed and delivered
this Affirmation and Consent as of the date hereof.
RECOTON CORPORATION
By
Title:
[List Guarantors]
By
Title:
EXHIBIT 10.33
AMENDMENT AND WAIVER
AMENDMENT AND WAIVER, dated as of August 12, 1998 (this "AMENDMENT AND
WAIVER"), to the Second Amended and Restated Credit Agreement, dated as of June
18, 1998 (as heretofore amended and as the same may be further amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among RECOTON CORPORATION, a New York corporation (the "BORROWER"), the several
banks and other financial institutions from time to time parties thereto (the
"LENDERS"), and THE CHASE MANHATTAN BANK, as administrative agent for the
Lenders (in such capacity, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders, and the Administrative Agent are
parties to the Credit Agreement;
WHEREAS, the Borrower has requested that the Lenders and the
Administrative Agent agree to amend or waive certain provisions of the Credit
Agreement, and the Lenders and the Administrative Agent have agreed to such
amendments and waivers upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the Borrower, the Lenders and the Administrative Agent
hereby agree as follows:
1. DEFINITIONS. All terms defined in the Credit Agreement shall have
such defined meanings when used herein unless otherwise defined herein.
2. AMENDMENT OF CERTAIN PROVISIONS OF SECTION 7.1 OF THE CREDIT
AGREEMENT. Subsection 7.1(a) of the Credit Agreement is hereby amended effective
as of June 30, 1998 by deleting therefrom:
"March 31, 1998 through December 30, 1998 0.80 to 1.00";
and inserting in lieu thereof:
"March 31, 1998 through June 29, 1998 0.80 to 1.00
June 30, 1998 through December 30, 1998 0.62 to 1.00".
3. WAIVER OF CERTAIN PROVISIONS OF SECTION 7.2 OF THE CREDIT
AGREEMENT. Section 7.2 of the Credit Agreement is hereby waived to the extent,
and only to the extent, that the Borrower may not be in compliance therewith due
to the issuance and sale of Senior Notes (as defined in the Credit Agreement);
PROVIDED that any such Senior Notes shall be issued and sold (a) after the date
hereof and prior to September 30, 1998 and (b) in a principal amount not to
exceed $25,000,000.
4. WAIVER OF CERTAIN PROVISIONS OF SECTION 7.4 OF THE CREDIT
AGREEMENT. Section 7.4 of the Credit Agreement is hereby waived to the extent,
and only to the extent, that the Borrower may not be in compliance therewith due
to the guarantee by Subsidiaries of the Borrower of up to $25,000,000 in newly
issued and sold Senior Notes; PROVIDED that any such Senior Notes shall be
issued and sold (a) after the date hereof and prior to September 30, 1998 and
(b) in a principal amount not to exceed $25,000,000.
5. APPLICABLE MARGIN; COMMITMENT FEE RATE. (a) Notwithstanding the
definition of Applicable Margin set forth in subsection 1.1 of the Credit
Agreement, for the period commencing on the most recent Adjustment Date to have
occurred prior to the date hereof and ending on the second Adjustment Date
following the date hereof, the Applicable Margin shall equal (i) with respect to
ABR Loans, 0.50% per annum and (ii) with respect to Eurodollar Loans, 2.75% per
annum.
(b) Notwithstanding the definition of Commitment Fee Rate set forth in
subsection 1.1 of the Credit Agreement, for the period commencing on the most
recent Adjustment Date to have occurred prior to the date hereof and ending on
the second Adjustment Date following the date hereof, the Commitment Fee Rate
shall equal 0.50% per annum.
6. EFFECTIVENESS. This Amendment and Waiver shall become effective on
the condition that (a) the Borrower shall have delivered to the Administrative
Agent duly executed copies of this Amendment and Waiver, which copies shall
include the acknowledgement and consent of the Guarantors, (b) the
Administrative Agent shall have received duly executed copies of this Amendment
and Waiver from the Required Lenders and (c) to the extent there is any
violation of the covenants contained in the Note Purchase Agreement, dated as of
January 6, 1997, between the Borrower and the banks and other financial
institutions parties thereto, the Administrative Agent shall have received a
copy of a waiver (in form and substance reasonably satisfactory to the
Administrative Agent) waiving any violations of such covenants.
7. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants that the representations and warranties contained in the Credit
Agreement (except those which expressly speak as of a certain date) will be,
after giving effect to this Amendment and Waiver, true and correct in all
material respects, as if made on and as of the date hereof.
8. LIMITED WAIVER. Except as expressly waived hereby, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect in accordance with the provisions thereof. This
Amendment and Waiver shall not be deemed to be a waiver of, or consent to, any
other term or condition of the Credit Agreement or the other Loan Documents or
to prejudice any other right or rights which the Administrative Agent or any
Lender may now have or may have in the future under or in connection with the
Credit Agreement or any of the instruments or agreements referred to therein, as
the same may be amended from time to time.
9. FEES, COSTS AND EXPENSES. The Borrower agrees to pay or reimburse
the Administrative Agent for any fees that may be payable in connection with
this Amendment and Waiver and all its reasonable and customary out-of-pocket
costs and expenses incurred in connection with the preparation, negotiation and
execution of this Amendment and Waiver, including, without limitation, the
reasonable fees and disbursements of its counsel.
10. COUNTERPARTS. This Amendment and Waiver may be executed by one or
more of the parties hereto in any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Amendment and Waiver
by facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
11. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be executed and delivered by their respective duly authorized
officers.
RECOTON CORPORATION
By: /s/ Stuart Mont
----------------------
(Signature)
Name: Stuart Mont
-------------------
(Print)
Title: Executive Vice President-
Operations & COO
(Print)
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: /s/ Joseph Maltese
--------------------------
(Signature)
Name: Joseph Maltese
--------------------------
(Print)
Title: Vice President
(Print)
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION, as a Lender
By: /s/ William C. Barr, III
----------------------------
(Signature)
Name: William C. Barr, III
-----------------------------
(Print)
Title: First Vice President
(Print)
HARRIS TRUST AND SAVINGS BANK,
as a Lender
By:
(Signature)
Name:
(Print)
Title:
(Print)
MARINE MIDLAND BANK,
as a Lender
By: /s/ Roger Coleman
-----------------------------
(Signature)
Name: Roger Coleman
-----------------------------
(Print) Vice President
Title:
(Print)
FIRST UNION NATIONAL BANK,
as a Lender
By: /s/ Todd A. Smith
-----------------------------
(Signature)
Name: Todd A. Smith
(Print)
Title: Vice President
(Print)
<PAGE>
THE UNDERSIGNED GUARANTORS HEREBY CONSENT AND AGREE TO THE FOREGOING
AMENDMENT AND WAIVER AS OF THE DATE HEREOF:
Christie Design Corporation, a Delaware corporation
InterAct Accessories, Inc., a Delaware corporation
Recoton Audio Corporation, a Delaware corporation
ReCone, Inc., a Delaware corporation
Recoton Home Audio, Inc., a California corporation
Recoton Japan, Inc., an Illinois corporation
Recoton International Holdings, Inc., a Delaware
corporation
Recoton European Holdings, Inc., a Delaware
corporation
AAMP of Florida, Inc., a Florida corporation
By:/s/ Stuart Mont
---------------------------------------------
Name: Stuart Mont
Title: Vice President
Recoton German Holdings GmbH, a German corporation
Mac Audio Electronic GmbH, a German corporation
Magnat Audio-Produkte GmbH, a German corporation
Heco Audio-Produkte GmbH, a German corporation
Arcona s.r.l., an Italian corporation
Recoton Italia s.r.l., an Italian corporation
By:/s/Jeremy Mermagen
---------------------------------------------
Name: Jeremy Mermagen
Title: Director
Recoton Canada Ltd., a Canadian corporation
By: /s/ Stuart Mont
--------------------------------------------
Name: Stuart Mont
Title: President
Recoton (Far East) Limited, a Hong Kong corporation
STD Holding Limited, a Hong Kong corporation
STD Electronic International Limited, a Hong Kong
corporation
STD Manufacturing Limited, a Hong Kong corporation
STD Plastic Industrial Limited, a Hong Kong
corporation
STD Trading Limited, a Hong Kong corporation
Peak Hero Limited, a Hong Kong corporation
Ever Smart Management Limited, a Hong Kong
corporation
By: /s/ Robert Borchardt
----------------------------------------------
Name: Robert Borchardt
Title: Director
EXHIBIT 10.34
OPTION NO. 18
Recoton Corporation
COMMON STOCK PURCHASE OPTION
For the Purchase of 10,000 Shares
This certifies that, for value received, The Equity Group Inc. (the
"Holder") is entitled, subject to the terms and conditions hereinafter set
forth, at any time, and from time to time, prior to and including March 31,
2003, to purchase up to a total of 10,000 shares of Common Stock, $.20 par value
("Common Stock"), of Recoton Corporation, a New York corporation (the
"Company"), at a price of $25.50 per share, in lawful funds of the United States
of America payable in cash or by certified or official bank check, such price
and the number of shares purchasable pursuant hereto being subject to adjustment
upon the contingencies set forth in this option (such price, as adjusted from
time to time, is called the "Purchase Price"). Upon presentation and surrender
of this Option, with the Subscription Form annexed hereto duly executed,
together with payment of the Purchase Price of the shares of Common Stock
thereby purchased, at the principal office of the Company, the Holder shall be
entitled to receive a certificate or certificates representing the shares of
Common Stock so purchased. All shares which may be issued upon the exercise of
this option will, upon issuance, be fully paid and non-assessable and free from
all taxes, liens and charges with respect thereto.
This Option is subject to the following terms and conditions:
1. EXERCISE
The purchase rights represented by this Option are exercisable at the
option of the Holder in whole at any time but in no event after March 31, 2003.
In the case of the purchase of less than all the shares purchasable under this
Option, the Company shall cancel this Option upon the surrender hereof and shall
execute and deliver a new Option of like tenor for the balance of the shares
purchasable hereunder.
2. REGISTRATION
2.1 REGISTRATION OF OPTION COMMON STOCK; OPTION TO PURCHASE. If the
Company shall at any time and from time to time after the date hereof propose
the registration under the Securities Act of 1933 (which Act, together with any
similar Federal statute in force in the future, is hereinafter referred to as
the "Act") of any securities of the Company, the Company shall give written
notice of such proposed registration to the Holder and will permit the Holder to
offer for sale, sell or otherwise dispose of such number of shares of Option
Common Stock (as such term is defined below) as the Holder, by written notice
(delivered to the Company within 30 days of the Holder's receipt of the notice
of the proposed registration) specifies, by including such shares of Option
Common Stock in the proposed registration. For purposes of this Option, "Option
Common Stock" shall mean shares of Common Stock issued or issuable upon the
exercise of this Option. Notwithstanding the foregoing, whenever the Holder
shall notify the Company of its intention to exercise its rights under said
Articles, the Company may, instead of granting such rights, and at the Company's
sole option, purchase for cash any shares of Common Stock of the Company then
held by the Holder pursuant to this Option at the greater of any Public Offering
Price (as determined by reference to any then pending Registration Statement
prepared by the Company), the closing price on Nasdaq for the prior 30 trading
days (discarding the five highest and five lowest prices) or $25.50 per share.
2.2 COSTS AND EXPENSES. The Holder shall bear all costs and expenses
of any registration and qualifications pursuant to subsection 2.1 directly
attributable to the inclusion in any such registration of any Option Common
Stock; PROVIDED, HOWEVER, that the Company shall bear 50% of such expenses
(legal, printing, filing fees) up to a maximum of $5000. The Company, however,
shall bear all costs and expenses attributable to any such registration which
the Company would have borne had no Option Common Stock been included therein.
2.3 INDEMNIFICATION. The Company shall indemnify and hold harmless the
Holder and any underwriter (as defined in the Act) for such Holder, and each
person, if any, who controls the Holder or underwriter within the meaning of the
Act, against all losses, claims, damages or liabilities, joint or several, to
which such Holder or underwriter or controlling person may be subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities, joint
or several, to which such Holder or underwriter or controlling person may be
subject, under the Act or otherwise, are caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which shares of Option Common Stock were registered under the
Act, or qualified under the Blue Sky laws of applicable jurisdictions, pursuant
to this Section 2, any prospectus contained therein, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities arise out of or are based upon any untrue
statement or alleged untrue statement or omission based upon and made in
conformity with information furnished to the Company in writing by the Holder or
by any underwriter for the Holder expressly for use therein in which case the
Holder shall indemnify, hold harmless and defend the Company against all such
losses, claims damages or liabilities.
2.4 LEGEND. The Company may imprint on all certificates representing
shares of Option Common Stock, or shares issued in substitution or exchange
therefor, the following legend:
"These shares have not been registered under the Securities Act
of 1933, as amended, and may not be sold, assigned or otherwise
transferred without registration thereunder unless the Company
Corporation has received the written opinion of counsel
satisfactory to it that, after investigation of the relevant
facts, such counsel is of the opinion that such sale, assignment
or transfer does not involve a transaction requiring registration
under the Securities Act of 1933, as amended."
2.5 ADDITIONAL ACTS. The Holder shall take all actions, as may be
required by the Company, to comply with all applicable rules and regulations
promulgated pursuant to the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended.
3. COMPANY'S ACKNOWLEDGMENT OF OBLIGATIONS
The Company will, at the time of the exercise of this option, upon the
request of the Holder, acknowledge in writing its continuing obligation to
afford to the Holder any rights (including without limitation, any right to
registration of the shares of Option Common Stock) to which the Holder shall
continue to be entitled after such exercise in accordance with the provisions of
this Option; PROVIDED, HOWEVER, that if the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to the Holder any such rights. The aforementioned rights shall be
personal to the Holder and shall not be transferred or assigned.
4. ADJUSTMENTS
4.1 SUBDIVISION OR COMBINATION OF SHARES. In case the Company shall at
any time subdivide its outstanding shares of Common Stock into a greater number
of shares, the Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced and the number of shares of Option Common Stock
purchasable hereunder shall be proportionately increased. In case the
outstanding shares of the Common Stock of the Company shall be combined into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Option common Stock purchasable hereunder shall be proportionately reduced.
Except upon consolidation or reclassification of the shares of Common Stock of
the Company as provided for in this subsection 4.1, the Purchase Price in effect
at any time may not be adjusted upward or increased in any manner whatsoever.
4.2 REORGANIZATION, MERGERS, ETC. If any capital reorganization or
reclassification of the capital stock of the Company (other than as provided in
subsection 4.1), or consolidation or merger of the Company with another
corporation, or the sale or conveyance of all or substantially all of its assets
to another corporation shall be effected, then, as a condition of such
reorganization, reclassification, consolidation, merger, sale or conveyance,
lawful and adequate provisions shall be made whereby the Holder shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions specified in this Option and in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger, sale or conveyance not taken place. In
any such case appropriate provision shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof (including without
limitation provisions for adjustment of the Purchase Price and of the number of
shares purchasable upon the exercise of this option) shall thereafter be
applicable, as nearly as may be in relation to any stock, securities or assets
thereafter deliverable upon the exercise hereof.
4.3 NOTICE TO HOLDER. (a) Upon any increase or decrease in the number
of shares of Common Stock purchasable upon the exercise of this Option then, and
in each such case, the Company within 30 days thereafter shall give written
notice thereof, pursuant to Section 9, which notice shall state the increased or
decreased number of shares purchasable upon the exercise of this Option, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be mailed under the
provisions of paragraph (b) of this subsection 4.3.
(b) In case at any time:
(i) The Company shall declare any dividend upon its Common Stock
payable otherwise than in cash or in Common Stock of the Company or
payable otherwise than out of net income or retained earnings of the
Company; or
(ii) The Company shall offer for subscription to the holders of
its Common Stock any additional shares of stock of any class or any
other securities convertible into or exchangeable for shares of stock
or any rights or options to subscribe thereto; or
(iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale or
conveyance of all or substantially all of the assets of the Company,
or a consolidation or merger of the Company with another corporation;
or
(iv) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
pursuant to Section 9, at the earliest time legally practicable (and not less
than 30 days before any record date or other date set for definitive action) of
the date on which (A) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or option or (B)
such reorganization, reclassification, sale, conveyance, consolidation, merger,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notices shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution, subscription
rights or options or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, sale, conveyance, consolidation, merger, dissolution,
liquidation, or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the Company,
the right to exercise this option shall cease and terminate).
5. REPLACEMENT
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this option, and, in case of
loss, theft or destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Option, if mutilated, the
Company will make and deliver a new Option of like tenor, in lieu of this
option.
6. NO FRACTIONAL SHARES
The Company shall not be required to issue stock certificates
representing fractions of shares of Common Stock, but may at its option in
respect of any final fraction of a share make a payment in cash based on the
Purchase Price.
7. RESERVATION OF SHARES
The Company will reserve and keep available a sufficient number of
shares of Common Stock to satisfy the requirements of this Option and any other
outstanding Options. Before taking any action which would cause an adjustment
reducing the Purchase Price below the then par value of the shares of Common
Stock issuable upon exercise of this Option, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Purchase Price.
8. MERGER, ETC.
The Company shall not effect any consolidation, merger or sale of
substantially all of its property to any other corporation, unless prior to or
simultaneously with the consummation thereof the successor corporation (if other
than the Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume by written instrument executed and mailed or
delivered to the Holder at the address indicated in Section 9, the obligation of
such corporation to deliver to the Holder shares of stock, securities or
property as, in accordance with the provisions of this option, the Holder may be
entitled to purchase and to perform and to observe each and every covenant and
condition of this option to be performed and observed by the Company.
9. NOTICES
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first class postage prepaid:
(i) if to the Holder, at 919 Third Avenue, New York, New York
10022 or at such other address as may have been furnished to the
Company in writing by the Holder;
(ii) if to the Company, at 2950 Lake Emma Road, Lake Mary,
Florida 32746, Attention: Secretary, or at such other address as may
have been furnished to the Holder in writing by the Company.
10. ASSIGNMENT
The Holder may not sell, transfer or assign this Option, in whole or
in part, except to Robert D. Goldstein ("Goldstein"). In the event of such
transfer or assignment to Goldstein, Goldstein shall assume all of the rights
and obligations of the Holder hereunder, including, but not limited to, the
obligation not to further sell, transfer or assign this Option.
WITNESS the seal of the Company and the signatures of its duly
authorized officers.
Dated: as of April 7, 1998
RECOTON CORPORATION
By: /S/ JOSEPH H. MASSOT
---------------------------------
Name: JOSEPH H. MASSOT
Title: Vice President & Treasurer
Attest:
/S/ STUART MONT
- -----------------------
(SECRETARY)
AGREED:
THE EQUITY GROUP, INC.
BY: /S/ ROBERT GOLDSTEIN
- ------------------------
Name: Robert Goldstein
Title: President
<PAGE>
SUBSCRIPTION FORM
To be executed by the Holder
Upon Exercise of the Option
RECOTON CORPORATION
The undersigned hereby exercises the right to purchase _____ shares of
stock covered by this option at the Purchase Price of $ according to the
conditions thereof and herewith makes payment of the Purchase Price of such
shares full.
Signature_______________________________
Address_________________________________
_________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Statement of Financial Condition at June 30, 1998
(Unaudited) and the Condensed Consolidated Statement of Income for the Six
Months Ended June 30, 1998 (Unaudited) 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-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,464
<SECURITIES> 0
<RECEIVABLES> 117,965
<ALLOWANCES> 3,743
<INVENTORY> 189,818
<CURRENT-ASSETS> 347,760
<PP&E> 61,626
<DEPRECIATION> 22,691
<TOTAL-ASSETS> 440,730
<CURRENT-LIABILITIES> 111,307
<BONDS> 180,319
<COMMON> 2,585
0
0
<OTHER-SE> 143,932
<TOTAL-LIABILITY-AND-EQUITY> 440,730
<SALES> 278,821
<TOTAL-REVENUES> 279,026
<CGS> 169,532
<TOTAL-COSTS> 169,532
<OTHER-EXPENSES> 93,066
<LOSS-PROVISION> 1,063
<INTEREST-EXPENSE> 7,393
<INCOME-PRETAX> 7,972
<INCOME-TAX> 1,196
<INCOME-CONTINUING> 6,776
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,776
<EPS-PRIMARY> .58
<EPS-DILUTED> .56
</TABLE>
