<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): June 19, 1997
---------------------------
Riddell Sports Inc.
- ------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-19298 22-2890400
- ---------------------------- ------------ ------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
900 Third Avenue, New York, New York 10022
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 826-4300
--------------
N/A
- ------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Cheer Acquisition Corp. (the 'Purchaser'), a wholly-owned subsidiary of
Riddell Sports Inc. ('Riddell'), has completed its cash tender offer (the
'Offer') for all outstanding shares of common stock of Varsity Spirit
Corporation ('Varsity') at a price of $18.90 per share. The Offer expired at
11:00 a.m., New York City time, on Thursday, June 19, 1997. The shares purchased
constitute approximately 98.6% of Varsity's 4,563,183 shares of common stock
issued and outstanding. The remaining Varsity shares will be acquired in a
subsequent second-step merger transaction expected to occur on or about July 25,
1997.
The total amount of funds required to purchase the Varsity shares pursuant
to the tender offer was $85,265,743.50. The source of the funds was the proceeds
of a $115,000,000 offering of 10 1/2% Senior Notes Due 2007 of Riddell (the
'Senior Notes') pursuant to Rule 144A under the Securities Act of 1933 (the
'Offering'). The Indenture, dated as of June 19, 1997, between Riddell, certain
subsidiaries of Riddell, as Guarantors, and Marine Midland Bank, as Trustee,
with respect to the Senior Notes is included as Exhibit 99.1 hereto and is
incorporated herein by reference.
In connection with the Offering, Riddell entered into a Registration Rights
Agreement pursuant to which Riddell agreed to file with the Securities and
Exchange Commission (the 'Commission') within a certain time period a
registration statement with respect to an offer to exchange the Senior Notes for
a new issue of debt securities of Riddell registered under the Securities Act of
1933, with terms substantially identical to those of the Senior Notes. The
Registration Rights Agreement, dated as of June 19, 1997, between Riddell, as
Issuer, certain subsidiaries of Riddell, as Guarantors, and NationsBanc Capital
Markets, Inc. and First Chicago Capital Markets, Inc., as Purchasers, is
included as Exhibit 99.2 hereto and is incorporated herein by reference.
In addition, as described in the Purchaser's Offer to Purchase with respect
to the Offer (filed with the Commission as Exhibit (a)(1) to Riddell's and
Purchaser's Tender Offer Statement on Schedule 14D-1 (the 'Schedule 14D-1') on
May 12, 1997), Riddell entered into a Credit Agreement (the 'Credit Agreement')
among Riddell, as Borrower, the subsidiaries of Riddell, as Guarantors, and the
Lenders identified therein, and NBD Bank, as Administrative Agent, and
NationsBank, N.A., as Documentation Agent, dated as of June 19, 1997; the Credit
Agreement is included as Exhibit 99.3 hereto and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Audited financial statements of Varsity, including Varsity's consolidated
balance sheets as of December 31, 1995 and 1996, and the related consolidated
statements of income, cash flows and shareholders' equity for each of the two
years in the period ended December 31, 1996 and the nine months ended December
31, 1994; and unaudited financial statements of Varsity, including Varsity's
consolidated balance sheets as of March 31, 1997 and 1996 and the consolidated
statements of operations, cash flows and shareholders' equity for the three
months ended March 31, 1997 and 1996, are set forth below.
1
<PAGE>
VARSITY SPIRIT CORPORATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets at March 31, 1997, December 31, 1996 and March 31, 1996.............. 3
Condensed Consolidated Statements of Operations for the three months ended March 31, 1997 and 1996......... 4
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1997 and 1996......... 5
Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 1997 and
1996..................................................................................................... 6
Notes to Condensed Consolidated Financial Statements....................................................... 7
Audited Consolidated Financial Statements:
Report of Independent Certified Public Accountants......................................................... 10
Consolidated Balance Sheets at December 31, 1995 and 1996.................................................. 11
Consolidated Statements of Income for the nine months ended December 31, 1994 and the years ended December
31, 1995 and 1996........................................................................................ 12
Consolidated Statements of Shareholders' Equity for the nine months ended December 31, 1994 and the years
ended December 31, 1995 and 1996......................................................................... 13
Consolidated Statements of Cash Flows for the nine months ended December 31, 1994 and the years ended
December 31, 1995 and 1996............................................................................... 14
Notes to Consolidated Financial Statements................................................................. 15
</TABLE>
2
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
-------------- ----------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current:
Cash and cash equivalents................................... $ 2,077 $ 9,360 $ 842
Accounts receivable, less allowance of $220, $220, and $170
for possible losses...................................... 3,681 6,897 3,184
Inventories (Note 4)........................................ 8,642 5,419 7,849
Prepaid expenses (Note 5)................................... 5,426 2,616 4,690
Deferred sales (Note 6)..................................... 666 265 652
Refundable income taxes..................................... 1,440 238 1,239
Deferred tax benefit........................................ 256 259 207
-------------- ----------------- --------------
Total Current Assets.......................................... 22,188 25,054 18,663
Property and equipment, less accumulated depreciation......... 4,167 4,010 3,556
Goodwill and other assets..................................... 8,944 8,727 6,606
-------------- ----------------- --------------
$ 35,299 $37,791 $ 28,825
-------------- ----------------- --------------
-------------- ----------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................ $ 3,589 $ 1,993 $ 3,263
Accruals:
Compensation and payroll taxes........................... 330 849 307
Income taxes............................................. -- 117 --
Other.................................................... 163 156 76
Customer deposits............................................. 2,242 3,813 1,780
Current maturities of long-term debt.......................... 120 120 --
-------------- ----------------- --------------
Total Current Liabilities..................................... 6,444 7,048 5,426
Deferred income taxes......................................... 399 366 174
Long-term debt................................................ 480 480 --
-------------- ----------------- --------------
Total Liabilities............................................. 7,323 7,894 5,600
Contingencies (Note 12).......................................
Shareholders' Equity:
Preferred stock............................................. -- -- --
Common stock................................................ 47 47 47
Additional paid-in-capital.................................. 14,187 14,144 13,639
Excess of purchase price over predecessor basis............. (2,517) (2,517) (2,517)
Retained earnings........................................... 16,288 18,253 12,090
-------------- ----------------- --------------
28,005 29,927 23,259
Treasury stock, at cost....................................... (29) (30) (34)
-------------- ----------------- --------------
Total Shareholders' Equity.................................... 27,976 29,897 23,225
-------------- ----------------- --------------
$ 35,299 $37,791 $ 28,825
-------------- ----------------- --------------
-------------- ----------------- --------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited).
3
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Uniforms and accessories................................................................... $ 2,814 $ 2,277
Camps and events........................................................................... 5,527 4,139
------- -------
8,341 6,416
------- -------
COSTS OF REVENUES:
Uniforms and accessories................................................................... 1,996 1,618
Camps and events........................................................................... 3,791 3,094
------- -------
5,787 4,712
------- -------
Gross profit............................................................................... 2,554 1,704
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES................................................ 5,455 4,250
------- -------
Operating loss............................................................................. (2,901) (2,546)
OTHER INCOME 62 47
------- -------
Loss before taxes on income................................................................ (2,839) (2,499)
TAXES ON INCOME (benefit) (Note 8)........................................................... (1,125) (992)
------- -------
NET LOSS..................................................................................... $(1,714) $(1,507)
------- -------
------- -------
NET LOSS PER SHARE........................................................................... $ (0.36) $ (0.32)
------- -------
------- -------
WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENT
SHARES OUTSTANDING (Notes 9 and 10)........................................................ 4,732 4,705
------- -------
------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited).
4
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1997 1996
------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................................. $(1,714) $(1,507)
Deferred income taxes..................................................................... 36 (31)
Depreciation.............................................................................. 339 252
Amortization.............................................................................. 72 49
Change in operating assets and liabilities:
Accounts receivable.................................................................... 2,815 2,814
Inventories............................................................................ (3,223) (2,923)
Prepaid expenses....................................................................... (2,810) (2,418)
Refundable income taxes................................................................ (1,193) (821)
Other assets........................................................................... (289) (26)
Accounts payable....................................................................... 1,596 1,585
Accruals............................................................................... (629) (149)
Customer deposits...................................................................... (1,571) (285)
------- ---------
Net cash used by operating activities.................................................. (6,571) (3,460)
------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................................................ (496) (681)
------- ---------
Net cash used by investing activities.................................................. (496) (681)
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid............................................................................ (251) (180)
Proceeds from issuance of common stock.................................................... 35 83
------- ---------
Net cash used by financing activities.................................................. (216) (97)
------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (Note 11)............................................. (7,283) (4,238)
CASH AND CASH EQUIVALENTS, beginning of period.............................................. 9,360 5,080
------- ---------
CASH AND CASH EQUIVALENTS, end of period.................................................... $ 2,077 $ 842
------- ---------
------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited).
5
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
EXCESS OF
PURCHASE
COMMON STOCK ADDITIONAL PRICE OVER
---------------- PAID-IN PREDECESSOR RETAINED TREASURY
SHARES AMOUNT CAPITAL BASIS EARNINGS STOCK TOTAL
------ ------ ---------- ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1996.......... 4,736 $ 47 $ 14,144 $(2,517) $ 18,253 $(30) $29,897
Net loss for the period.............. -- -- -- -- (1,714) -- (1,714)
Issuance of common stock upon
exercise of stock options.......... 4 -- 34 -- -- 1 35
Tax benefit related to exercise of
stock options (Note 11)............ -- -- 9 -- -- -- 9
Cash dividends ($.055 per share)..... -- -- -- -- (251) -- (251)
------ ------ ---------- ----------- -------- -------- -------
BALANCES, MARCH 31, 1997............. 4,740 $ 47 $ 14,187 $(2,517) $ 16,288 $(29) $27,976
------ ------ ---------- ----------- -------- -------- -------
------ ------ ---------- ----------- -------- -------- -------
BALANCES, DECEMBER 31, 1995.......... 4,710 $ 47 $ 13,523 $(2,517) $ 13,777 $(36) $24,794
Net loss for the period.............. -- -- -- -- (1,507) -- (1,507)
Issuance of common stock upon
exercise of stock options.......... -- -- 81 -- -- 2 83
Tax benefit related to exercise of
stock options (Note 11)............ -- -- 35 -- -- -- 35
Cash dividends ($.04 per share)...... -- -- -- -- (180) -- (180)
------ ------ ---------- ----------- -------- -------- -------
BALANCES, MARCH 31, 1996............. 4,710 $ 47 $ 13,639 $(2,517) $ 12,090 $(34) $23,225
------ ------ ---------- ----------- -------- -------- -------
------ ------ ---------- ----------- -------- -------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements
(unaudited).
6
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: The interim statements have been prepared pursuant to the requirements
for reporting on Form 10-Q. The December 31, 1996 balance sheet
presented was derived from audited financial statements but does not
include all disclosures required by generally accepted accounting
principles. The interim financial statements and notes thereto should
be read in conjunction with the latest Annual Report on Form 10-K of
Varsity Spirit Corporation (the 'Company'). In the opinion of
management, the interim financial statements reflect all adjustments
necessary for a fair presentation of financial position and operating
results for the interim periods.
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make
estimates and assumptions that effect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
NOTE 2: The results of operations for the three months ended March 31, 1997
and 1996 are not necessarily indicative of results to be expected for
the full year.
NOTE 3: The consolidated financial statements include the accounts of Varsity
Spirit Corporation and its subsidiaries. All material intercompany
accounts and transactions are eliminated.
NOTE 4: Inventories are summarized as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Finished Goods............................. $ 6,544 $3,608 $ 5,980
Raw Materials.............................. 2,098 1,811 1,869
----------- ------------ -----------
$ 8,642 $5,419 $ 7,849
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out method.
NOTE 5: Prepaid expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Deferred costs:
Catalog and brochures.................... $ 1,325 $ 330 $ 1,082
Camps, clinics and championships......... 888 612 894
Supplies and samples....................... 603 414 616
Commissions................................ 1,406 450 995
Prepaid tour costs......................... 346 207 284
Insurance.................................. 170 218 280
Other...................................... 688 385 539
----------- ------------ -----------
$ 5,426 $2,616 $ 4,690
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
NOTE 6: Deferred sales consist of shipped uniform and accessory finished goods
that have not been invoiced. It is the policy of the Company to
reflect the sale in the financial statements during the month in which
the finished goods are shipped to the customer, but not to invoice the
sale until the customer's entire order has been shipped.
7
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7: The Company has a $9,000,000 bank line of credit which expires on June
30, 1997. No balances were outstanding under the agreement as of March
31, 1997, December 31, 1996, or March 31, 1996. The agreement requires
that the Company maintain certain financial ratios and maintain a
minimum tangible net worth. The line bears interest at the lower of
prime or LIBOR plus 1%.
NOTE 8: Income taxes have been provided based on the estimated annual
effective tax rates for the periods.
NOTE 9: For the three months ended March 31, 1997 and 1996, net income per
share calculations are based upon weighted average common and
equivalent shares outstanding totaling 4,732,000 and 4,705,000,
respectively.
NOTE 10: In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, 'Earnings per
Share' ('SFAS 128'). This statement simplifies the standards for
computing earnings per share ('EPS') previously found in APB Opinion
No. 15, 'Earnings per Share' as the presentation of primary and
fully-diluted EPS is replaced with Basic and Diluted EPS. Basic EPS
excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of
the entity.
SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997, and applies to entities with
publicly-held common stock or potential common stock. The Company
will adopt SFAS 128 in the financial statements issued for the
year ended December 31, 1997. If the provisions of SFAS 128 had
been applied to the three months ended March 31, 1997, estimated
Basic EPS and Diluted EPS would have been $(0.38) and $(0.36),
respectively.
NOTE 11: Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1997 1996
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Cash paid for:..............................................
Income taxes.............................................. $158 $ 27
Interest.................................................. $ -- $ --
</TABLE>
Non-cash financing activities:
During the three month periods ended March 31, 1997 and 1996,
additional paid-in-capital was increased by a reduction in income
taxes payable of $9,000 and $35,000, respectively, arising from the
exercise of stock options.
NOTE 12: On May 5, 1997, the Company, Riddell Sports, Inc., a Delaware
corporation ('Riddell'), and Cheer Acquisition Corporation, a
Tennessee corporation and a wholly owned subsidiary of Riddell ( the
'Merger Sub'), entered into an Agreement and Plan of Merger (the
'Merger Agreement') pursuant to which Merger Sub will offer to
purchase all outstanding shares of common stock, par value $0.01 per
share, of the Company (the 'Shares') at $18.90 per share, net to the
seller in cash (the 'Offer Price'). In addition to various conditions,
the offer is subject to the receipt of tenders of a majority of the
outstanding shares on a fully-diluted basis. Pursuant to the Merger
Agreement, as soon as practicable after the completion of the offer
and satisfaction or waiver of all conditions, the Merger Sub will be
merged with and into the Company (the 'Merger') with the Company
surviving the Merger as a wholly owned subsidiary of Riddell ( the
'Surviving Corporation'). At the time at which the Merger is
consummated (the 'Effective Time'), each Share then outstanding (other
than Shares held in treasury of the Company, Shares held by Riddell,
the Merger Sub or any
8
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
other wholly owned subsidiary of Riddell and Shares held by the
stockholders of the Company who exercise their dissenters' rights, if
any, under the Tennessee Business Corporation Act) will be converted
into the right to receive the Offer Price in cash.
In connection with the Merger Agreement, the Company has agreed to
prepay in full the Term Note issued to United Special Events, Inc.
('USE') in connection with the purchase by the Company's wholly
owned subsidiary, Varsity USA, Inc. of the spirit camp business of
USE. Under the terms of the Term Note, USE has the right to convert
the entire $600,000 principal amount of the Term Note into shares of
Common Stock of the Company at a conversion price of $14.97.
Additionally, the Company has agreed to terminate, immediately prior
to the Merger, outstanding options under its stock option plans,
resulting in option termination payments totalling approximately
$4,877,000.
9
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Varsity Spirit Corporation
Memphis, Tennessee
We have audited the accompanying consolidated balance sheets of Varsity Spirit
Corporation and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years ended December 31, 1996 and 1995 and the nine-month period ended
December 31, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Varsity Spirit
Corporation and subsidiaries at December 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the years ended December 31,
1996 and 1995 and the nine-month period ended December 31, 1994, in conformity
with generally accepted accounting principles.
BDO SEIDMAN, LLP
Memphis, Tennessee
February 12, 1997
10
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents................................................................. $ 5,080 $ 9,360
Accounts receivable, less allowance of $170 and $220 for possible losses.................. 6,650 7,162
Inventories (Note 2)...................................................................... 4,926 5,419
Prepaid expenses (Note 3)................................................................. 2,272 2,616
Refundable income taxes................................................................... 383 238
Deferred tax benefit (Note 8)............................................................. 176 259
------------ ------------
Total Current Assets........................................................................ 19,487 25,054
Property and Equipment, less accumulated depreciation (Note 4).............................. 3,127 4,010
Goodwill, less accumulated amortization of $972 and $1,193 (Note 1)......................... 5,929 7,928
Other Assets................................................................................ 700 799
------------ ------------
$ 29,243 $ 37,791
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................................................... $ 1,678 $ 1,993
Accruals:
Compensation and payroll taxes......................................................... 266 849
Income taxes (Note 8).................................................................. 167 117
Other.................................................................................. 99 156
Customer deposits......................................................................... 2,065 3,813
Current maturities of long-term debt (Note 6)............................................. -- 120
------------ ------------
Total Current Liabilities................................................................... 4,275 7,048
Deferred Income Taxes (Note 8).............................................................. 174 366
Long-term Debt (Notes 1 and 6).............................................................. -- 480
------------ ------------
Total Liabilities........................................................................... 4,449 7,894
------------ ------------
Commitments and Contingencies (Notes 7 and 10)
Shareholders' Equity (Notes 7 and 11)
Preferred stock, $.01 par value--shares authorized 5,000,000; none issued................. -- --
Common stock, $.01 par value--shares authorized 10,000,000; shares issued 4,710,386 and
4,735,961.............................................................................. 47 47
Additional paid-in capital................................................................ 13,523 14,144
Excess of purchase price over predecessor basis........................................... (2,517) (2,517)
Retained earnings......................................................................... 13,777 18,253
------------ ------------
24,830 29,927
Treasury stock, at cost, 215,504 and 179,378 shares......................................... (36) (30)
------------ ------------
Total Shareholders' Equity.................................................................. 24,794 29,897
------------ ------------
$ 29,243 $ 37,791
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
DECEMBER 31, ------------------
1994 1995 1996
----------------- ------- -------
<S> <C> <C> <C>
REVENUES:
Uniforms and accessories.............................................. $35,866 $44,049 $49,472
Camps and events...................................................... 23,721 31,449 38,977
----------------- ------- -------
59,587 75,498 88,449
----------------- ------- -------
COSTS OF REVENUES:
Uniforms and accessories.............................................. 18,659 23,379 26,849
Camps and events...................................................... 16,826 23,114 26,764
----------------- ------- -------
35,485 46,493 53,613
----------------- ------- -------
Gross profit....................................................... 24,102 29,005 34,836
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................ 16,117 22,679 26,388
----------------- ------- -------
Operating income................................................... 7,985 6,326 8,448
----------------- ------- -------
OTHER
Interest income--net.................................................. 150 178 166
----------------- ------- -------
Income before taxes on income...................................... 8,135 6,504 8,614
TAXES ON INCOME (Note 8)................................................ 3,218 2,341 3,414
----------------- ------- -------
NET INCOME.............................................................. $ 4,917 $ 4,163 $ 5,200
----------------- ------- -------
----------------- ------- -------
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENT SHARES OUTSTANDING (Note 7)................................ 4,587 4,679 4,734
----------------- ------- -------
----------------- ------- -------
NET INCOME PER SHARE (Note 7)........................................... $ 1.07 $ 0.89 $ 1.10
----------------- ------- -------
----------------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
EXCESS OF
PURCHASE
COMMON STOCK ADDITIONAL PRICE OVER
-------------- PAID-IN PREDECESSOR RETAINED TREASURY
SHARES AMOUNT CAPITAL BASIS EARNINGS STOCK TOTAL
------ ------ ---------- ------------ --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, MARCH 31, 1994........................... 4,699 $ 47 $ 13,016 $ (2,517) $ 5,234 $(44) $15,736
Net income for the period........................ -- -- -- -- 4,917 -- 4,917
Issuance of common stock upon exercise of stock
options........................................ -- -- 62 -- -- 2 64
Tax benefit related to exercise of stock
options........................................ -- -- 24 -- -- -- 24
------ ------ ---------- ------------ --------- -------- -------
BALANCES, DECEMBER 31, 1994........................ 4,699 47 13,102 (2,517) 10,151 (42) 20,741
Net income for the period........................ -- -- -- -- 4,163 -- 4,163
Issuance of common stock upon exercise of stock
options........................................ 11 -- 279 -- -- 6 285
Tax benefit related to exercise of stock
options........................................ -- -- 142 -- -- -- 142
Cash dividends ($.12 per share).................. -- -- -- -- (537) -- (537)
------ ------ ---------- ------------ --------- -------- -------
BALANCES, DECEMBER 31, 1995........................ 4,710 47 13,523 (2,517) 13,777 (36) 24,794
Net income for the period........................ -- -- -- -- 5,200 -- 5,200
Issuance of common stock upon exercise of stock
options........................................ 26 -- 453 -- -- 6 459
Tax benefit related to exercise of stock
options........................................ -- -- 168 -- -- -- 168
Cash dividends ($.16 per share).................. -- -- -- -- (724) -- (724)
------ ------ ---------- ------------ --------- -------- -------
BALANCES, DECEMBER 31, 1996........................ 4,736 $ 47 $ 14,144 $ (2,517) $18,253 $(30) $29,897
------ ------ ---------- ------------ --------- -------- -------
------ ------ ---------- ------------ --------- -------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
NINE MONTHS ENDED ------------------
DECEMBER 31, 1994 1995 1996
----------------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 4,917 $ 4,163 $ 5,200
Deferred income taxes.................................................. (15) 21 109
Depreciation and amortization.......................................... 577 992 1,318
Changes in operating assets and liabilities, net of effect of
businesses acquired (Note 1)
Accounts receivable................................................. (3,073) (1,544) (482)
Inventories......................................................... 61 (1,039) (242)
Prepaid expenses.................................................... 3,778 (859) (209)
Refundable income taxes............................................. -- (383) 145
Accounts payable.................................................... (193) 210 62
Accruals............................................................ 100 (695) 741
Customer deposits................................................... (3,103) 890 1,650
-------- ------- -------
Net cash provided by operating activities......................... 3,049 1,756 8,292
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of USE (Note 1)............................................ -- -- (1,926)
Net cash received upon acquisition of Intropa (Note 1)................. 764 -- --
Purchase of property and equipment..................................... (667) (1,984) (1,828)
Decrease (increase) in other assets.................................... 19 (319) 7
-------- ------- -------
Net cash provided (used) by investing activities.................. 116 (2,303) (3,747)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................................. 64 286 459
Cash dividends......................................................... -- (537) (724)
-------- ------- -------
Net cash provided (used) by financing activities.................. 64 (252) (265)
-------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (Note 9)................................................... 3,229 (799) 4,280
CASH AND CASH EQUIVALENTS, at beginning of period........................ 2,650 5,879 5,080
-------- ------- -------
CASH AND CASH EQUIVALENTS, at end of period.............................. $ 5,879 $ 5,080 $ 9,360
-------- ------- -------
-------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF ACCOUNTING POLICIES
Business
Varsity Spirit Corporation (the 'Company') is involved in the business of
organizing, administering, and producing instructional camps, clinics, and
special events predominantly in the United States for spirit groups associated
with secondary schools, colleges, and universities through its divisions,
Universal Cheerleaders Association ('UCA'), Universal Dance Association ('UDA'),
Varsity Sports Gyms ('VSG') and Varsity Deutschland ('VSD') and its wholly-owned
subsidiary, Varsity USA, Inc. ('USA'), which acquired the camp business assets
of United Special Events, Inc., on May 15, 1996. Instructional camps and clinics
include large residential camps and smaller private individual squad level
camps. Its wholly-owned subsidiary, Varsity Spirit Fashions & Supplies, Inc.
('Varsity'), designs and markets cheerleader uniforms and accessories to spirit
groups associated with secondary schools, colleges and universities primarily in
the United States. The selling cycle of the Company is highly seasonal.
Varsity/Intropa Tours, Inc. ('Intropa'), a wholly-owned subsidiary acquired
December 1, 1994, organizes group performance tours, primarily in Europe, for
cheerleaders, bands, orchestras and choirs.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions are
eliminated.
Business Acquisitions
Effective May 15, 1996, the Company's subsidiary, USA, acquired certain of
the assets of United Special Events, Inc. ('USE'), a company which specializes
in organizing, administering, and producing instructional camps, clinics, and
special events, predominately in the western United States, for spirit groups
associated with secondary schools, colleges, and universities. The purchase
price was approximately $1.95 million, of which $1.35 million was paid at
closing and the $600,000 balance was financed by a five-year unsecured
convertible promissory note, bearing interest at 8%. The acquisition was
accounted for using the purchase method. The purchase price and liabilities
assumed were allocated to assets acquired based on their estimated fair values,
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Purchase price, including out of pocket expenses of $88........................ $2,038
Current liabilities assumed.................................................... 369
Bank debt retired at closing................................................... 644
Current assets................................................................. (530)
Fixed assets................................................................... (120)
Covenant not to compete........................................................ (120)
-------
Goodwill....................................................................... $2,281
-------
-------
</TABLE>
The USA operations since the date of acquisition have been included in the
Company's consolidated results of operations. The operating results would not
have been materially different, if the acquisition had occurred on January 1,
1996.
Effective December 1, 1994, a subsidiary acquired certain of the assets of
Intropa International U.S.A., Inc. ('Intropa'), a tour company which specializes
in performance tours for cheerleaders, bands, orchestras and choruses. Total
cash consideration was approximately $1.25 million, of which $961,000 was paid
at closing. $240,000 of the balance was included in accounts payable at December
31, 1994 and was paid 120 days after the closing date. The acquisition was
accounted for using the purchase method.
The Intropa operations since the date of acquisition have been included in
the Company's consolidated results of operations.
15
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles ('GAAP') requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade receivables, other
current assets, accounts payable and accruals meeting the definition of a
financial instrument approximate fair value.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
by the first-in, first-out method.
Samples
The Company provides samples of merchandise carried in the catalogs to its
sales representatives. All costs related to samples used in the sale of the
Company's uniforms and accessories are amortized ratably over three years.
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed using
the straight-line and accelerated methods for financial reporting purposes over
the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Computer equipment..................................................................... 5
Computer software...................................................................... 3
Machinery and equipment................................................................ 5-7
Furniture and fixtures................................................................. 5
Leasehold improvements................................................................. 2-6
Vehicles............................................................................... 3-5
</TABLE>
For income tax purposes, depreciation is computed using primarily
accelerated methods.
Goodwill
Goodwill, stated at cost less accumulated amortization, represents the
purchase cost allocated to the earning capacity of acquired companies, and is
amortized over periods from 35 to 40 years on the straight-line basis. The
Company continually evaluates the market coverage and earning capacity of its
acquirees to determine if the unamortized goodwill can be recovered from their
undiscounted future cash flows over the remaining amortization period. Should
this evaluation indicate that goodwill will not be recoverable, the Company's
carrying value of the goodwill will be reduced by the estimated shortfall of
undiscounted cash flows.
Catalog Costs
Cost of producing catalogs are deferred and amortized over the selling
season for uniforms and accessories.
Revenue Recognition
Revenue is recognized on sales of uniforms at the time of shipment and on
camps, clinics, special events and tours on the start date of the respective
activity. Expenses incurred and payments received that are associated with the
camps, clinics, events or tours are deferred until the revenue is recognized.
16
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF ACCOUNTING POLICIES--(CONTINUED)
Taxes on Income
Income taxes are calculated using the liability method specified by
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes' ('FAS 109').
Net Income Per Share
Net income per share is computed based on the weighted average number of
common shares outstanding during each period, after giving effect to the
exercise of dilutive options (see Note 7) and assuming the repurchase, at fair
market value of shares using the proceeds from such exercise.
Stock Options
Stock options are granted to certain officers, employees, directors and
consultants generally at the prevailing market price on the date of the grant.
The Company makes no charge to earnings with respect to stock options, except
where the option price is less than the market price at date of grant. Proceeds
from the sale of unissued common stock under these options are credited to
common stock and additional paid-in capital at the time the options are
exercised. If treasury stock is issued, the Company's treasury stock is reduced
by the cost of the treasury shares reissued and additional paid-in capital is
increased for the excess of the option price over the cost of the treasury
stock.
Statement of Financial Accounting Standards No. 123, 'Accounting for
Stock-Based Compensation' ('SFAS No. 123') issued by the Financial Accounting
Standards Board is effective for transactions entered into in fiscal years that
begin after December 15, 1995. As allowed under the provisions of SFAS No. 123,
the Company will continue to measure compensation cost for employee stock-based
compensation plans using the intrinsic value based method of accounting
prescribed by the Accounting Principles Board Opinion No. 25, 'Accounting for
Stock Issued to Employees,' and has made pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting had been
applied (see Note 7).
Employee Benefits
The Company provides a defined contribution retirement plan for
substantially all of its full-time employees which meets the requirements of
Section 401(k) of the Internal Revenue Code. The Company's policy is to fund the
retirement plan costs accrued.
Fiscal Year End
Effective April 1, 1994, the Company's Board of Directors approved a change
in the Company's fiscal year from March 31 to December 31.
New Accounting Pronouncement
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 128, 'Earnings Per Share' ('SFAS 128'). This statement
simplifies the standards for computing EPS previously found in APB Opinion No.
15, 'Earnings Per Share' as the presentation of primary and fully-diluted EPS is
replaced with Basic and Diluted EPS. Basic EPS excludes dilution and is computed
by dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, and applies to entities with publicly-held common stock
or potential common stock. The Company will adopt SFAS 128 in financial
statements issued for the year ending December 31, 1997. If the provisions of
SFAS 128 had been applied to the year ended December 31, 1996, estimated Basic
EPS and Diluted EPS would have been $1.15 and $1.10, respectively.
17
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Finished products.......................................................... $3,217 $3,608
Raw materials.............................................................. 1,709 1,811
------ ------
Inventories................................................................ $4,926 $5,419
------ ------
------ ------
</TABLE>
NOTE 3--PREPAID EXPENSES
Prepaid expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred costs:
Catalogs................................................................. $ 250 $ 330
Camps, clinics and championships......................................... 575 612
Prepaid insurance.......................................................... 413 218
Supplies and samples....................................................... 342 414
Prepaid commissions........................................................ 164 450
Prepaid tour costs......................................................... 339 207
Other...................................................................... 189 385
------ ------
Prepaid expenses........................................................... $2,272 $2,616
------ ------
------ ------
</TABLE>
Deferred catalog costs consist of the Company's expenses associated with
planning, processing, and distributing the Company's uniform and accessory,
danceware and youth catalogs to schools and universities throughout the United
States. The catalogs are mailed in the Company's first quarter of the following
year and the costs of the catalogs are amortized over the Company's selling
season for uniforms and accessories.
Deferred camps and clinics costs are costs incurred in connection with the
organization of the Company's summer cheerleader camp and clinic programs for
the following summer season. These costs are amortized during June, July and
August, which are the months in which the cheerleading camps and clinics are
held.
Deferred championship costs comprise costs associated with organizing and
producing the National Dance Team, High School and College Cheerleading
Championships sponsored by the Company. These costs and associated revenues are
recognized in the month the event occurs.
Direct costs related to organizing, scheduling and arranging upcoming group
tours are recorded as prepaid tour costs and the costs and revenues associated
with the tour are recognized when the tour begins.
18
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--PROPERTY AND EQUIPMENT
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment and software.......................................... $ 2,735 $ 4,013
Machinery and equipment.................................................. 1,786 1,999
Furniture and fixtures................................................... 1,347 1,665
Leasehold improvements................................................... 278 414
Vehicles................................................................. 68 69
------- -------
6,214 8,160
Less accumulated depreciation............................................ (3,087) (4,150)
------- -------
Net property and equipment............................................... $ 3,127 $ 4,010
------- -------
------- -------
</TABLE>
Depreciation expense charged to operations was $793,000 and $1,065,000,
respectively, for each of the years ended December 31, 1995 and 1996 and
$444,000 for the nine months ended December 31, 1994.
NOTE 5--REVOLVING CREDIT AGREEMENT
The Company has a revolving credit agreement with a bank which is available
through June 30, 1997, and provides for maximum borrowings of $9,000,000. Under
the agreement, outstanding borrowings bear interest at the lower of prime (8.25%
at December 31, 1996) or LIBOR plus 1% (6.53% at December 31, 1996). The line of
credit is unsecured, but the Company has agreed not to subordinate any
additional assets except in the ordinary course of business without the bank's
approval. The line of credit also requires that the Company maintain certain
financial ratios and meet a minimum tangible net worth. There were no amounts
outstanding under this revolving line of credit agreement at December 31, 1995
or 1996.
NOTE 6--LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Promissory note bearing interest at 8%, payable in annual
installments of $120,000, plus interest, through May
2001..................................................... $ 600
Current portion............................................ (120)
--------------
Long-term debt............................................. $ 480
--------------
--------------
</TABLE>
On any payment date, the holder of the note shall be entitled, at their
discretion, to convert not less than 75% of any installment of unpaid principal
amount of the note into shares of the Company's common stock based upon a
conversion price of $14.97 per share.
Management believes the carrying value of the Company's long-term debt
approximates fair value based on the current rates offered to the Company.
NOTE 7--COMMON STOCK
On January 31, 1995, the Company's Board of Directors authorized a
three-for-two stock split to be effected in the form of a 50% stock dividend to
be distributed on February 24, 1995 to shareholders of record on February 14,
1995. Shareholders' equity has been restated to give retroactive recognition to
the stock split for all periods presented by reclassifying from retained
earnings to common stock the par value of the additional shares
19
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--COMMON STOCK--(CONTINUED)
arising from the split. In addition, all references in the financial statements
to number of shares, per share amounts and stock option data of the Company's
common stock have been restated.
The Company maintains two stock option plans, the 1989 Stock Option Plan
and the 1991 Stock Option Plan. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion 25, Accounting for Stock Issued to Employees, and related
Interpretations. Under APB Opinion 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation cost is recognized. Under the 1989 plan,
270,000 options were granted to certain employees at an initial exercise price
of $5.00 per share. The options vested in three equal annual installments ending
April 1, 1995 and expire ten years from date of grant. The Company acquired the
shares to cover the exercise of the 1989 options from its two largest
stockholders for $.17 per share. In November 1991, the 1989 plan was amended to
provide that cancelled options would become available for additional grants at
an exercise price equal to fair market value of the shares at the date of such
grants.
The 1991 plan, as amended, provides options to acquire 600,000 shares that
may be granted to officers, directors and key employees at an exercise price
equal to fair market value at date of grant (110% of fair market value for
options issued to holders of more than 10% of Company stock). Options may be
exercised for a term determined by the Board of not less than one year or more
than ten years from the date of grant.
At December 31, 1996, 21,049 options are available for grant under the 1989
plan, and 159,408 options remain available for grants under the 1991 plan, as
amended.
SFAS No. 123, 'Accounting for Stock-Based Compensation' requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's stock option plans had been
determined in accordance with the fair value based method prescribed in SFAS
123. The Company estimates the fair value of each stock option on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in the years ended December 31,
1995 and 1996, respectively; dividend yield of 1.8597% for both years; expected
volatility of 40.59% for both years; risk-free interest rates of 6.5% for both
years; and expected option lives of 7 years for both years.
Under the accounting provisions of SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1996
------- -------
(IN THOUSANDS
EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net income--as reported............................................... $ 4,163 $ 5,200
Net income--pro forma................................................. $ 4,012 $ 4,867
Earnings per share--as reported....................................... $ 0.89 $ 1.10
Earnings per share--pro forma......................................... $ 0.86 $ 1.03
------- -------
------- -------
</TABLE>
20
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--COMMON STOCK--(CONTINUED)
Information regarding the status of the Company's two fixed stock option
plans as of December 31, 1994, 1995 and 1996 and changes during the nine months
ended December 31, 1994 and the years ending December 31, 1995 and 1996 is
presented below:
<TABLE>
<CAPTION>
1995 1996
--------------------- ---------------------
WEIGHTED- WEIGHTED-
1994 AVERAGE AVERAGE
-------- EXERCISE EXERCISE
SHARES SHARES PRICE SHARES PRICE
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Options outstanding, beginning of period................ 373,055 353,533 $ 6.40 457,508 $ 8.35
Options granted......................................... -- 162,475 11.96 179,890 14.63
Options exercised....................................... (12,224) (47,878) 5.97 (61,701) 7.44
Options cancelled....................................... (7,298) (10,622) 9.23 (7,251) 12.71
-------- -------- --------- -------- ---------
Options outstanding, end of period...................... 353,533 457,508 $ 8.35 568,446 $ 10.36
Option price range at end of period..................... $5.00 to $5.00 to $5.00 to
$9.50 $13.50 $15.95
Option price range for exercised shares................. $5.00 to $5.00 to $5.00 to
$8.67 $9.34 $9.34
Options available for grant at end of period............ 204,949 203,096 180,457
-------- -------- --------- -------- ---------
Weighted-average fair value of options, granted during
the period............................................ $ 5.82 $ 7.14
--------- ---------
--------- ---------
</TABLE>
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS
WEIGHTED- -------------------------
AVERAGE WEIGHTED- WEIGHTED-
EXERCISABLE REMAINING AVERAGE AVERAGE
- ----------------------- NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ----------------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 5.00- 8.67.... 226,206 5.3 years $6.07 226,206 $6.07
9.50- 9.54.... 20,475 6.5 years 9.53 20,475 9.53
11.83-13.01.... 145,775 8.0 years 11.98 48,592 11.98
14.50-15.95.... 175,990 9.2 years 14.64 N/A
----------- --------- ----------- ---------
$ 5.00-15.95.... 568,446 295,273
----------- -----------
----------- -----------
</TABLE>
21
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--TAXES ON INCOME
Under FAS 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Taxes on income in the consolidated statements of income are made up of the
following components:
<TABLE>
<CAPTION>
YEAR ENDED
NINE MONTHS ENDED DECEMBER 31,
DECEMBER 31, ----------------
1994 1995 1996
------------------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $2,763 $1,950 $2,802
State............................................... 470 370 499
------- ------ ------
3,233 2,320 3,301
------- ------ ------
Deferred:
Federal............................................. (13) 19 96
State (2) 2 17
------- ------ ------
(15) 21 113
------- ------ ------
Taxes on income....................................... $3,218 $2,341 $3,414
------- ------ ------
------- ------ ------
</TABLE>
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
----- -----
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventory........................................................ $ 109 $ 172
Bad debt allowance............................................... 67 87
----- -----
Total deferred tax assets.......................................... 176 259
Deferred tax liabilities:
Property and equipment........................................... (174) (329)
Goodwill and other assets........................................ -- (37)
----- -----
Total deferred tax liabilities..................................... (174) (366)
----- -----
Net deferred tax asset (liability)................................. $ 2 $(107)
----- -----
----- -----
</TABLE>
The effective tax rate on income was different from the federal statutory
tax rate. The following summary reconciles taxes at the federal statutory tax
rate with the effective rate:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------------------
1994 1995 1996
------------------ ----------------------- -----------------------
<S> <C> <C> <C>
Taxes on income at federal statutory rate..... 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State income taxes, net of federal tax
benefit.................................. 3.8 3.8 3.9
Amortization of goodwill.................... .5 .7 .6
Non-deductible meals and entertainment...... 1.3 1.9 1.7
Other items................................. -- (4.4) (.6)
----- ----- -----
Taxes on income at effective rate............. 39.6% 36.0% 39.6%
----- ----- -----
----- ----- -----
</TABLE>
22
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the consolidated statements of cash flows, the Company
considers cash on hand and in checking, savings and money market accounts to be
cash equivalents.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------------------------------
1994 1995 1996
----------------------- ----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid for:
Income taxes........................... $ 3,186 $ 2,826 $ 3,035
Interest............................... $ 1 $ 28 $ 27
------- ------- -------
------- ------- -------
</TABLE>
Non-cash investing and financing activities:
During the years ended December 31, 1996 and 1995, and the nine-month
period ended December 31, 1994, additional paid-in capital was increased by a
reduction in income taxes payable of $168,000, $142,000, and $24,000,
respectively, arising from the exercise of stock options.
In May 1996, the Company purchased certain assets of United Special Events,
Inc. for cash consideration of approximately $1.95 million. In conjunction with
the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fair value of assets acquired.............................. $3,051
Cash paid to seller and transaction costs.................. (2,082)
Deferred consideration (Note 6)............................ (600)
-------
Liabilities assumed........................................ $ 369
-------
-------
</TABLE>
In December 1994, the Company purchased all of the assets of
Varsity/Intropa Tours for cash consideration of approximately $1.25 million. In
conjunction with the acquisition, liabilities were assumed as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Fair value of assets acquired.............................. $5,394
Cash paid to the seller and transactions costs............. (1,018)
Deferred consideration..................................... (292)
-------
Liabilities assumed........................................ $4,084
-------
-------
</TABLE>
NOTE 10--COMMITMENTS AND CONTINGENCIES
A. Leases
The Company's office facilities and warehouse space are leased under
noncancellable operating leases which expire at various times from October 1997
through November 2000. Rent expense for the years ended December 31, 1996 and
1995, and the nine-month period ended December 31, 1994 was $739,000, $684,000,
and $388,000, respectively.
23
<PAGE>
VARSITY SPIRIT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--COMMITMENTS AND CONTINGENCIES--(CONTINUED)
As of December 31, 1996, future net minimum rental payments required under
operating leases that have initial or remaining noncancellable terms in excess
of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, (IN THOUSANDS)
- ----------------------------------------------------------- --------------
<S> <C>
1997....................................................... $591
1998....................................................... 155
1999....................................................... 142
2000....................................................... 89
------
Total minimum lease payments............................... $977
------
------
</TABLE>
B. Concentration of Credit Risk
The Company earns substantially all of its revenues from sales to and
events and activities sponsored primarily by secondary schools, colleges and
universities throughout the United States. The Company generally requires
deposits for mail order sales of merchandise and for camp registrations. The
Company maintains reserves for potential losses and such losses have not
exceeded management's expectations.
C. Litigation
The Company is involved in various legal matters in the ordinary course of
its business. None of these matters are expected to have a material adverse
effect on the Company's consolidated financial statements.
D. Supplier Agreements
The Company has multi-year agreements with independent manufacturers to
produce its uniforms under which garment prices and production levels are
negotiated annually.
E. Retirement Plan
Effective January 1, 1993, the Company adopted a tax-qualified employee
benefit plan which meets the criteria of Section 401(k) of the Internal Revenue
Code. Under the Plan, participants may elect to defer from 2% to 15% of their
compensation and the Company may make discretionary contributions, as determined
annually by the Company's management, of up to 1.25% of the employees'
compensation. Each participant is fully vested at all times in their respective
contribution. Participants become fully vested in contributions made by the
Company on a graduated scale over a seven-year period. Operations were charged
with $35,000 related to this plan in the nine-month period ended December 31,
1994, $25,000 for the year ended December 31, 1995 and $27,500 for the year
ended December 31, 1996.
NOTE 11--SUBSEQUENT EVENT
On February 13, 1997, the Company's Board of Directors declared a $.055 per
share cash dividend to be paid on March 6, 1997, to shareholders of record as of
February 24, 1997.
24
<PAGE>
(b) Pro Forma Financial Information
The unaudited pro forma condensed consolidated balance sheet of Riddell as
of March 31, 1997 and the unaudited pro forma condensed consolidated statements
of operations for the year ended December 31, 1996 and the three months ended
March 31, 1997 are set forth below.
RIDDELL SPORTS INC.
Pro Forma Financial Information:
<TABLE>
<S> <C>
Introduction............................................................................................... 26
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1997.............................. 27
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.......................................... 28
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the year ended December 31, 1996..................................................................... 29
For the three months ended March 31, 1997................................................................ 30
Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations............................... 31
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
INTRODUCTION
The accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Unaudited Pro Forma Condensed Consolidated Statements of Operations have
been prepared reflecting: (i) the acquisition of Varsity Spirit Corporation
('Varsity') by Riddell (the 'Acquisition'), which will be accounted for under
the purchase method of accounting; (ii) the Offering of the Senior Notes; and
(iii) the Credit Agreement.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet presents the
pro forma financial condition of the Company as if the Acquisition and Offering
had occurred as of March 31, 1997. The Unaudited Pro Forma Condensed
Consolidated Statements of Operations for the fiscal year ended December 31,
1996 and the three months ended March 31, 1997 include the results of Riddell's
and Varsity's operations and give effect to the Acquisition and Offering as if
they had occurred on January 1, 1996.
In accordance with the purchase method of accounting, the excess of the
purchase price over fair values of the net identifiable assets and liabilities
acquired is recorded as goodwill. The carrying values of Varsity's net assets
are assumed to equal their fair values for purposes of these pro forma financial
statements, unless indicated otherwise in the Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet. These values and the resulting allocation
of the purchase price are subject to revision following the results of any
appraisals after consummation of the Acquisition. However, management does not
believe that the results of any such appraisals will yield materially different
values from the carrying values.
The unaudited pro forma financial data is presented for informational
purposes only and is not necessarily indicative of the operating results or
financial position that would have occurred had the Acquisition and Offering
been consummated at the dates indicated, nor is it necessarily indicative of
future operating results or financial position. The unaudited pro forma
condensed consolidated financial data should be read in conjunction with the
financial statements of Varsity and the related notes thereto included elsewhere
herein, and the financial statements of Riddell included in its Annual Report on
Form 10-K as of and for the year ended December 31, 1996 and its quarterly
report on Form 10-Q as of and for the three months ended March 31, 1997.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
----------------- -----------------------------
RIDDELL VARSITY ACQUISITION(A) OFFERING(B) PRO FORMA
------- ------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............................. $ 304 $ 2,077 $ (5,127)(1) $ 93,371 $ 1,131
(90,932)(2)
4,438 (3)
(3,000)(4)
Accounts receivable, trade, less allowance for
doubtful accounts.................................. 21,142 4,347
25,489
Inventories........................................... 14,620 8,642
23,262
Other current assets.................................. 6,297 7,122 2,030(1)
15,449
------- ------- -------------- ----------- ---------
Total current assets.................................... 42,363 22,188 (92,591) 93,371 65,331
Property and equipment, less accumulated depreciation... 3,421 4,167
7,588
Intangible assets and deferred charges, less accumulated
amortization.......................................... 33,645 7,856 65,453(2) 6,100 113,054
Other assets............................................ 65 1,088
1,153
------- ------- -------------- ----------- ---------
Total assets............................................ $79,494 $35,299 $ (27,138) $ 99,471 $187,126
------- ------- -------------- ----------- ---------
------- ------- -------------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt..................... $ 3,176 $ 120 $ (120)(1) $ (3,176) $ --
Accounts payable...................................... 4,049 3,589 7,638
Accrued liabilities................................... 6,843 493 (275) 7,061
Customer deposits..................................... -- 2,242 2,242
------- ------- -------------- ----------- ---------
Total current liabilities............................... 14,068 6,444 (120) (3,451) 16,941
Long-term debt, less current portion.................... 31,939 480 (480)(1) 103,241 135,180
Deferred taxes.......................................... 1,820 399
2,219
Other liabilities....................................... 3,939 --
(319) 3,620
Shareholders' equity:
Common stock.......................................... 81 47 (47)(2)
12 (3) 93
Capital in excess of par and additional paid in
capital............................................ 31,457 11,641 600 (1)
(12,241)(2) 35,883
4,426 (3)
Retained earnings (accumulated deficit)............... (3,810) 16,288 (3,097)(1)
(13,191)(2) (6,810)
(3,000)(4)
------- ------- -------------- ----------- ---------
Total shareholders' equity.............................. 27,728 27,976 (26,538)
29,166
------- ------- -------------- ----------- ---------
Total liabilities and shareholders' equity.............. $79,494 $35,299 $ (27,138) $ 99,471 $187,126
------- ------- -------------- ----------- ---------
------- ------- -------------- ----------- ---------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated
Balance Sheet.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
NOTE A. PRO FORMA ADJUSTMENTS--ACQUISITION
(1) To record option termination payments of approximately $4,877,000 and
certain bonus payments of $250,000 made by Varsity, immediately prior
to the Acquisition, net of the effect of tax benefits of $2,030,000,
and to reflect the call of outstanding debt of $600,000 and subsequent
conversion thereof into 40,080 Varsity shares.
(2) To reflect the acquisition of Varsity and the allocation of the
purchase price based upon preliminary estimates of fair values of the
assets acquired and the liabilities assumed, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Components of purchase price:
Purchase of outstanding shares (at $18.90 per share)..... $ 87,002
Estimated Acquisition related costs...................... 3,930
--------------
Total purchase price....................................... 90,932
Allocation of purchase price:
Historical book value of net assets acquired............. (25,479)
--------------
65,453
Net book value of goodwill acquired...................... 7,856
--------------
Excess of purchase price over book value of net assets
purchased (goodwill)..................................... $ 73,309
--------------
--------------
</TABLE>
(3) To reflect purchase of Riddell common stock by certain Varsity
shareholders for $4,438,000.
(4) To reflect payment by Riddell of $3,000,000 to secure stand-by bridge
financing commitment.
NOTE B. PRO FORMA ADJUSTMENTS--OFFERING
To reflect financing transactions related to the Acquisition, as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Issuance of Senior Notes................................... $115,000
Initial borrowings on Credit Agreement..................... 12,680
--------------
127,680
Riddell debt to be refinanced, including accrued
interest................................................. (28,209)
Debt issuance costs:
Senior Notes............................................. (5,290)
Credit Agreement......................................... (810)
--------------
Net cash received.......................................... $ 93,371
--------------
--------------
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------ ------------------------
RIDDELL VARSITY ACQUISITION OFFERING PRO FORMA
------------- ------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues...................................... $72,382 $88,449 $ $ $160,831
Cost of revenues.................................. 38,813 53,613 92,426
------------- ------- ---------
Gross profit...................................... 33,569 34,836 68,405
Selling, general and administrative expenses...... 25,369 26,388 1,580 (1) 52,949
150 (2)
(443)(3)
(95)(4)
Product liability expense......................... 2,484 -- 2,484
------------- ------- ----------- ---------
Income from operations............................ 5,716 8,448 (1,192) 12,972
Interest expense (income), net.................... 2,763 (166) 11,330(6) 13,927
------------- ------- ----------- -------- ---------
Income (loss) before taxes........................ 2,953 8,614 (1,192) (11,330) (955)
Income taxes...................................... 110 3,414 (154)(5) (3,370)(5) --
------------- ------- ----------- -------- ---------
Net income (loss) from continuing operations...... $ 2,843 $ 5,200 $(1,038) $ (7,960) $ (955)
------------- ------- ----------- -------- ---------
------------- ------- ----------- -------- ---------
Net income (loss) from continuing operations per
share........................................... $ 0.34 $ (0.10)
------------- ---------
------------- ---------
Weighted average common and equivalent shares
outstanding..................................... 8,427 986(7) 9,413
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------ -------------------------------------------
RIDDELL VARSITY ACQUISITION OFFERING PRO FORMA
------- ------- ------------------------ --------------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues........................... $18,575 $ 8,341 $ $ $ 26,916
Cost of revenues....................... 10,094 5,787 15,881
------- ------- ---------
Gross profit........................... 8,481 2,554 11,035
Selling, general and administrative
expenses............................. 7,207 5,455 386 (1) 12,981
38 (2)
(88)(3)
(17)(4)
Product liability expense.............. 625 -- 625
------- ------- ----------- ---------
Income (loss) from operations.......... 649 (2,901) (319) (2,571)
Interest expense (income), net......... 666 (62) 2,827 (6) 3,431
------- ------- ----------- --------------- ---------
Loss before taxes...................... (17) (2,839) (319) (2,827) (6,002)
Income taxes (credits)................. -- (1,125) (27)(5) (1,113)(5) (2,265)
------- ------- ----------- --------------- ---------
Net loss............................... $ (17) $(1,714) $ (292) $ (1,714) $ (3,737)
------- ------- ----------- --------------- ---------
------- ------- ----------- --------------- ---------
Net loss per share..................... $ (0.00) $ (0.41)
------- ---------
------- ---------
Weighted average common and equivalent
shares outstanding................... 8,068 986(7) 9,054
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Statements
of Operations.
30
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(1) Reflects the amortization expense arising from the Acquisition for goodwill
(as determined in the Pro Forma Condensed Consolidated Balance Sheet) of
$73,309 over 40 years, less amortization expense included in Varsity's
historical results for the periods, for a net adjustment of $1,580 and $386
for the year ended December 31, 1996 and the three months ended March 31,
1997, respectively.
(2) Varsity salary increase pursuant to contract entered into in conjunction
with the Acquisition.
(3) Adjustment to eliminate costs incurred by Varsity to maintain its status as
a separate public corporation including costs for maintaining a separate
board of directors, costs related to issuance of annual and quarterly
reports, and other costs related to maintaining Nasdaq listings and
shareholder records.
(4) Adjustments to reflect cost reductions for certain freight and travel
expenses incurred by Varsity or Riddell which would not have been incurred
had these expenses been administered under programs which existed during the
years within the other company.
(5) Reflects income tax effect of the pro forma adjustments.
(6) Reflects the increase in interest expense arising from the transaction due
to debt incurred to finance the purchase and net debt refinanced in
conjunction with the transaction, determined as follows:
<TABLE>
<S> <C>
Total purchase price and related costs........................ $ 90,932
Option termination payments................................... 4,877
Financing costs, including bridge costs....................... 9,100
Less proceeds generated from sale of Riddell stock............ (4,438)
--------
100,471
Senior Notes.................................................. 115,000
--------
Funds, from Offering, available to refinance existing debt.... $ 14,529
--------
--------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
-------------------- -----------------
<S> <C> <C>
Incremental Interest Expense:
Interest expense on the Senior Notes and net interest
expense on the Credit Agreement for incremental
borrowings and debt refinanced, computed using
historical rates and balances, but under revised
borrowing terms, including commitment fees, with an
estimated weighted average interest rate of 10.25%
and 10.40%, for the period ended December 31, 1996
and March 31, 1997, respectively................... $ 13,038 $ 3,139
Less historical net interest expense of existing debt
refinanced net of funds historically invested by
Varsity............................................ (2,399) (485)
Amortization of debt issue costs:
Senior Notes (over 10 years)....................... 529 132
Credit Agreement costs (over 5 years).............. 162 41
---------- -------
Incremental interest expense......................... $ 11,330 $ 2,827
---------- -------
---------- -------
</TABLE>
A 1/8% increase in the assumed weighted average interest rates would increase
pro forma interest expense by $158 and $37, respectively.
31
<PAGE>
(7) Reflects purchase of approximately 986,000 common shares by certain members
of Varsity management. The Riddell stock options to be issued to Varsity
employees have been excluded from equivalent shares as the effect would be
anti-dilutive.
32
<PAGE>
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2 -- Agreement and Plan of Merger, dated as of May 5, 1997, by and
among Riddell, Purchaser and Varsity (incorporated by reference
to Annex I to the Offer to Purchase, filed as Exhibit (a)(1) to
the Schedule 14D-1 filed by Riddell and Purchaser with the
Commission on May 12, 1997).
99.1 -- Indenture, dated as of June 19, 1997, between Riddell, certain
subsidiaries of Riddell, as Guarantors, and Marine Midland
Bank, as Trustee.
99.2 -- Registration Rights Agreement, dated as of June 19, 1997,
between Riddell, as Issuer, certain subsidiaries of Riddell, as
Guarantors, and NationsBanc Capital Markets, Inc. and First
Chicago Capital Markets, Inc., as Purchasers.
99.3 -- Credit Agreement among Riddell, as Borrower, the subsidiaries
of Riddell, as Guarantors, and the Lenders identified therein,
and NBD Bank, as Administrative Agent, and NationsBank, N.A., as
Documentation Agent, dated as of June 19, 1997.
33
<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 HEREUNTO DULY AUTHORIZED.
June 26, 1997
RIDDELL SPORTS INC.
By: /s/ DAVID GROELINGER
---------------------------------
David Groelinger
Chief Financial Officer
34
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2 -- Agreement and Plan of Merger, dated as of May 5, 1997, by and
among Riddell, Purchaser and Varsity (incorporated by reference
to Annex I to the Offer to Purchase, filed as Exhibit (a)(1) to
the Schedule 14D-1 filed by Riddell and Purchaser with the
Commission on May 12, 1997.)
99.1 -- Indenture, dated as of June 19, 1997, between Riddell, certain
subsidiaries of Riddell, as Guarantors, and Marine Midland
Bank, as Trustee.
99.2 -- Registration Rights Agreement, dated as of June 19, 1997,
between Riddell, as Issuer, certain subsidiaries of Riddell, as
Guarantors, and NationsBanc Capital Markets, Inc. and First
Chicago Capital Markets, Inc., as Purchasers.
99.3 -- Credit Agreement among Riddell, as Borrower, the subsidiaries
of Riddell, as Guarantors, and the Lenders identified therein,
and NBD Bank, as Administrative Agent, and NationsBank, N.A., as
Documentation Agent, dated as of June 19, 1997.
35
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RIDDELL SPORTS INC.
as Issuer
The Parties Listed
on Schedule I hereto
as Guarantors
10 1/2% SENIOR NOTES DUE 2007
------------------------------------
INDENTURE
Dated as of June 19, 1997
------------------------------------
MARINE MIDLAND BANK
as Trustee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1)..................................................................... 7.10
(a)(2)..................................................................... 7.10
(a)(3) .................................................................... N.A.
(a)(4)..................................................................... N.A.
(a)(5)..................................................................... 7.10
(b) ....................................................................... 7.10
(c) ....................................................................... N.A.
311 (a) ....................................................................... 7.11
(b) ....................................................................... 7.11
(c) ....................................................................... N.A.
312 (a)........................................................................ 2.05
(b)........................................................................ 11.03
(c) ....................................................................... 11.03
313 (a) ....................................................................... 7.06
(b)(2) .................................................................... 7.07
(c) ....................................................................... 7.06;11.02
(d)........................................................................ 7.06
314 (a) ....................................................................... 4.03;11.02
(c)(1) .................................................................... 11.04
(c)(2) .................................................................... 11.04
(c)(3) .................................................................... N.A.
(e) ....................................................................... 11.05
(f)........................................................................ N.A.
315 (a)........................................................................ 7.01
(b)........................................................................ 7.05,11.02
(c)........................................................................ 7.01
(d)........................................................................ 7.01
(e)........................................................................ 6.11
316 (a)(last sentence) ........................................................ 2.09
(a)(1)(A).................................................................. 6.05
(a)(1)(B).................................................................. 6.04
(a)(2)..................................................................... N.A.
(b) ....................................................................... 6.07
(c) ....................................................................... 2.12
317 (a)(1) .................................................................... 6.08
(a)(2)..................................................................... 6.09
(b) ....................................................................... 2.04
318 (a)........................................................................ 11.01
(b)........................................................................ N.A.
(c)........................................................................ 11.01
N.A. means not applicable.
</TABLE>
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions....................................................... 1
Section 1.02. Other Definitions................................................. 15
Section 1.03. Incorporation by Reference of Trust Indenture Act................. 16
Section 1.04. Rules of Construction............................................. 16
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating................................................... 17
Section 2.02. Execution and Authentication...................................... 18
Section 2.03. Registrar and Paying Agent........................................ 18
Section 2.04. Paying Agent to Hold Money in Trust............................... 19
Section 2.05. Holder Lists...................................................... 19
Section 2.06. Transfer and Exchange............................................. 19
Section 2.07. Replacement Senior Notes.......................................... 30
Section 2.08. Outstanding Senior Notes.......................................... 30
Section 2.09. Treasury Senior Notes............................................. 31
Section 2.10. Temporary Senior Notes............................................ 31
Section 2.11. Cancellation...................................................... 31
Section 2.12. Defaulted Interest................................................ 31
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee................................................ 32
Section 3.02. Selection of Senior Notes to Be Redeemed.......................... 32
Section 3.03. Notice of Redemption.............................................. 32
Section 3.04. Effect of Notice of Redemption.................................... 33
Section 3.05. Deposit of Redemption Price....................................... 33
Section 3.06. Senior Notes Redeemed in Part..................................... 33
Section 3.07. Optional Redemption............................................... 33
Section 3.08. Mandatory Redemption.............................................. 34
Section 3.09. Offer to Purchase by Application of Excess Proceeds............... 34
ARTICLE 4
COVENANTS
Section 4.01. Payment of Senior Notes........................................... 36
Section 4.02. Maintenance of Office or Agency................................... 36
Section 4.03. Reports........................................................... 37
Section 4.04. Compliance Certificate............................................ 37
Section 4.05. Taxes............................................................. 38
Section 4.06. Stay, Extension and Usury Laws.................................... 38
Section 4.07. Restricted Payments............................................... 38
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.... 41
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock........ 42
Section 4.10. Asset Sales....................................................... 44
Section 4.11. Transactions with Affiliates...................................... 45
Section 4.12. Liens............................................................. 45
Section 4.13. Line of Business.................................................. 46
Section 4.14. Corporate Existence............................................... 46
Section 4.15. Offer to Repurchase Upon Change of Control........................ 46
Section 4.16. Limitation on Issuances and Sales of Capital Stock of
Wholly Owned Restricted Subsidiaries.............................. 47
Section 4.17. Additional Subsidiary Guarantees.................................. 47
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.......................... 48
Section 5.02. Successor Corporation Substituted................................. 48
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................. 49
Section 6.02. Acceleration...................................................... 50
Section 6.03. Other Remedies.................................................... 51
Section 6.04. Waiver of Past Defaults........................................... 51
Section 6.05. Control by Majority............................................... 51
Section 6.06. Limitation on Suits............................................... 52
Section 6.07. Rights of Holders of Senior Notes to Receive Payment.............. 52
Section 6.08. Collection Suit by Trustee........................................ 52
Section 6.09. Trustee May File Proofs of Claim.................................. 53
Section 6.10. Priorities........................................................ 53
Section 6.11. Undertaking for Costs............................................. 53
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................. 54
Section 7.02. Rights of Trustee................................................. 55
Section 7.03. Individual Rights of Trustee...................................... 55
Section 7.04. Trustee's Disclaimer.............................................. 56
Section 7.05. Notice of Defaults................................................ 56
Section 7.06. Reports by Trustee to Holders of the Senior Notes................. 56
Section 7.07. Compensation and Indemnity........................................ 56
Section 7.08. Replacement of Trustee............................................ 57
Section 7.09. Successor Trustee by Merger, etc.................................. 58
Section 7.10. Eligibility; Disqualification..................................... 58
Section 7.11. Preferential Collection of Claims Against Company................. 58
Section 7.12. "Trustee" to Include Paying Agent................................. 59
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......... 59
Section 8.02. Legal Defeasance and Discharge.................................... 59
Section 8.03. Covenant Defeasance............................................... 59
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 60
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions..................... 61
Section 8.06. Repayment to Company.............................................. 62
Section 8.07. Reinstatement..................................................... 62
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Senior Notes........................ 62
Section 9.02. With Consent of Holders of Senior Notes........................... 63
Section 9.03. Compliance with Trust Indenture Act............................... 65
Section 9.04. Revocation and Effect of Consents................................. 65
Section 9.05. Notation on or Exchange of Senior Notes........................... 65
Section 9.06. Trustee to Sign Amendments, etc................................... 65
ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01. Subsidiary Guarantees............................................. 65
Section 10.02. Limitation on Guarantor Liability................................. 66
Section 10.03. Execution and Delivery of Subsidiary Guarantee.................... 67
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms................ 67
Section 10.05. Releases Following Sale of Assets................................. 68
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls...................................... 68
Section 11.02. Notices........................................................... 68
Section 11.03. Communication by Holders of Senior Notes with
Other Holders of Senior Notes..................................... 70
Section 11.04. Certificate and Opinion as to Conditions Precedent................ 70
Section 11.05. Statements Required in Certificate or Opinion..................... 70
Section 11.06. Rules by Trustee and Agents....................................... 70
Section 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders.................................................. 71
Section 11.08. Governing Law..................................................... 71
Section 11.09. No Adverse Interpretation of Other Agreements..................... 71
Section 11.10. Successors........................................................ 71
Section 11.11. Severability...................................................... 71
Section 11.12. Counterpart Originals............................................. 71
Section 11.13. Table of Contents, Headings, etc.................................. 71
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
iv
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INDENTURE dated as of June 19, 1997 between Riddell Sports Inc., a
Delaware corporation (the "Company"), the domestic subsidiaries of the Company
listed on Schedule I attached hereto, as Guarantors (the "Guarantors"), and
Marine Midland Bank, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10 1/2% Senior Notes Due 2007.
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global Senior Note substantially in the
form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Senior Notes sold in reliance on Rule
144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Senior Notes" means up to $25 million aggregate principal
amount of Senior Notes (other than the Initial Senior Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same
series as the Initial Senior Notes.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory or other current assets in the
ordinary course of business consistent with past practices (provided that
transactions governed by Section 4.15 and/or Section 5.01 shall be governed by
such provisions and not by Section 4.10), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions that have a fair market value
(as determined in good faith by the Board of
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Directors) in excess of $1.0 million. Notwithstanding the foregoing: (i) a
transfer of assets by the Company to a Guarantor or by a Guarantor to the
Company or to another Guarantor, (ii) an issuance of Equity Interests by a
Guarantor to the Company or to another Guarantor, (iii) a dividend,
distribution, Restricted Payment or Investment that is permitted by Section 4.07
and (iv) the transfer of any royalty payment by the Company or any Subsidiary as
contemplated by the MOU, and as modified by the terms of any definitive
settlement agreement negotiated thereunder (provided that the aggregate payouts
made pursuant to the definitive settlement agreement are not materially more
expensive to the Company than the terms of the MOU), shall not be deemed to be
Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company, or
any authorized committee of the Board of Directors.
"Borrowing Base" means as of any date, an amount equal to the sum of
(a) 85% of the face amount of all accounts receivable owned by the Company and
its Restricted Subsidiaries as of such date that are not more than 90 days past
due, and (b) 60% of the book value of all inventory owned by the Company and its
Subsidiaries as of such date, all calculated on a consolidated basis and in
accordance with GAAP. To the extent that information is not available as to the
amount of accounts receivable or inventory or trade payables as of a specific
date, the Company may utilize the most recent available information provided to
the lenders under the Credit Facilities for purposes of calculating the
Borrowing Base.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the full faith and credit
of the United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Keefe Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting at the
time of purchase the qualifications specified in clause (iii) above and (v)
commercial paper of a domestic issuer
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having at the time of purchase a rating of at least A-1 by Standard and Poor's
Rating Group ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's")
maturing within six months after the date of acquisition.
"Cedel" means Cedel Bank, S.A..
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principals or their Related Parties, (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any person (as defined
above), other than the Principals and their Related Parties, becomes the
beneficial owner (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of 35% or more of the Voting Stock of the Company,
(iv) the first day on which a majority of the members of the Board of Directors
of the Company are not Continuing Directors or (v) the Company consolidates
with, or merges with or into, any Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of the
Company outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding shares of such
Voting Stock of such surviving or transferee Person (immediately after giving
effect to such issuance).
"Company" means Riddell Sports Inc., and any and all successors
thereto.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, net
payments (if any) pursuant to Hedging Obligations and any deferred financing
fees incurred, and other financing fees expensed, in connection with the
acquisition of Varsity), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income,
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plus (v) any other fees or expenses expensed in connection with the acquisition
of Varsity, in each case, without duplications and on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of a Person shall be
added to Consolidated Net Income to compute Consolidated Cash Flow only to the
extent (and in the same proportion) that the Net Income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 11.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the New Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time. Indebtedness under Credit Facilities
outstanding on the date on which Senior Notes are first issued and authenticated
under this Indenture shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (i) of the definition of Permitted
Debt.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
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"Definitive Note" means a certificated Senior Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
substantially in the form of Exhibit A hereto except that such Senior Note shall
not bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Senior Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Senior Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Senior Notes mature; provided,
however, that a class of Capital Stock shall not be Disqualified Stock hereunder
solely as the result of any maturity or redemption that is conditioned upon, and
subject to, compliance with Section 4.07.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private offering of Capital Stock
(other than Disqualified Stock) of the Company.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Senior Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of this Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other
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fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations but
excluding amortization of debt issuance costs and excluding any deferred
financing fees incurred, and other financing fees expensed, in connection with
the acquisition of Varsity) and (ii) the consolidated interest of such Person
and its Restricted Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or one of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or one of its Restricted Subsidiaries (whether or not such
Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend
payments on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests (other than Disqualified Stock) of the
Company, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person and its Restricted Subsidiaries, expressed as
a decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges shall not be obligations of the referent
Person or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect as of the date of this
Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, substantially in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii)-(iii) or 2.06(f) hereof.
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"Global Note Legend" means the legend set forth in Section
2.06(g)(ii) hereof, which is required to be placed on all Global Notes issued
under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means any Subsidiary that executes a Subsidiary Guarantee
in accordance with the provisions of this Indenture, and its respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates or the value of foreign currencies purchased or received by
the Company in the ordinary course of business.
"Holder" means a Person in whose name a Senior Note is registered.
"IAI Global Note" means the global Senior Note substantially in the
form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee that will be issued in a denomination equal to
the outstanding principal amount of the Senior Notes sold to Institutional
Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations, in
each case, except any amount that constitutes an accrued expense or trade
payable, if and to the extent any of the foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall be
(i) the accreted value thereof, in the case of any Indebtedness that does not
require current payments of interest, and (ii) the principal amount thereof,
together with any interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means entities that clear through or maintain
a custodial relationship with a Participant either directly or indirectly.
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"Initial Purchaser" means each of NationsBanc Capital Markets, Inc.
and First Chicago Capital Markets, Inc.
"Initial Senior Notes" means $115,000,000 aggregate principal amount
of Senior Notes issued under this Indenture on the Issue Date.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Restricted
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of Section 4.07 hereof.
"Issue Date" means the date of this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Senior Notes for use by
such Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant
to Section 6 of the Registration Rights Agreement.
"MOU" means the Memorandum of Understanding entered into as of the
3rd day of June, 1997, by and among the Company, RHC Licensing Corporation,
Riddell, Inc., Equilink Licensing Corporation, Ridmark Corporation, MacMark
Corporation, NBD Bank N.A., MLC Partners Limited Partnership, Robert
Nederlander, Leonard Toboroff, John McConnaughy, Jr., Fredric H. Brooks,
Connecticut
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Economics Corporation, Robert Weisman, Bruce H. Levitt, as Bankruptcy Trustee of
M Holdings Corporation, Paul Swanson, as Bankruptcy Trustee of MGS Acquisition,
Inc., Official Unsecured Creditors Committee of MacGregor Sporting Goods, Inc.
and MacGregor Sports, Inc., Official Unsecured Creditors' Committee of MacGregor
Sporting Goods, Inc., M Holdings Corporation, f/k/a MacGregor Sporting Goods,
Inc., Innovative Promotions, Inc., Ernest Wood, Jr., Harry Wood, Pursuit
Athletic Footwear, Inc., and Riddell Athletic Footwear, Inc. in the form set
forth on a Schedule 11.19 of the New Credit Facility.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under the Credit
Facilities) secured by a Lien on the asset or assets that were the subject of
such Asset Sale and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain credit facility, dated as of
June 19, 1997, by and among the Company and NationsBank, N.A. and NBD Bank, as
agents and lenders, providing for up to $40.0 million of revolving credit
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, extended, modified, renewed, refunded, replaced or refinanced from time
to time.
"Non Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
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"Note Custodian" means the Trustee, as custodian with respect to the
Senior Notes in global form, or any successor entity thereto in such capacity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Senior Notes by the Company.
"Offering Memorandum" means the offering memorandum dated June 13,
1997 with respect to the Offering of the Senior Notes.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice-President of such
Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Despositary, Euroclear or Cedel,
respectively (and, with respect to the Depositary, shall include Euroclear and
Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Businesses" means (i) the lines of businesses that the
Company or any of the Guarantors were engaged in on the date of this Indenture
or that are contemplated by the Offering Memorandum, (ii) the businesses engaged
in by any acquired businesses, provided that a substantial portion of their
business at the time of acquisition was related or ancillary to the Company's
then existing lines of business, (iii) extensions of the businesses referred to
in clauses (i) and (ii), including, without limitation, new products and
services to its markets or new distribution channels, (iv) any other lines of
business or activities that are related or ancillary to the businesses referred
to in clauses (i)-(iii), and (v) unrelated lines of business that individually
are not material to the Company and the Guarantors taken as a whole.
"Permitted Investments" means (a) any Investment in the Company or in
a Guarantor, (b) any continuing 50% equity Investment in MacMark Corporation by
the Company or any Guarantor; (c) any Investment in Cash Equivalents; (d) any
Investment by the Company or any Guarantor in a Person, if as a result of such
Investment (i) such Person becomes a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Guarantor; (e) any
Investment made as a result of the receipt of
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<PAGE>
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10; (f) any acquisition of assets solely in exchange
for the issuance of Equity Interests (other than Disqualified Stock) of the
Company; and (g) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (g) that are at the time outstanding,
not to exceed $5.0 million.
"Permitted Liens" means (i) Liens on assets of the Company and its
Subsidiaries securing Indebtedness under the Credit Facilities that was
permitted by the terms of this Indenture to be incurred; provided that such
Liens shall be permitted only to the extent they cover assets securing such
Indebtedness as of the date of this Indenture; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or such Subsidiary; (iv)
Liens on property existing at the time of acquisition thereof by the Company or
any Subsidiary of the Company, provided that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure the performance of
statutory or regulatory obligations, leases, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (iv) of the third paragraph of Section 4.09
covering only the assets acquired with such Indebtedness; (vii) Liens existing
on the date of this Indenture; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $2.5
million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (x)
Liens on assets of any Guarantor to secure Senior Indebtedness of such Guarantor
that is permitted to be incurred pursuant to the terms of Indenture; (xi) Liens
on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; and (xii) Liens on Unrestricted Margin Stock.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Senior Notes, such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and is subordinated in
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<PAGE>
right of payment to, the Senior Notes on terms at least as favorable to the
Holders of Senior Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iv) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means Robert E. Nederlander, Leonard Toboroff, John
McConnaughy, Jr., David Mauer, Dan Cougill or Jeffrey G. Webb.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Senior Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 19, 1997, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Senior Notes, one or more registration rights agreements between the Company and
the other parties named on the signature pages thereof, as such agreement(s) may
be amended, modified or supplemented from time to time, relating to rights given
by the Company to the purchasers of any Additional Senior Notes that may be
issued pursuant to the provisions of this Indenture to register such Additional
Senior Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of its nominee, issued in a denomination equal to the
outstanding principal amount of the Senior Notes initially sold in reliance on
Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any spouse or
former spouse or immediate family member of such Principal, (B) the estate or
any heir of such Principal, (C) any Subsidiary of any of the Principals or any
other Related Party or (D) any trust, the beneficiaries of whom are Principals
or Related Parties.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
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<PAGE>
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a global Senior Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means any Indebtedness which by its terms is
not expressly subordinated in right of payment to the Senior Notes.
"Senior Notes" means the Company's 10 1/2% Senior Notes due 2007
issued pursuant to this Indenture.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means a subsidiary, including its
subsidiaries, which meets any of the following conditions:
(1) The Company's and its other subsidiaries' investments in and
advances to the subsidiary exceed 10 percent of the total assets of
the Company and its subsidiaries consolidated as of the end of the
most recently completed fiscal year (for a proposed business
combination to be accounted for as a pooling of interests, this
condition is also met when the number of common shares exchanged or
to be exchanged by the Company exceeds 10 percent of its total common
shares outstanding at the date the combination is initiated); or
(2) The Company's and its other subsidiaries' proportionate
share of the total assets (after intercompany eliminations) of the
subsidiary exceeds 10 percent of the total assets of the Company and
its subsidiaries consolidated as of the end of the most recently
completed fiscal year; or
(3) The Company's and its other subsidiaries' equity in the
income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in
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<PAGE>
accounting principle of the subsidiary exceeds 10 percent of such
income of the Company and its subsidiaries consolidated for the most
recently completed fiscal year. For purposes of this definition under
this Indenture, a "significant subsidiary" shall be determined in
accordance with the Computational Senior Note Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such
Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Senior Notes,
executed pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the Trust Indenture Act of 1939; provided, however, that in the event the
Trust Indenture Act of 1939 is amended after such date, then "TIA" means, to the
extent required by such amendment, the Trust Indenture Act of 1939 as so
amended.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note
substantially in the form of Exhibit A attached hereto that bears the Global
Note Legend and that has the "Schedule of Exchanges of Interests in the Global
Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Senior Notes
that do not bear the Private Placement Legend.
"Unrestricted Margin Stock" means the capital stock of Varsity that
constitutes "margin stock" (as defined in Regulation G of the Board of Governors
of the Federal Reserve System as from time to time in effect), if, and to the
extent that the value of such margin stock exceeds 25% of the total assets of
the Company and its Subsidiaries, subject to the restrictions contained in
Sections 4.10 and 4.12 hereof; provided that it is understood that upon
completion of the merger pursuant to the Varsity Merger Documents there shall be
no Unrestricted Margin Stock outstanding.
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"Unrestricted Subsidiary" means any Subsidiary (other than Riddell,
Inc. or Varsity or any successor to either of them) that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a resolution of the
Board of Directors but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company (as determined in good faith by the Board
of Directors); (c) is a Person with respect to which neither the Company nor any
of its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company or any of
its Restricted Subsidiaries and has at least one executive officer that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Varsity" shall mean Varsity Spirit Corporation, an Illinois
corporation or its successors.
"Varsity Merger Documents" means the Agreement and Plan of Merger by
and among Riddell Sports Inc., Cheer Acquisition Corp. and Varsity Spirit
Corporation, dated as of May 5, 1997, and the several Stock Purchase Agreements,
dated as of May 5, 1997, between Riddell Sports Inc. and certain employees of
Varsity Spirit Corporation, in each case as amended from to time.
"Voting Stock" means, with respect to any Person, the Capital Stock
of such Person that is at the time entitled to vote in the election of the board
of directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"........................................ 4.11
"Asset Sale Offer"............................................. 3.09
"Authentication Order"......................................... 2.02
"Change of Control Offer"...................................... 4.15
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
"Change of Control Payment".................................... 4.15
"Change of Control Payment Date"............................... 4.15
"Covenant Defeasance".......................................... 8.03
"Event of Default"............................................. 6.01
"Excess Proceeds".............................................. 4.10
"incur"........................................................ 4.09
"Legal Defeasance" ............................................ 8.02
"Offer Amount"................................................. 3.09
"Offer Period"................................................. 3.09
"Paying Agent"................................................. 2.03
"Payment Default".............................................. 6.01
"Permitted Debt"............................................... 4.09
"Purchase Date"................................................ 3.09
"Registrar".................................................... 2.03
"Replacement Assets"........................................... 4.10
"Restricted Payments".......................................... 4.07
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Senior Notes;
"indenture security Holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Senior Notes and the Subsidiary Guarantees means the
Company and the Guarantors, respectively, and any successor obligor upon the
Senior Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Senior Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Subsidiary
Guarantees shall be substantially in the form of Exhibit F attached hereto, the
terms of which are incorporated in and made a part of this Indenture. The Senior
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Senior Note shall be dated the date of its
authentication. The Senior Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Senior Note conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
Senior Notes issued in global form shall be substantially in the form
of Exhibit A attached hereto (including the Global Note Legend affixed thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Senior Notes issued in definitive form shall be substantially in the
form of Exhibit A attached hereto (but without the Global Note Legend affixed
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Senior Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Senior Notes from time
to time endorsed thereon and that the aggregate principal amount of outstanding
Senior Notes represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges and redemptions. Any endorsement of a
Global Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Senior Notes represented thereby shall be made
by the Trustee or the Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and
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<PAGE>
"Customer Handbook" of Cedel Bank shall be applicable to transfers of beneficial
interests in the Regulation S Global Note that is held by the agent members
through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Senior Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Senior Notes
and may be in facsimile form.
If an Officer whose signature is on a Senior Note no longer holds
that office at the time a Senior Note is authenticated, the Senior Note shall
nevertheless be valid.
A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Senior Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Senior
Notes. The aggregate principal amount of Senior Notes outstanding at any time
may not exceed $140,000,000 except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. An authenticating agent may authenticate
Senior Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Senior Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Senior Notes may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global Notes.
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<PAGE>
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Senior
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Senior Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Senior Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged by
the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 90 days after the date of such notice from the Depositary or (ii)
the Company in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a written
notice to such effect to the Trustee. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Senior Note authenticated and delivered in exchange for, or
in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06,
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Senior Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in
19
<PAGE>
the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that beneficial interests in the IAI Global Note may not under any
circumstances be transferred to a Person who takes delivery thereof in the
form of a beneficial interest in the IAI Global Note and, provided
further, that prior to the expiration of the Restricted Period transfers
of beneficial interests in the Regulation S Global Note may not be made to
a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred only to Persons who take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the Registrar
to effect the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note
to a Person who takes delivery thereof in the form of a beneficial
interest in the same Global Note), the transferor of such beneficial
interest must deliver to the Registrar either (A) (1) a written order from
a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global
Note in an amount equal to the beneficial interest to be transferred or
exchanged and (2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a Participant
or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a
Definitive Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given by the Depositary to
the Registrar containing information regarding the Person in whose name
such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above. Upon an Exchange Offer by the Company
in accordance with Section 2.06(f) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted
Global Notes. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Notes contained in this
Indenture, the Senior Notes and otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in the 144A Global Note or the Regulation S Global
Note if the transfer complies with the requirements of clause (ii) above
and the Registrar receives the following:
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(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D),
an Opinion of Counsel in form reasonably acceptable to the Registrar
to the effect that such exchange or transfer is in
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compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of beneficial interests
transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) If any holder of a beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note, a certificate from such holder in the form of
Exhibit C hereto, including, subject to Section 2.06(c)(ii) below,
the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(2) thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
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(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Senior
Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
(ii) Notwithstanding 2.06(c)(i) hereof, a holder of a beneficial
interest in a Restricted Global Note may exchange such beneficial interest
for an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(b) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D),
an Opinion of Counsel in form reasonably acceptable to the Company,
to the effect that such exchange or transfer is in
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compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities Act.
(iii) If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Note, then, upon satisfaction
of the conditions set forth in Section 2.06(b)(ii) hereof, the Trustee
shall cause the aggregate principal amount of the applicable Global Note
to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to
the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Senior Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant to
this Section 2.06(c)(iii) shall not bear the Private Placement Legend. A
beneficial interest in an Unrestricted Global Note cannot be exchanged for
a Definitive Note bearing the Private Placement Legend or transferred to a
Person who takes delivery thereof in the form of a Definitive Note bearing
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) If any Holder of a Restricted Definitive Note proposes to
exchange such Senior Note for a beneficial interest in a Restricted Global
Note or to transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Senior Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Definitive Note is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than
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those listed in subparagraphs (B) through (D) above, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Definitive Note is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such Definitive Note is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cancel the Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of clause (B)
above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) A Holder of a Restricted Definitive Note may exchange such
Senior Note for a beneficial interest in an Unrestricted Global Note or
transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Senior Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in the form
of Exhibit C hereto, including the certifications in item (1)(c)
thereof;
(2) if the Holder of such Definitive Notes proposes to
transfer such Senior Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D),
an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein
and in the
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Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Definitive Notes are
being exchanged or transferred in compliance with any applicable blue
sky securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) A Holder of an Unrestricted Definitive Note may exchange such
Senior Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) Restricted Definitive Notes may be transferred to and registered
in the name of Persons who take delivery thereof if the Registrar receives
the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
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(ii) Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Senior Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof;
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Senior Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D),
an Opinion of Counsel in form reasonably acceptable to the Company to
the effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein
and in the Private Placement Legend are not required in order to
maintain compliance with the Securities Act, and such Restricted
Definitive Note is being exchanged or transferred in compliance with
any applicable blue sky securities laws of any State of the United
States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such
Senior Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register such a
transfer, the Registrar shall register the Unrestricted Definitive Notes
pursuant to the instructions from the Holder thereof. Unrestricted
Definitive Notes cannot be exchanged for or transferred to Persons who
take delivery thereof in the form of a Restricted Definitive Note.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letter of Transmittal that they are not (x)
broker-dealers, (y) participating in the distribution of the Exchange Notes or
(z) affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii)
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Definitive Notes in an aggregate principal amount equal to the principal amount
of the Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Senior Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Restricted Global Note and each Definitive Note (and all Senior Notes
issued in exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THIS SENIOR NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SENIOR NOTE MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH
EVIDENCE IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS
SENIOR NOTE IS ISSUED ) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii)-(iii),
(d)(ii)-(iii), (e)(ii)-(iii) or (f) to this Section 2.06 (and all
Senior Notes issued in exchange therefor or substitution thereof)
shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY."
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(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Senior Notes represented by such Global Note
shall be reduced accordingly and an endorsement shall be made on such Global
Note, by the Trustee or by the Depositary at the direction of the Trustee, to
reflect such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note, by
the Trustee or by the Depositary at the direction of the Trustee, to reflect
such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Senior Note selected for redemption in whole or in part,
except the unredeemed portion of any Senior Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Senior Notes during a period beginning at
the opening of business 15 days before the day of any selection of Senior
Notes for redemption under Section 3.02 hereof and ending at the close of
business on the day of selection, (B) to register the transfer of or to
exchange any Senior Note so selected for redemption in whole or in part,
except the unredeemed portion of any Senior Note being redeemed in part or
(C) to register the transfer of or to exchange a Senior Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Senior Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Senior Note is registered as the absolute
owner of such Senior Note for the purpose of receiving payment of
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principal of and interest on such Senior Notes and for all other purposes,
and none of the Trustee, any Agent or the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT SENIOR NOTES.
If any mutilated Senior Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Senior Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Senior Note
is replaced. The Company may charge for its expenses in replacing a Senior Note.
Every replacement Senior Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Senior Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING SENIOR NOTES.
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Senior Note does not cease to be outstanding because the Company or an Affiliate
of the Company holds the Senior Note.
If a Senior Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Senior Notes payable on that date, then on and after that date
such Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
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SECTION 2.09. TREASURY SENIOR NOTES.
In determining whether the Holders of the required principal amount
of Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Senior Notes that a Responsible Officer of
the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY SENIOR NOTES.
Until certificates representing the Senior Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Senior Notes upon a written order of the Company signed by two Officers of the
Company. Temporary Senior Notes shall be substantially in the form of
certificated Senior Notes but may have variations that the Company considers
appropriate for temporary Senior Notes and as shall be reasonably acceptable to
the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate Definitive Notes in exchange for temporary Senior
Notes. Until so exchanged, Holders of temporary Senior Notes shall be entitled
to all of the benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Senior Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy canceled Senior Notes (subject to the record retention requirement
of the Exchange Act), unless the Company directs the Trustee to return such
Senior Notes to the Company. Certification of the destruction of all canceled
Senior Notes shall be delivered to the Company. The Company may not issue new
Senior Notes to replace Senior Notes that it has paid or that have been
delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Senior Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Senior Notes and in Section 4.01 hereof. The Company shall notify the
Trustee in writing of the amount of defaulted interest proposed to be paid on
each Senior Note and the date of the proposed payment. The Company shall fix or
cause to be fixed each such special record date and payment date, provided that
no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Senior Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Senior Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF SENIOR NOTES TO BE REDEEMED.
If less than all of the Senior Notes are to be redeemed or purchased
in an offer to purchase at any time, selection of Senior Notes for redemption or
purchase shall be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which the Senior Notes are
listed, or, if the Senior Notes are not so listed, on a pro rata basis or
(inasmuch as a precise pro rata selection may not be possible in light of the
last clause of this Section 3.02) by such other method as the Trustee shall deem
fair and appropriate; provided that no Senior Notes of $1,000 or less shall be
redeemed or purchased in part.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Senior Notes are to be redeemed at its registered address.
The notice shall identify the Senior Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date upon surrender of such Senior Note, a new Senior Note or
Senior Notes in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue
on and after the redemption date;
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(g) the paragraph of the Senior Notes and/or Section of this
Indenture pursuant to which the Senior Notes called for redemption are
being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Senior Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date (unless the Trustee consents to a shorter notice period), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Senior Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not
be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to the redemption date, the Company shall deposit with
the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Senior Notes to be redeemed on that date.
The Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Senior Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Senior Notes or the portions of Senior Notes called for redemption. If a
Senior Note is redeemed on or after an interest record date but on or prior to
the related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Senior Note was registered at the close of
business on such record date. If any Senior Note called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Senior Notes and in Section 4.01 hereof.
SECTION 3.06. SENIOR NOTES REDEEMED IN PART.
Upon surrender of a Senior Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Senior Notes shall not be redeemable at the Company's option prior to July 15,
2002. Thereafter, the Senior Notes shall be subject
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to redemption at any time at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on July 15 of the
years indicated below:
Year Percentage
---- ----------
2002.............................................. 105.25%
2003.............................................. 103.50%
2004.............................................. 101.75%
2005 and thereafter............................... 100.00%
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time on or before July 15, 2000, the Company may (but shall not
have the obligation to) redeem, on one or more occasions, up to 35% of the
aggregate principal amount of the Senior Notes at a redemption price equal to
110 1/2% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that at least $75.0 million
aggregate principal amount of Senior Notes remain outstanding immediately after
the occurrence of such redemption; and provided further, that such redemption
shall occur within 45 days of the date of the closing of such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.15 hereof, the
Company shall not be required to make mandatory redemption payments or sinking
fund payments with respect to the Senior Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Senior Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Senior Notes required
to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less
than the Offer Amount has been tendered, all Senior Notes tendered in response
to the Asset Sale Offer. Payment for any Senior Notes so purchased shall be made
in the same manner as interest payments are made.
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If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Senior Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Senior Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders,
with a copy to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Senior Notes pursuant to
the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer
shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant
to an Asset Sale Offer may only elect to have all of such Senior Note
purchased and may not elect to have only a portion of such Senior Note
purchased;
(f) that Holders electing to have a Senior Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Senior
Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Senior Note completed, or transfer by
book-entry transfer, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at
least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Senior Note the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Senior Note purchased;
(h) that, if the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Senior Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Senior Notes in denominations of $1,000, or integral multiples thereof,
shall be purchased); and
(i) that Holders whose Senior Notes were purchased only in part shall
be issued new Senior Notes equal in principal amount to the unpurchased
portion of the Senior Notes surrendered (or transferred by book-entry
transfer).
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On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Senior Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered, all Senior
Notes tendered, and shall deliver to the Trustee an Officers' Certificate
stating that such Senior Notes or portions thereof were accepted for payment by
the Company in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Senior Notes
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Senior Note, and the Trustee, upon written
request from the Company, shall authenticate and mail or deliver such new Senior
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Senior Note surrendered. Any Senior Note not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF SENIOR NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Senior Notes on the dates and in the manner
provided in the Senior Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Senior
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
Affiliate of the Trustee, Registrar or co-registrar) where Senior Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Senior Notes and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
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presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Senior Notes are outstanding, the Company shall furnish to the
Holders of Senior Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and
10-K if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries (showing in reasonable detail, either on the face
of the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports.
(b) Whether or not required by the rules and regulations of the SEC,
at any time after the Company files the Exchange Offer Registration Statement,
the Company shall file a copy of all such information and reports with the SEC
for public availability (unless the SEC shall not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request.
(c) The Company and the Guarantors have agreed that, for so long as
any Senior Notes remain outstanding, they shall furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (with respect to each
Guarantor, to the extent required under the TIA) shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this
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Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Senior Notes
is prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Senior Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and each of
the Company and the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of
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the Company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company), provided that each
Restricted Subsidiary of the Company will be permitted to declare and pay
dividends to the holders of such Restricted Subsidiary's common Equity Interests
on a pro rata basis; (ii) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company, any
Restricted Subsidiary of the Company or any Affiliate of the Company (other than
any such Equity Interests owned by the Company or any Restricted Subsidiary of
the Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value, any Indebtedness that is
subordinated to the Senior Notes, except (x) a payment of interest or principal
at Stated Maturity or (y) pursuant to a change of control provision applicable
to such subordinated Indebtedness, provided that the Company has complied with
the terms of Section 4.15 hereof and has paid, or has made adequate provision in
the reasonable judgment of the Board of Directors for the payment of, the Senior
Notes that have been or may be tendered in response to a Change of Control
Offer; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (including all Restricted Payments permitted by
the next succeeding paragraph but excluding Restricted Payments permitted by
clauses (ii), (iii) and (vi) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus (ii) 100%
of the aggregate net cash proceeds received by the Company from the issue or
sale since the date of this Indenture of Equity Interests of the Company (other
than Disqualified Stock) or of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent that any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment and (C) the amount resulting from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (in each case, such amount
to be valued as provided in the second succeeding paragraph) not to exceed the
amount of Investments
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previously made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary and which was treated as a Restricted Payment under this Indenture.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of, other Equity
Interests of the Company (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any member of the Company's (or any of its Restricted Subsidiaries')
management, employees or consultants pursuant to any management, employee or
consultant equity subscription agreement or stock option agreement; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $500,000 in any twelve-month period
and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction; (v) cash payments in lieu of fractional
shares issuable as dividends on preferred securities of the Company or any of
its Restricted Subsidiaries; provided that such cash payments shall not exceed
$50,000 in the aggregate in any twelve-month period and no Default or Event of
Default shall have occurred and be continuing immediately after such
transaction; and (vi) payments pursuant to the Varsity Merger Documents.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by Riddell, Inc. and
Varsity be transferred to or held by an Unrestricted Subsidiary. For purposes of
making such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments under
the first paragraph of this Section 4.07. All such outstanding Investments shall
be deemed to constitute Investments in an amount equal to the greatest of (x)
the net book value of such Investments at the time of such designation and (y)
the fair market value of such Investments at the time of such designation. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the provisions of Section 4.07. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness
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of such Unrestricted Subsidiary and such designation shall only be permitted if
(i) such Indebtedness is permitted under Section 4.09 hereof calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would be
in existence following such designation.
In computing the Consolidated Net Income of the Company under the
foregoing clause (c)(i), (i) the Company may use audited financial statements
for the portions of the relevant period for which audited financial statements
are available on the date of determination and unaudited financial statements
and other current financial data based on the books and records of the Company
for the remaining portion of such period and (ii) the Company shall be permitted
to rely in good faith on the financial statements and other financial data
derived from its books and records that are available on the date of
determination. If the Company makes a Restricted Payment that, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of this Indenture, such
Restricted Payment shall be deemed to have been made in compliance with this
Indenture notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Consolidated Net Income of the Company
for any period.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $5.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 hereof were computed, together with a copy of any fairness opinion or
appraisal required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of this Indenture, (b) the New Credit
Facility as in effect as of the date of this Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Facility as in effect on the date of this Indenture, (c) this Indenture and the
Senior Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
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acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (f) by reason of customary non-assignment provisions in leases,
licenses, encumbrances, contracts or similar assets entered into or acquired in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced or (i) restrictions contained in
agreements for the sale or disposition of assets or of all of the capital stock
of Subsidiaries that are otherwise in compliance with the terms of this
Indenture to the extent such agreements contain restrictions with respect to
assets or the Subsidiary sold or disposed of thereunder.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock (except that a Subsidiary of
the Company may issue preferred stock to the Company or to any Guarantor);
provided, however, that the Company or the Guarantors may incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1, if such
incurrence or issuance is on or prior to September 30, 1999, or 2.25 to 1, if
such incurrence or issuance is after September 30, 1999, in each case,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The Company shall not incur any Indebtedness that is contractually
subordinated to any other Indebtedness of the Company unless such Indebtedness
is also contractually subordinated to the Senior Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall be
deemed to be contractually subordinated to any other Indebtedness of the Company
solely by virtue of being unsecured.
The provisions of the first paragraph of this Section 4.09 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company and the Guarantors of Indebtedness
(including letters of credit) pursuant to the Credit Facilities (with letters of
credit being deemed to have a principal amount equal to the maximum potential
liability of the Company and the Guarantors thereunder) outstanding under all
Credit Facilities after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refinance or replace any
Indebtedness incurred pursuant to this clause (i), does not exceed the greater
of (a) $40.0 million or (b) the amount of the Borrowing Base minus Indebtedness
incurred pursuant to clause (iv) of this Section 4.09;
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(ii) the incurrence by the Company and the Guarantors of the Existing
Indebtedness;
(iii) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Senior Notes (other than any Additional Senior Notes) and the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of the Guarantors of
Indebtedness in an aggregate principal amount not to exceed $3.0 million at any
time outstanding (x) incurred in connection with the settlement of, or the
payment of any judgment with respect to, any outstanding litigation in existence
as of the date of this Indenture, which may include the payment of legal fees
and expenses relating to such litigation, or (y) represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used in the
business of the Company or such Guarantor; provided, however, that any
indebtedness incurred pursuant to clause (x) shall have been incurred no later
than 18 months after the date of this Indenture.
(v) the incurrence by the Company or any of the Guarantors of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used
to refund, refinance or replace Indebtedness that was permitted by this
Indenture to be incurred;
(vi) the incurrence by the Company or any of the Guarantors of
intercompany Indebtedness between or among the Company and any of the
Guarantors; provided, however, that (A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a Person
other than the Company or a Guarantor and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Guarantor
shall be deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Guarantor, as the case may be;
(vii) the incurrence by the Company or any of the Guarantors of Hedging
Obligations that are incurred for the purpose of fixing or hedging currency
exchange risk or interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be outstanding;
(viii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company;
(ix) Indebtedness incurred in respect of performance, surety and
similar bonds provided by the Company in the ordinary course of business, and
refinancings thereof;
(x) Indebtedness arising from guarantees of Indebtedness of the Company
or any Subsidiary or other agreements of the Company or a Subsidiary providing
for indemnification, adjustment of purchase price or similar obligations, in
each case, incurred or assumed in connection with the disposition of any
business, assets or Subsidiary, other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition, provided that the
maximum aggregate liability in respect of all such Indebtedness shall at no time
exceed the gross proceeds actually received by the Company and its Subsidiaries
in connection with such disposition;
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(xi) the guarantee by any of the Guarantors of Indebtedness of the
Company or another Guarantor that was permitted to be incurred under this
Indenture; and
(xii) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09 and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Accrual of interest and the accretion of
accreted value shall not be deemed to be an incurrence of Indebtedness for
purposes of this Section 4.09.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) for any Asset Sale other than an Asset Sale of
Unrestricted Margin Stock, at least 75% of the consideration therefor received
by the Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet), of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Senior Notes or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale other than an Asset Sale of Unrestricted Margin Stock, the Company may
apply such Net Proceeds, at its option, (a) to permanently reduce Indebtedness
under the Credit Facilities (and correspondingly reduce commitments thereunder)
or to permanently reduce other Senior Indebtedness of the Company or any
Guarantor or (b) to the acquisition of a controlling interest in a Permitted
Business, the making of a capital expenditure or the acquisition of other
long-term assets (collectively "Replacement Assets"). Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit Indebtedness or otherwise invest such Net Proceeds in any
manner that is not prohibited by this Indenture. Any Net Proceeds from Asset
Sales, other than an Asset Sale of Unrestricted Margin Stock, that are not
applied or invested as provided in the first sentence of this paragraph shall be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company shall be required to make an Asset
Sale Offer to all Holders of Senior Notes and Additional Senior Notes to
purchase the maximum principal amount of Senior Notes and Additional Senior
Notes that may be
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purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in Section 3.09 of this Indenture. To the extent
that the aggregate amount of Senior Notes and Additional Senior Notes tendered
pursuant to an Asset Sale Offer is less than or equal to the Excess Proceeds,
the Company (or such Subsidiary) may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Senior Notes
and Additional Senior Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Senior Notes and Additional Senior
Notes to be purchased on a pro rata basis or (inasmuch as a precise pro rata
selection may not be possible under the Indenture) by such other method as the
Trustee shall deem fair and appropriate. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $500,000, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that (w) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries consistent with the past practice of the
Company or such Restricted Subsidiary, or any employee benefit plan available to
employees or senior executives of the Company or any Restricted Subsidiary
generally, in each case in the ordinary course of business, (x) transactions
between or among the Company and/or its Restricted Subsidiaries, (y) dividends,
distributions, Restricted Payments and Investments that are permitted by Section
4.07 hereof and (z) any transactions pursuant to the Varsity Merger Documents,
in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
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SECTION 4.13. LINE OF BUSINESS.
The Company shall, and shall cause the Guarantors to, engage
only in Permitted Businesses.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Senior Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Senior
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Senior Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
date of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes on the date specified in such notice, which date
shall be no earlier than 30 days and no later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by this Indenture and described in such notice. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Senior Notes
as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Senior Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee shall promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note shall be in a principal amount of
$1,000 or an integral multiple thereof. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
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(c) The Change of Control provisions described in subsections (a) and
(b) of this Section 4.15 shall be applicable whether or not any other provisions
of this Indenture are applicable.
(d) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Senior Notes validly tendered and not withdrawn under
such Change of Control Offer.
SECTION 4.16. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Capital Stock of any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Capital Stock of such Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Guarantor.
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES
If the Company or any of its Subsidiaries shall acquire or create
another Subsidiary after the date of this Indenture, then such newly acquired or
created Subsidiary shall execute a Subsidiary Guarantee in the form of a
Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the
terms of this Indenture, except for (i) all Subsidiaries that have properly been
designated as Unrestricted Subsidiaries in accordance with this Indenture for so
long as they continue to constitute Unrestricted Subsidiaries and (ii) all
Subsidiaries organized outside of the United States and its territories. The
form of such Subsidiary Guarantee is attached as Exhibit F hereto.
SECTION 4.18. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Senior Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Senior Notes unless such consideration is offered to be
paid or is paid to all Holders of the Senior Notes that consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
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ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Senior
Notes and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; (iv) except in the case of a merger of
the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made will, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09 hereof and (v) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, sale, assignment, transfer, lease, conveyance or
other disposition and such supplemental indenture complies with this Article and
that all conditions precedent herein provided for relating to such transaction
have been complied with.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Senior Notes except in
the case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Senior Notes;
(b) the Company defaults in payment when due of the principal of or
premium, if any, on the Senior Notes;
(c) the Company fails to comply with Sections 4.07, 4.09, 4.10 or 4.15;
(d) the Company fails for 60 days after notice to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% of the
Senior Notes (including Additional Senior Notes, if any) voting as a single
class, then outstanding to comply with any of its other agreements in this
Indenture or the Senior Notes;
(e) there is a default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) the Company or any of its Restricted Subsidiaries fails to pay
final judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(g) the Company or any of its Significant Restricted Subsidiaries or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Restricted Subsidiary pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
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(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Significant Restricted Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its
Significant Restricted Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary or for all or substantially
all of the property of the Company or any of its Significant
Restricted Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Restricted
Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Restricted Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Restricted Subsidiary;
and the order or decree remains unstayed and in effect for 60
consecutive days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding
Senior Notes and Additional Senior Notes, if any (voting as a single class), may
declare all the Senior Notes to be due and payable immediately, by written
notice to the Company (and to the Trustee if given by the Holders).
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Restricted Subsidiaries or any group of Subsidiaries that, taken as
a whole, would constitute a Significant Restricted Subsidiary, all outstanding
Senior Notes shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Senior Notes by written notice to the Trustee may on behalf of all
of the Holders rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default (except nonpayment of principal, interest or premium that has become due
solely because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after July 15, 2002 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Senior Notes pursuant to Section 3.07 hereof, then, upon acceleration of the
Senior Notes, an equivalent premium shall also become and be immediately due and
payable, to the extent permitted by law, anything in this Indenture or in the
Senior Notes to the contrary notwithstanding. If an Event of Default occurs
prior to July 15, 2002 by reason of any willful action (or inaction) taken (or
not taken) by or on behalf
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of the Company with the intention of avoiding the prohibition on redemption of
the Senior Notes prior to such date, then, upon acceleration of the Senior
Notes, an additional premium shall also become and be immediately due and
payable to the extent permitted by law in an amount, for each of the years
beginning on July 15 of the years set forth below, as set forth below:
Year Percentage
---- ----------
1997...................................... 113.50%
1998...................................... 112.25%
1999...................................... 110.50%
2000...................................... 108.75%
2001...................................... 107.00%
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Senior Notes or to enforce the performance of any
provision of the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Senior Notes or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder of a Senior Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Senior Notes (including any Additional Senior Notes) by
notice to the Trustee may on behalf of the Holders of all of the Senior Notes
waive an existing Default or Event of Default and its consequences hereunder,
except a continuing Default or Event of Default in the payment of the principal
of, premium and Liquidated Damages, if any, or interest on, the Senior Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Senior Notes may rescind an acceleration and its consequences, including any
related payment default that resulted from such acceleration). Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Senior Notes or that may
involve the Trustee in personal liability.
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Notwithstanding any provision to the contrary in this Indenture, the Trustee
shall not be obligated to take any action with respect to the provisions of the
last paragraph of Section 6.02 hereof unless directed to do so pursuant to this
Section 6.05.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Senior Note may pursue a remedy with respect to this
Indenture or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes offer
and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the rights of
another Holder of a Senior Note or to obtain a preference or priority over
another Holder of a Senior Note.
SECTION 6.07. RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Senior Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Senior Note, on or after the
respective due dates expressed in the Senior Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Senior Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Senior Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Senior
Notes or the rights of any Holder, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid on the
Senior Notes for principal, premium and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Senior Notes for principal, premium and
Liquidated Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in
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its discretion may assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in the suit, having due regard to the merits
and good faith of the claims or defenses made by the party litigant. This
Section does not apply to a suit by the Trustee, a suit by a Holder of a Senior
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of the rights or powers
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vested in it by this Indenture at the request or direction of any of the Holders
pursuant to the provisions of this Indenture, including, without limitation, the
provisions of Section 6.05 hereof, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or documents, but the Trustee, in its discretion may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company or any Guarantor, personally or by agent or attorney.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights
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it would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Notes, it shall
not be accountable for the Company's use of the proceeds from the Senior Notes
or any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Senior Notes or any other document in connection with the sale
of the Senior Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Senior Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Senior Note, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of the
Senior Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Senior Notes remain outstanding,
the Trustee shall mail to the Holders of the Senior Notes a brief report dated
as of such reporting date that complies with TIA ss. 313(a) (but if no event
described in TIA ss. 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Senior Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Senior Notes are listed in accordance with TIA ss.
313(d). The Company shall promptly notify the Trustee when the Senior Notes are
listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
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The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other Person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the resignation or removal of the Trustee and the satisfaction and discharge of
this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Senior Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Senior
Notes of a majority in principal amount of the then outstanding Senior Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
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If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Senior Notes of at least 10% in principal amount of the then
outstanding Senior Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Senior Note
who has been a Holder of a Senior Note for at least six months, fails to comply
with Section 7.10, such Holder of a Senior Note may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Senior Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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Section 7.12. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 7, shall in such case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 7, in place of the Trustee.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Senior Notes
upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Senior Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Senior Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Senior Notes
when such payments are due, (b) the Company's obligations with respect to such
Senior Notes under Article 2 and Section 4.02 hereof, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.03, 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 5.01(iv) hereof with respect to the
outstanding Senior Notes on and after the date the conditions set forth in
Section 8.04 below are satisfied (hereinafter, "Covenant Defeasance"), and the
Senior Notes shall thereafter be deemed not "outstanding" for the purposes of
any
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direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Senior Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Senior Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Senior Notes shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(d) through 6.01(f) hereof shall not constitute Events of
Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Senior Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Senior Notes, cash in
U.S. dollars, non-callable Government Securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest and Liquidated
Damages on the outstanding Senior Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company
must specify whether the Senior Notes are being defeased to maturity
or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the
outstanding Senior Notes shall not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and
shall be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Company shall have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Senior Notes shall not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and shall be subject to federal income tax
on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not
occurred;
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(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or
a portion of the proceeds of which will be used to defease the Senior
Notes pursuant to this Article Eight concurrently with such
incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is
concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under,
any material agreement or instrument (other than this Indenture) to
which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that on the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Senior Notes and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Senior Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Senior
Notes.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered
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to the Trustee (which may be the opinion delivered under Section 8.04(a)
hereof), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Senior Note and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Senior Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Senior
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Senior Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Senior Notes to receive such payment from
the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Senior Notes without the consent of any Holder of a
Senior Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
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(c) to provide for the assumption of the Company's or a Guarantor's
obligations to Holders of Senior Notes in the case of a merger or
consolidation pursuant to Article 5 or Article 10 hereof;
(d) to provide for the issuance of Additional Senior Notes in
accordance with the limitations set forth in this Indenture on the Issue
Date;
(e) to make any change that would provide any additional rights or
benefits to the Holders of Senior Notes or that does not adversely affect
the legal rights under this Indenture of any such Holder;
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the Trust Indenture
Act; or
(g) to allow any Guarantor to execute a supplemental indenture and/or
a Subsidiary Guarantee with respect to the Senior Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF SENIOR NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof) the Subsidiary Guarantees and the Senior Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Senior Notes (including Additional Senior Notes, if any)
then outstanding voting as a single class (including, without limitation,
consents obtained in connection with a purchase of or a tender offer or exchange
offer for the Senior Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Senior
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture, the Subsidiary
Guarantees or the Senior Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Senior Notes (including
Additional Senior Notes, if any) voting as a single class (including consents
obtained in connection with a tender offer or exchange offer for the Senior
Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Senior Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.02 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or
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otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Senior
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Senior Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Senior Notes
(including Additional Senior Notes, if any) then outstanding voting as a single
class may waive compliance in a particular instance by the Company with any
provision of this Indenture or the Senior Notes. However, without the consent of
each Holder affected, an amendment or waiver may not (with respect to any Senior
Notes held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Note or alter the provisions with respect to the redemption of
the Senior Notes (other than provisions relating to Section 4.10 or
4.15 hereof);
(c) reduce the rate of or change the time for payment of
interest on any Senior Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Senior Notes
(except a rescission of acceleration of the Senior Notes by the
Holders of at least a majority in aggregate principal amount of the
Senior Notes (including Additional Senior Notes, if any) and a waiver
of the payment default that resulted from such acceleration);
(e) make any Senior Note payable in money other than that
stated in the Senior Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Senior Notes
to receive payments of principal of or premium, if any, or interest
on the Senior Notes;
(g) waive a redemption payment with respect to any Senior Note
(other than a payment required by Section 4.10 or 4.15 hereof);
(h) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the
terms of this Indenture; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
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SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Senior Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Senior Note is a continuing consent by the Holder of a
Senior Note and every subsequent Holder of a Senior Note or portion of a Senior
Note that evidences the same debt as the consenting Holder's Senior Note, even
if notation of the consent is not made on any Senior Note. However, any such
Holder of a Senior Note or subsequent Holder of a Senior Note may revoke the
consent as to its Senior Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SENIOR NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company in
exchange for all Senior Notes may issue and the Trustee shall, upon receipt of
an Authentication Order, authenticate new Senior Notes that reflect the
amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04, an Officer's Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01. SUBSIDIARY GUARANTEES.
Subject to this Article 10, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Senior Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Senior Notes or the obligations of the Company hereunder or thereunder,
that: (a) the principal of and interest
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on the Senior Notes will be promptly paid in full when due, whether at maturity,
by acceleration, redemption or otherwise, and interest on the overdue principal
of and interest on the Senior Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Senior Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Senior Notes or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Senior Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demands whatsoever and covenant that this Subsidiary Guarantee shall not be
discharged except by complete performance of the obligations contained in the
Senior Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
SECTION 10.02 LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Senior Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant
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under such laws, and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under this
Article 10, result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.
SECTION 10.03. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 10.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an officer
of such Guarantor on each Senior Note authenticated and delivered by the Trustee
and that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents and attested to by an Officer.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Senior Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Senior Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.17 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Subsidiary Guarantees in accordance with
Section 4.17 hereof and this Article 10, to the extent applicable.
SECTION 10.04. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another Person whether or not
affiliated with such Guarantor unless:
(a) subject to Section 10.05 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or
the Company) unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form and substance
reasonably satisfactory to the Trustee, under the Senior Notes, the
Indenture and the Subsidiary Guarantee on the terms set forth herein or
therein; and
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it
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had been named herein as a Guarantor. Such successor Person thereupon may cause
to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of
the Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary Guarantees so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Subsidiary Guarantees theretofore and thereafter issued in accordance
with the terms of this Indenture as though all of such Subsidiary Guarantees had
been issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Senior Notes shall prevent any consolidation or merger of a Guarantor with or
into the Company or another Guarantor, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety to
the Company or another Guarantor.
SECTION 10.05. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and relieved
of any obligations under its Subsidiary Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of this Indenture, including without limitation Section
4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.10 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Senior Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 10.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
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If to the Company:
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, NY 10022
Telecopier No.: (212) 826-5006
Attention: David Groelinger, Chief Financial Officer
with, in the case of any notice of Default or event of Default,
a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 735-2000
Attention: Sheldon Adler
If to the Trustee:
Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005
Telecopier No.: (212) 658-6425
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
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SECTION 11.03. COMMUNICATION BY HOLDERS OF SENIOR NOTES WITH OTHER
HOLDERS OF SENIOR NOTES.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied; provided,
however, that in the case of such application or request as to which the
furnishing of documents, certificates or opinions is specifically required
by any provision in this Indenture relating to such particular request or
application, no additional certificate or opinion need be furnished.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
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SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES
AND STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or the Guarantors under the Senior
Notes, the Subsidiary Guarantees or this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Senior Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Senior Notes.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE SENIOR NOTES AND THE SUBSIDIARY GUARANTEES BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Senior Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Senior Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
71
<PAGE>
SIGNATURES
Dated as of June 19, 1997
RIDDELL SPORTS INC.
By: /s/ David Groelinger
----------------------------
Name: David Groelinger
Title: Executive Vice President
RIDDELL GUARANTORS:
RIDDELL, INC.
ALL AMERICAN SPORTS CORPORATION
EQUILINK LICENSING CORPORATION
PROACQ CORP.
RHC LICENSING CORPORATION
RIDMARK CORPORATION
CHEER ACQUISITION CORP.
By: /s/ David Groelinger
----------------------------
Name: David Groelinger
Title: Vice President
VARSITY GUARANTORS:
VARSITY SPIRIT CORPORATION
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
VARSITY USA, INC.
VARSITY/INTROPA TOURS, INC.
INTERNATIONAL LOGOS, INC.
By: /s/ John M. Nichols
------------------------------
Name: John M. Nichols
Title: Senior Vice President
MARINE MIDLAND BANK
By: /s/ Frank Godino
--------------------------------
Name: Frank Godino
Title: Assistant Vice President
<PAGE>
EXHIBIT A
(Face of Senior Note)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUSIP/CINS ____________
10 1/2% Senior Notes Due 2007
No. ___ $__________
RIDDELL SPORTS INC., a Delaware corporation
promises to pay to _________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on July 15, 2007.
Interest Payment Dates: January 15, and July 15
Record Dates: January 1, and July 1 (whether or not a Business Day)
Reference is hereby made to the further provisions of this Senior Note set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Dated: _______________
RIDDELL SPORTS INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
This is one of the [Global]
Senior Notes referred to in
the within-mentioned
Indenture:
[SEAL]
MARINE MIDLAND BANK,
as Trustee
By:__________________________________
Authorized Signatory
Date: June 19, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE>
(Back of Senior Note)
10 1/2% Senior Notes due 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY.
THIS SENIOR NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THIS SENIOR NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE IF ANY, REQUIRED
UNDER THE INDENTURE PURSUANT TO WHICH THIS SENIOR NOTE IS ISSUED ) AND IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER JURISDICTION.
1. INTEREST. Riddell Sports Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Senior Note at 10 1/2%
per annum from June 19, 1997 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 6 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages, if any,
semi-annually in arrears on January 15 and July 15 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Senior Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Senior Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be January 15,
1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Senior Notes
(except defaulted interest) and Liquidated Damages, if any, to the Persons who
are registered Holders of Senior Notes at the close of business on the January 1
or July 1 next preceding the Interest Payment Date, even if such
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<PAGE>
Senior Notes are canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Senior Notes will be payable as to principal, premium
and Liquidated Damages, if any, and interest at the office or agency of the
Company maintained for such purpose within or without the City and State of New
York, or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available/next day funds will be required with respect to principal
of and interest, premium and Liquidated Damages on, all Global Notes and all
other Senior Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the Trustee
under the Indenture, will act as Paying Agent and Registrar. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Senior Notes under an Indenture dated
as of June 19, 1997 ("Indenture") between the Company, the Guarantors and the
Trustee. The terms of the Senior Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Senior Notes are
subject to all such terms, and Holders are referred to the Indenture and such
Act for a statement of such terms. To the extent any provision of this Senior
Note conflicts with the express provisions of the Indenture, the provisions of
the Indenture shall govern and be controlling. The Senior Notes are obligations
of the Company limited to $140 million in aggregate principal amount, and will
mature on July 15, 2007.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 5, the
Senior Notes shall not be redeemable at the Company's option prior to July 15,
2002. Thereafter, the Senior Notes shall be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on July 15 of the years indicated below:
Year Percentage
2002.................................. 105.25%
2003.................................. 103.50%
2004.................................. 101.75%
2005 and thereafter .................. 100.00 %
(b) Notwithstanding the provisions of clause (a) of this
Section 5, at any time on or before July 15, 2000, the Company may (but shall
not have the obligation to) redeem, on one or more occasions, up to 35% of the
aggregate principal amount of the Senior Notes at a redemption price equal to
110 1/2% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that at least $75.0 million
aggregate principal amount of Senior Notes remain outstanding
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<PAGE>
immediately after the occurrence of such redemption; and provided further, that
such redemption shall occur within 45 days of the date of the closing of such
Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Senior Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Senior Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales when the
aggregate amount of Excess Proceeds exceeds $5 million, the Company shall
commence an offer to all Holders of Senior Notes (as "Asset Sale Offer")
pursuant to Section 3.09 of the Indenture to purchase the maximum principal
amount of Senior Notes (including any Additional Senior Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Senior Notes (including any Additional Senior Notes) tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Senior Notes (including any
Additional Senior Notes) surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Senior Notes (including any
Additional Senior Notes) to be purchased on a pro rata basis or (inasmuch as a
precise pro rata selection may not be possible under the Indenture) by such
other method as the Trustee shall deem fair and appropriate. Holders of Senior
Notes and Additional Senior Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Senior Notes and Additional Senior Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Senior Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Senior Notes are to be redeemed at its registered address. Senior Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Senior Notes held by a Holder are to be
redeemed. On and after the redemption date, interest ceases to accrue on Senior
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Senior Note or portion
A-4
<PAGE>
of a Senior Note selected for redemption, except for the unredeemed portion of
any Senior Note being redeemed in part. Also, the Company need not exchange or
register the transfer of any Senior Notes for a period of 15 days before a
selection of Senior Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Senior Note may
be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Subsidiary Guarantees or the Senior Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the then outstanding Senior Notes and Additional Senior Notes, if any,
voting as a single class (including consents obtained in connection with a
purchase of or tender offer or exchange offer for the Senior Notes), and any
existing default or compliance with any provision of the Indenture, the
Subsidiary Guarantees or the Senior Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Senior Notes
and Additional Senior Notes, if any, voting as a single class (including
consents obtained in connection with a purchase of or tender offer or exchange
offer for Senior Notes). Without the consent of any Holder of a Senior Note, the
Indenture, the Subsidiary Guarantees or the Senior Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Senior Notes in addition to or in place of certificated Senior
Notes, to provide for the assumption of the Company's or Guarantors' obligations
to Holders of the Senior Notes in case of a merger or consolidation pursuant to
Article 5 of the Indenture, to provide for the Issuance of Additional Senior
Notes in accordance with the limitations set forth in the Indenture, to make any
change that would provide any additional rights or benefits to the Holders of
the Senior Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Senior Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Senior Notes; (ii) default in payment when due of the principal
of or premium, if any, on the Senior Notes; (iii) failure by the Company to
comply with the provisions described under the captions 4.07, 4.09, 4.10 or
4.15; (iv) failure by the Company for 60 days after notice from the Trustee or
the Holders of at least 25% of the Senior Notes (including Additional Senior
Notes, if any) voting as a single class, then outstanding to comply with any of
its other agreements in the Indenture or the Senior Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $5.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any
A-5
<PAGE>
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; and (viii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Restricted Subsidiaries.
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company or any of the Guarantors, as such,
shall not have any liability for any obligations of the Company or such
Guarantors under the Senior Notes, the Subsidiary Guarantee or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Senior Note waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Senior Notes.
15. AUTHENTICATION. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Senior Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of June 19, 1997, between the Company and
the parties named on the signature pages thereof or, in the case of Additional
Senior Notes, Holders of Restricted Global Notes and Restricted Definitive Notes
shall have all the rights set forth in one or more registration rights
agreements, if any, between the Company and the other parties named on the
signature pages thereto, relating to rights given by the Company to the
purchasers of any Additional Senior Notes (collectively, the "Registration
Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Senior Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Riddell Sports Inc.
900 Third Avenue
27th Floor
New York, NY 10022
Attention: Secretary
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Senior Note, fill in the form below: (I) or (we) assign
and transfer this Senior Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Senior Note on the books of the Company. The agent may
substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ___________________________________________________________
Your Signature: _________________________________
(Sign exactly as your name appears on the face of this Senior Note)
Signature Guarantee:* ________________________________________________
* Participant is a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate
box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Senior Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased:
$___________
Date: ________________ Your Signature: ________________________________
(Sign exactly as your name appears on the Senior Note)
Tax Identification No.: _____________________
Signature Guarantee:* ________________________________________________
* Participant is a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer
Principal Amount of Principal Amount of following such decrease of Trustee or
Date of Exchange this Global Note this Global Note (or increase) Senior Note Custodian
- ---------------- --------------------- --------------------- ----------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, NY 10022
Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005
Attn: Corporate Trust Department
Re: 10 1/2% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of June 19, 1997
(the "Indenture"), between Riddell Sports Inc., as issuer (the "Company"), the
parties listed in Schedule I thereto, as Guarantors, and Marine Midland Bank, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Senior Note[s] or interest in such Senior Note[s] specified in Annex A hereto,
in the principal amount of $___________ in such Senior Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. / / Check if Transferee will take delivery of a beneficial interest in the
Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore
B-1
<PAGE>
securities market and neither such Transferor nor any Person acting on its
behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. / / Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) / / such Transfer is being effected pursuant to an effective registration
statement under the Securities Act and in compliance with the prospectus
delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of
a principal amount of Senior Notes at the time of transfer of less than
$250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that such Transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Note and/or the Definitive Notes and in the Indenture and the
Securities Act.
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<PAGE>
4. / / Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) / / Check if Transfer is pursuant to Rule 144. (i) The Transfer is being
effected pursuant to and in accordance with Rule 144 under the Securities Act
and in compliance with the transfer restrictions contained in the Indenture and
any applicable blue sky securities laws of any state of the United States and
(ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) / / Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) / / Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is
being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
---------------------------
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: _____________, _____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / IAI Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
(ii) / / Regulation S Global Note (CUSIP ), or
(iii) / / IAI Global Note (CUSIP ); or
(iv) / / Unrestricted Global Note (CUSIP ); or
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, NY 10022
Attn: Chief Financial Officer
Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005
Attn: Corporate Trust Department
Re: 10 1/2% Senior Notes due 2007
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of June
19, 1997 (the "Indenture"), among Riddell Sports Inc., as issuer (the
"Company"), the parties listed in Schedule I thereto, as Guarantors, and Marine
Midland Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
_____________, (the "Owner") owns and proposes to exchange
the Senior Note[s] or interest in such Senior Note[s] specified herein, in the
principal amount of $____________ in such Senior Note[s] or interests (the
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note
(a) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities
C-1
<PAGE>
Act and (iv) the Definitive Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(c) / / Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) / / Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) / / Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) / / Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] / / 144A Global Note, / / Regulation S Global Note, / / IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
<PAGE>
--------------------------------
[Insert Name of Owner]
By:_____________________________
Name:
Title:
Dated: _______________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, NY 10022
Attn: Chief Financial Officer
Marine Midland Bank
140 Broadway, 12th Floor
New York, NY 10005
Attn: Corporate Trust Department
Re: 10 1/2% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of June
19, 1997 (the "Indenture"), between Riddell Sports Inc., as issuer (the
"Company"), the parties listed in Schedule I thereto, as Guarantors, and Marine
Midland Bank, as trustee. Capitalized terms used but not defined herein shall
have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Senior
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Senior Notes or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Senior Notes
have not been registered under the Securities Act, and that the Senior Notes and
any interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the Senior
Notes or any interest therein, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that is purchasing at least $250,000
principal amount of Senior Notes and that, prior to such transfer, furnishes (or
has furnished on its behalf by a U.S. broker-dealer) to you and to the Company a
signed letter substantially in the form of this letter and an Opinion of Counsel
in form reasonably acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the provisions of Rule 144(k) under the Securities
D-1
<PAGE>
Act or (F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing the Definitive
Note or beneficial interest in a Global Note from us in a transaction meeting
the requirements of clauses (A) through (E) of this paragraph a notice advising
such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Senior
Notes or beneficial interest therein, we will be required to furnish to you and
the Company such certifications, legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Senior Notes
purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Senior Notes or beneficial
interest therein acquired by us must be effected through one of the Placement
Agents.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Senior
Notes, and we and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
5. We are acquiring the Senior Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each of
which is an institutional "accredited investor") as to each of which we exercise
sole investment discretion, and are so acquiring or purchasing at least $250,000
principal amount of Senior Notes.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
-----------------------------
[Insert Name of Accredited Investor]
By:
--------------------------
Name:
Title:
Dated: _______________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF SECURITY
RELATING TO SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of June 19, 1997 (the "Indenture") among
Riddell Sports Inc., the Guarantors listed on Schedule I thereto and Marine
Midland Bank, as trustee (the "Trustee"), (a) the due and punctual payment of
the principal of, premium, if any, and interest on the Senior Notes (as defined
in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Senior Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Senior Notes and to the Trustee pursuant to the Subsidiary Guarantee
and the Indenture are expressly set forth in Article 10 of the Indenture and
reference is hereby made to the Indenture for the precise terms of the
Subsidiary Guarantee. Each Holder of a Senior Note, by accepting the same, (a)
agrees to and shall be bound by such provisions, (b) authorizes and directs the
Trustee, on behalf of such Holder, to take such action as may be necessary or
appropriate to effectuate the subordination as provided in the Indenture and (c)
appoints the Trustee attorney-in-fact of such Holder for such purpose; provided,
however, that the Indebtedness evidenced by this Subsidiary Guarantee shall
cease to be so subordinated and subject in right of payment upon any defeasance
of this Senior Note in accordance with the provisions of the Indenture.
<PAGE>
RIDDELL GUARANTORS:
RIDDELL, INC.
ALL AMERICAN SPORTS CORPORATION
EQUILINK LICENSING CORP.
PROACQ CORPORATION
RHC LICENSING CORP.
RIDMARK CORPORATION
CHEER ACQUISITION CORP.
By: _______________________________
Name:
Title:
VARSITY GUARANTORS:
VARSITY SPIRIT CORPORATION
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
VARSITY USA, INC.
VARSITY/INTROPA TOURS, INC.
INTERNATIONAL LOGOS, INC.
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTEEING SUBSIDIARY
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of ________________, among __________________ (the "Guaranteeing
Subsidiary"), a subsidiary of Riddell Sports Inc. (or its permitted successor),
a Delaware corporation (the "Company"), the Company, the other Guarantors (as
defined in the Indenture referred to herein) and Marine Midland Bank, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of June 19, 1997 providing
for the issuance of an aggregate principal amount of up to $140,000,000 of 10
1/2% Senior Notes due 2007 (the "Senior Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the
Senior Notes and the Indenture on the terms and conditions set forth herein (the
"Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Senior Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Senior Note authenticated and delivered by the
Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and
enforceability of the Indenture, the Senior Notes or
the obligations of the Company hereunder or
thereunder, that:
(i) the principal of and interest on the Senior Notes
will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and interest
on the Senior Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be promptly paid
in full or performed, all in accordance with the
terms hereof and thereof; and
F-1
<PAGE>
(ii) in case of any extension of time of payment or
renewal of any Senior Notes or any of such other
obligations, that same will be promptly paid in full
when due or performed in accordance with the terms of
the extension or renewal, whether at stated maturity,
by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall
be jointly and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Senior Notes or the Indenture,
the absence of any action to enforce the same, any
waiver or consent by any Holder of the Senior Notes
with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any
action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(c) The following is hereby waived:diligence presentment,
demand of payment, filing of claims with a court in
the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations
contained in the Senior Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Subsidiary
Guarantee.
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Guarantee.
(i) Pursuant to Section 10.02 of the Indenture, after
giving effect to any maximum amount and any other
contingent and fixed liabilities that are relevant
under any
F-2
<PAGE>
applicable Bankruptcy or fraudulent conveyance laws,
and after giving effect to any collections from,
rights to receive contribution from or payments made
by or on behalf of any other Guarantor in respect of
the obligations of such other Guarantor under Article
10 of the Indenture shall result in the obligations
of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guaranteeing Subsidiary agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Senior Note a notation of such
Subsidiary Guarantee.
4. GUARANTEEING SUBSIDIARY MAY CONSOLIDATE, ETC. ON CERTAIN
TERMS.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 10.05 of the Indenture, the Person
formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the
Trustee, under the Senior Notes, the Indenture and
the Subsidiary Guarantee on the terms set forth
herein or therein; and
(ii) immediately after giving effect to such transaction,
no Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or
conveyance and upon the assumption by the successor
corporation, by supplemental indenture, executed and delivered
to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and
punctual performance of all of the covenants and conditions of
the Indenture to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein
as a Guarantor. Such successor corporation thereupon may
cause to be signed any or all of the Subsidiary Guarantees to
be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms
of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Senior Notes shall prevent
any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another
Guarantor.
F-3
<PAGE>
5. RELEASES.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary
Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Senior Notes and for the
other obligations of any Guarantor under the Indenture as
provided in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Senior Notes, any
Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of the Senior Notes by accepting a Senior Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Senior Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW
YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: _______________, ____ [GUARANTEEING SUBSIDIARY]
By: _______________________________
Name:
Title:
RIDDELL SPORTS INC.
By: _______________________________
Name:
Title:
RIDDELL GUARANTORS:
RIDDELL, INC.
ALL AMERICAN SPORTS CORPORATION
EQUILINK LICENSING CORP.
PROACQ CORPORATION
RHC LICENSING CORP.
RIDMARK CORPORATION
CHEER ACQUISITION CORP.
By:_________________________________
Name:
Title:
VARSITY GUARANTORS:
VARSITY SPIRIT CORPORATION
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
VARSITY USA, INC.
VARSITY/INTROPA TOURS, INC.
INTERNATIONAL LOGOS, INC.
By: ________________________________
Name:
Title:
MARINE MIDLAND BANK
as Trustee
By: ___________________________
Name:
Title:
<PAGE>
Schedule I
SCHEDULE OF GUARANTORS
The following schedule lists each Guarantor under the Indenture as of the
Issue Date:
All American Sports Corporation
Riddell, Inc.
RHC Licensing Corporation
Ridmark Corporation
Equilink Licensing Corporation
Proacq Corp.
Cheer Acquisition Corp.
Varsity Spirit Corporation
Varsity Spirit Fashions & Supplies, Inc.
International Logos, Inc.
Varsity/Intropa Tours, Inc.
Varsity USA, Inc.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of June 19, 1997
by and among
RIDDELL SPORTS INC.,
as Issuer
RIDDELL, INC., ALL AMERICAN SPORTS CORPORATION,
EQUILINK LICENSING CORPORATION. PROACQ CORP.,
RHC LICENSING CORPORATION., RIDMARK CORPORATION,
CHEER ACQUISITION CORP., VARSITY SPIRIT CORPORATION,
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
VARSITY USA, INC., VARSITY/INTROPA TOURS, INC.
and INTERNATIONAL LOGOS, INC.
as Guarantors
and
NATIONSBANC CAPITAL MARKETS, INC., AND
FIRST CHICAGO CAPITAL MARKETS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of June 19, 1997 by and among Riddell Sports Inc., a Delaware
corporation (the "Company"), and each of the existing and future domestic
subsidiaries of the Company (each a "Guarantor" and, collectively the
"Guarantors," each existing Guarantor being listed on Schedule I of the
Indenture), and NationsBanc Capital Markets, Inc. and First Chicago Capital
Markets, Inc. (each a "Purchaser" and, collectively, the "Purchasers"), each of
whom has agreed to purchase the Company's 10 1/2% Senior Notes due 2007 (the
"Senior Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated June
13, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantors
and the Purchasers. In order to induce the Purchasers to purchase the Senior
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Purchasers set forth in the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Broker-Dealer Exchange Notes: Any Exchange Notes acquired by a
Participating Broker-Dealer in an Exchange Offer in exchange for Transfer
Restricted Notes that such Broker-Dealer acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Notes acquired directly from the Company or any of its
affiliates).
Business Day: Any day except a Saturday, Sunday or other day in The
City of New York or in the city of the corporate trust office of the Trustee on
which banks are authorized to close.
Closing Date: The Closing Date as defined in the Purchase Agreement.
Commission: The Securities and Exchange Commission.
Company: The meaning set forth in the preamble and shall also
include the Company's successors.
Consummate: An Exchange Offer shall be deemed to be "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(c) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of Exchange Notes in the same aggregate
principal amount as the aggregate principal amount of Senior Notes that were
tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 6.
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Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: Notes issued by the Company under the Indenture
containing terms substantially identical to the Senior Notes (except that
interest shall accrue on the Exchange Notes from the last interest payment date
on which interest was paid on the Transfer Restricted Notes surrendered in
exchange therefor, or if no interest was paid, from the date of original
issuance of the Senior Notes and Holders whose Transfer Restricted Notes are
accepted in exchange therefore pursuant to the provisions of this Agreement will
be deemed to have waived the right to receive any payment in respect of interest
on the Senior Notes accrued after the date of the issuance of such notes) and to
be offered to Holders of Senior Notes in exchange for Senior Notes pursuant to
the Indenture (i) in the Exchange Offer or (ii) upon the request of any Holder
of Transfer Restricted Notes covered by a Shelf Registration Statement, in
exchange for such Transfer Restricted Notes.
Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Notes, so entitled to participate under applicable law and Commission policy,
the opportunity to exchange all such outstanding Transfer Restricted Notes held
by such Holders for Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Transfer Restricted Notes tendered in such
exchange offer by such Holders.
Exchange Offer Registration: A registration under the 1933 Act
effected pursuant to Section 3(a) hereof.
Exchange Offer Registration Statement: A Registration Statement on
Form S-4 (or, if applicable, on another appropriate form) relating to the
Exchange Offer, including the related Prospectus contained therein.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of June 19, 1997, among the
Company, the Guarantors and Midland Marine Bank, as trustee (the "Trustee"),
pursuant to which the Senior Notes and the Exchange Notes are to be issued, as
such Indenture is amended or supplemented from time to time in accordance with
the terms thereof.
Interest Payment Date: As defined in the Indenture and the Senior
Notes.
Issuers: The Company and the Guarantors.
Liquidated Damages: As defined in Section 6 hereof.
NASD: National Association of Securities Dealers, Inc.
Participating Broker-Dealer: The meaning set forth in Section 5(a)
hereof.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement,
at the time such Registration Statement is declared effective and any such
prospectus as amended or supplemented by any prospectus
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supplement and by all other amendments and supplements thereto, including
post-effective amendments, and in each case including all material incorporated
by reference into such Prospectus.
Purchase Agreement: The meaning set forth in the preamble to this
Agreement.
Purchaser: As defined in the preamble hereto.
Record Holder: With respect to any Damages Payment Date relating to
Senior Notes, each Person who is a Holder of Senior Notes on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur.
Registration Default: As defined in Section 6 hereof.
Registration Statement: Any registration statement of the Company
relating to (i) an offering of Exchange Notes pursuant to an Exchange Offer or
(ii) the registration for resale of Transfer Restricted Notes (but no other
securities) unless approved by the Holders whose Transfer Restricted Notes are
covered hereby) pursuant to the Shelf Registration Statement, in each case,
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Securities Act: The Securities Act of 1933, as amended.
Senior Notes: The Company's 10 1/2% Senior Notes issued pursuant to
the Indenture.
Shelf Filing Deadline: As defined in Section 4(a) hereof.
Shelf Registration Statement: A Registration Statement of the Company
pursuant to the provisions of Section 4(a) of this Agreement with respect to all
of the Transfer Restricted Notes (but no other securities unless approved by the
Holders whose Transfer Restricted Notes are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or any
similar rule that may be adopted by the Commission (which may be an amendment to
the Exchange Offer Registration Statement).
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Notes: Each Senior Note until the earliest of (a)
the date on which such Senior Note is exchanged in the Exchange Offer by a
person other than a Participating Broker Dealer, and entitled to be resold to
the public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Senior Note has been
disposed of in accordance with the Shelf Registration Statement, (c) the date on
which such Senior Note is disposed of by a Participating Broker-Dealer pursuant
to the "Plan of Distribution" section contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (d) the date on which such Senior Note is distributed to the public pursuant
to Rule 144 under the Act; provided, however, that Transfer Restricted Notes
shall not include (x) any Senior Notes not tendered for Exchange Notes after the
holder of such Senior Notes had the opportunity to tender its Senior Notes in an
Exchange Offer or (y) any Senior Notes with respect to which the holder thereof
did not deliver the notice required by Section 4(a)(ii) hereof.
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Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Notes. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Notes.
(b) Holders of Transfer Restricted Notes. A Person is deemed to be a
holder of Transfer Restricted Notes (each, a "Holder") whenever such Person owns
or beneficially owns Transfer Restricted Notes.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the Commission, the Company and the Guarantors
shall (i) cause to be filed with the Commission as soon as practicable after the
Closing Date, but in no event later than 45 days after the Closing Date, an
Exchange Offer Registration Statement under the Securities Act relating to the
Exchange Notes and the Exchange Offer, (ii) use their best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 120 days after the Closing Date, (iii)
in connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause such
Exchange Offer Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Securities Act and (C) cause all
necessary filings, if any, in connection with the registration and qualification
of the Exchange Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence the
Exchange Offer and use its best efforts to Consummate the Exchange Offer on the
earliest practicable date thereafter, but in no event later than 30 Business
Days after the Exchange Offer Registration Statement shall have been declared
effective. The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
provided, however, that in no event shall such period be less than 20 Business
Days. The Exchange Offer shall be on the appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Transfer
Restricted Notes and to permit resales of Senior Notes held by Broker-Dealers as
contemplated by Section 5 below.
(b) The Company shall commence the Exchange Offer by mailing the
related Exchange Offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this Agreement
and that all Transfer Restricted Notes validly tendered will be accepted
for exchange;
(ii) the date of acceptance for exchange (which shall comprise a
period of at least 20 Business Days from the date such notice is mailed)
(the "Exchange Date");
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(iii) that any Transfer Restricted Note not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Agreement;
(iv) that Holders electing to have a Transfer Restricted Note
exchanged pursuant to the Exchange Offer will be required to surrender
such Transfer Restricted Note, together with the enclosed letter of
transmittal, to the institution and at the address (located in the Borough
of Manhattan, The City of New York) specified in the notice prior to the
close of business on the Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the Exchange Date, by sending to the
institution and at the address (located in the Borough of Manhattan, The
City of New York) specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Transfer Restricted Notes delivered for exchange and a
statement that such Holder is withdrawing his election to have such
Transfer Restricted Notes exchanged.
As soon as practicable after the Exchange Date, the Company shall:
(i) accept for exchange Transfer Restricted Notes or portions
thereof tendered and not validly withdrawn pursuant to the Exchange Offer;
and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Transfer Restricted Notes or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Note equal in principal
amount to the aggregate principal amount of the Transfer Restricted Notes
surrendered by such Holder.
(c) The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Exchange Notes shall be included for registration in the Exchange Offer
Registration Statement.
SECTION 4. SHELF REGISTRATION
(a) Filing of Shelf Registration. If (i) the Company determines that
it is not required to file the Exchange Offer Registration Statement or
permitted to Consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any Holder of Transfer
Restricted Notes notifies the Company within 20 Business Days following
Consummation of the Exchange Offer that (A) it was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) it is a broker-dealer and owns Senior Notes acquired directly from the
Company or an affiliate of the Company, the Company shall:
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Securities Act, which may be an amendment to the
Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement") on or prior to the earliest to occur of (1) if
the Company determines that it is not required to file the Exchange Offer
Registration Statement as contemplated by clause (i) above, the earlier of
(x) the 30th day after the date such determination is made or (y) the
150th day after the Closing Date, and (2) the 30th day after the date on
which the Company receives notice from a Holder of Transfer Restricted
Notes as
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contemplated by clause (ii) above, (such earliest date being the "Shelf
Filing Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer Restricted Notes by those Holders who shall have
provided the information required pursuant to Section 4(b) hereof; and
(y) use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission on or before the 30th
day after the Shelf Filing Deadline.
The Company and the Guarantors shall use their best efforts to keep
such Shelf Registration Statement continuously effective until the earlier to
occur of (i) the date on which such Transfer Restricted Notes may be resold
under Rule 144 without volume restrictions and (ii) the date as of which all
Transfer Restricted Notes registered pursuant to the Shelf Registration
Statement have been resold; provided, however, that the Company may notify the
Holders of its suspension of any such Shelf Registration Statement (and, upon
receipt of such notice, Holders shall not be authorized by the Company to resell
and shall not resell Transfer Restricted Notes pursuant to such Registration
Statement as contemplated by this Section 2(b) during such period of suspension)
if the Company's Board of Directors determines in good faith that there is a
valid purpose for the suspension (which notice may be given twice during any
365-day period and no such suspension may exceed 45 days or comprise the 45-day
period immediately preceding the maturity date of the Senior Notes), and such
suspensions shall not give rise to any right to receive Liquidated Damages
pursuant to Section 2(f) hereof. The Company further agrees (i) to supplement or
amend the Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder with respect to information relating to such Holder (provided that no
amendment or supplement shall be required during any suspension period
contemplated by the proviso contained in the preceding sentence), (ii) to ensure
that the Shelf Registration Statement conforms with the terms of this Agreement
and (iii) to use its reasonable best efforts to cause any such amendment to
become effective and such Shelf Registration Statement to become usable as soon
as thereafter practicable. The Company agrees to furnish to the Holders of
Transfer Restricted Notes included in the Shelf Registration Statement copies of
any such supplement or amendment promptly after its being used or filed with the
Commission.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Notes may
include any of its Transfer Restricted Notes in any Shelf Registration Statement
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 20 business days after receipt of a request therefor, such
information as the Company may reasonably request for use in connection with any
Shelf Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Notes shall be entitled to Liquidated
Damages pursuant to Section 6 hereof unless and until such Holder shall have
used its best efforts to provide all such reasonably requested information. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER
(a) The staff of the Commission has taken the position that any
Broker-Dealer that receives Exchange Notes for its own account in the Exchange
Offer in exchange for Senior Notes that were acquired by such Broker-Dealer as a
result of market-making or other trading activities (a "Participating
Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the
Securities Act and
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must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes.
The Company and the Purchasers understand that it is the Commission
staff's position that if the Prospectus contained in the Exchange Offer
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligation under the Securities Act in connection with resales of Exchange Notes
for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
(b) In light of Section 5(a) above, notwithstanding the other
provisions of this Agreement, the Company agrees that, to the extent applicable,
the provisions of Section 4(a) of this Agreement as they relate to a Shelf
Registration shall also apply to an Exchange Offer Registration if reasonably
requested by a Purchaser or one or more Participating Broker-Dealers, as
provided in clause (ii) below, in order to expedite or facilitate the
disposition of any Exchange Notes by Participating Broker-Dealers consistent
with the positions of the Commission staff recited in Section 5(a) above;
provided that:
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as
would otherwise be contemplated by Section 7(b), for a period exceeding
180 days after the Exchange Date (as such period may be extended due to
the suspension of the disposition of Senior Notes as contemplated in
Section 4(a) hereof (during which suspension Participating Broker-Dealers
shall not be authorized by the Company to resell and shall not resell
Transfer Restricted Notes pursuant to the Registration Statement)
resulting from the determination in good faith of the Board of Directors
of the Company that there is a valid purpose for such suspension and
Participating Broker-Dealers shall not be authorized by the Company to
deliver and shall not deliver such Prospectus after such period in
connection with the resales contemplated by this Section 5; and
(ii) the application of the Shelf Registration procedures set forth
in Section 7 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Commission staff or the
Securities Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Purchasers at
the request of a Participating Broker-Dealer or with the reasonable
request in writing to the Company by one or more Broker-Dealers who
certify to the Purchasers and the Company in writing that they anticipate
that they will be Participating Broker-Dealers; provided, however, that if
no Broker-Dealer who provides such notice becomes a Participating
Broker-Dealer, then the obligations of the Company pursuant to this
Section 5(b) shall cease; and provided further that, in connection with
such application of the Shelf Registration procedures set forth in Section
7 to an Exchange Offer Registration, the Company shall be obligated (x) to
deal only with one entity representing the Participating Broker-Dealers,
which shall be either of the Purchasers unless both elect not to act as
such representative and (y) to cause to be delivered only one, if any,
"cold comfort" letter with respect to the Prospectus in the form existing
on the Exchange Date and with respect to each post-effective amendment to
the Registration Statement required to be filed pursuant to Item
512(a)(1)(ii) of Regulation S-K, if any, effected during the period
specified in clause (i) above; provided, however, that any Participating
Broker-Dealer that desires to be an addressee of such "cold comfort"
letter must provide at its expense an opinion of counsel that it is an
"underwriter" entitled to the statutory due diligence defense under
Section 11 of the Securities Act or provide such letters of representation
to the accountants requested to prepare such "cold comfort" letter as are
acceptable in form and substance to such accountants.
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(c) In addition to the foregoing, if the Company is required to
comply with the provisions of Section 5(b) hereof, the Company shall include a
"Plan of Distribution" section in the Prospectus contained in the Exchange Offer
Registration Statement and indicate therein that any Participating Broker-Dealer
who holds Transfer Restricted Notes that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, must acknowledge that it may exchange such Transfer Restricted Notes
(other than Transfer Restricted Notes acquired directly from the Company or any
affiliate thereof) pursuant to the Exchange Offer provided that such
Participating Broker-Dealer further acknowledges that it will deliver a
prospectus in connection with any resale of such Exchange Notes. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales of Broker-Dealer Exchange Notes by Participating Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Participating Broker-Dealer
or disclose the amount of Exchange Notes held by any such Participating
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
(d) The Purchasers shall have no liability to the Company or any
Holder with respect to any request that it may make pursuant to Section 5(b)
above.
SECTION 6. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any Registration Statement has not been declared effective
by the Commission on or prior to the date specified for such effectiveness in
this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has
not been Consummated within 30 business days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement, or (iv) except as set
forth in Section 4 hereof, any Registration Statement required by this Agreement
is filed and declared effective but shall thereafter cease to be effective or
fail to be usable for its intended purpose (in each case prior to such time as
all Registrable Securities covered by such Registration Statement remain
outstanding or such time as is otherwise set forth in this Agreement) without
being succeeded immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself declared effective
immediately (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company shall pay, or cause to be paid, and the
Guarantors hereby jointly and severally guarantee the payment of, Liquidated
Damages ("Liquidated Damages") to each Holder of Transfer Restricted Notes with
respect to the first 90-day period immediately following the occurrence of such
Registration Default, in an amount equal to $.05 per week per $1,000 principal
amount of Transfer Restricted Notes held by such Holder for each week or portion
thereof that the Registration Default continues. The amount of the Liquidated
Damages shall increase by an additional $.05 per week per $1,000 in principal
amount of Transfer Restricted Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Notes. All accrued Liquidated Damages shall be paid to Record Holders
by the Company by wire transfer of immediately available funds or by federal
funds check on each Damages Payment Date, as provided in the Indenture.
Notwithstanding anything herein to the contrary, upon (A) the filing by the
Issuers of such Registration Statement in the case of clause (i) above, (B) the
effectiveness of such Registration Statement after the Effectiveness Target Date
in the case of clause (ii) above, (C) Consummation of the Exchange Offer in the
case of clause (iii) above, or (D) the filing of a post-effective amendment to
the Registration Statement or an additional Registration Statement that causes
such Registration Statement to again be declared effective or made usable in the
case of clause (iv) above, the
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accrual of Liquidated Damages with respect to Transfer Restricted Notes as a
result of such clause (i), (ii), (iii) or (iv) as applicable, shall cease.
All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Security shall have been satisfied in full.
SECTION 7. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall comply with the provisions
of Section 7(c) below to the extent applicable, shall use their best efforts to
effect such exchange to permit the sale of Transfer Restricted Notes being sold
in accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Company and the Guarantors hereby agree to seek a no-action
letter or other favorable decision from the Commission allowing the
Company and the Guarantors to Consummate an Exchange Offer for such Senior
Notes. The Company and each Guarantor hereby agree to pursue the issuance
of such a decision to the Commission staff level but shall not be required
to take commercially unreasonable action to effect a change of Commission
policy. The Company and the each Guarantor hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission staff analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Notes shall furnish, upon the request of the Company, prior to
the Consummation thereof, a written representation to the Company (which
may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an
"affiliate" of the Company (as defined in Rule 144(a) of the Securities
Act), (B) it does not have and will not have any arrangements or
understanding with any person to participate in the distribution of the
Transfer Restricted Notes or the Exchange Notes within the meaning of the
Securities Act, (C) it is acquiring the Exchange Notes in its ordinary
course of business, (D) if such Holder is not a broker-dealer, that it is
not engaged in, and does not intend to engage in, a distribution of the
Exchange Notes and (E) if such Holder is a broker-dealer, that it will
receive Exchange Notes in exchange for Securities that were acquired as a
result of market-making activities or other trading activities and that it
will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. In addition, all such
Holders of Transfer Restricted Notes shall otherwise cooperate in the
Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer, any such Holder using the
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer and any affiliate of the Company (1) could
not under Commission policy as in effect on the date of this Agreement
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i) above),
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and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Exchange Notes obtained by such Holder in exchange
for Senior Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) and, if
applicable, any no-action letter obtained pursuant to clause (i) above and
(B) including a representation that neither the Company nor any Guarantor
has entered into any arrangement or understanding with any Person to
distribute the Exchange Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Exchange Notes
received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with a Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 7(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Notes being sold in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company and the Guarantors will as expeditiously as
possible prepare and file with the Commission a Registration Statement relating
to the registration on any appropriate form under the Securities Act, which form
shall be available for the sale of the Transfer Restricted Notes in accordance
with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Notes (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Senior Notes
by Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
(including, if required by the Securities Act or any regulation
thereunder, financial statements of the Guarantors) for the period
specified in Section 3 or 4 of this Agreement, as applicable; subject to
the Company's right to suspend any Shelf Registration Statement pursuant
to Section 4(a), upon the occurrence of any event that would cause any
such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Notes during the period required
by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Notes covered by
such Registration Statement have been sold;
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cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act, and to comply fully with the applicable provisions of
Rules 424 and 430A under the Securities Act in a timely manner; and comply
with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the Participating Broker Dealers that have provided
in writing to the Company a telephone number facsimile number and address
for notices to be given, if any, underwriters, if any, and selling Holders
of Transfer Restricted Securities promptly, and if requested by such
Persons, to confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission of
the qualification of the Transfer Restricted Notes for offering or sale in
any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto, or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Notes under state securities or Blue Sky laws, the
Company and the Guarantors shall use their best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders of Transfer
Restricted Securities and each of the underwriters, if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including, if the Holder so requests
in writing, all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject to
the review of such Holders and underwriter(s), if any, for a period of at
least five business days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer
Restricted Notes covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within five business days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives available (and
representatives of the Guarantors) for discussion of such document and
other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request, in order to facilitate the
public sale or other
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disposition of the Transfer Restricted Notes; and except as set forth in
the last paragraph of this Section 7, the Company consents to the use of
such Prospectus and any amendment or supplement thereto in accordance with
applicable law and in accordance herewith by each of the selling Holders
of Transfer Restricted Notes and any such underwriters in connection with
the offering and sale of the Transfer Restricted Notes covered by and in
the manner described in such Prospectus or any amendment or supplement
thereto in accordance with applicable law;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders of Transfer Restricted
Securities included therein or the underwriter(s), if any, promptly
incorporate in any Registration Statement or Prospectus, pursuant to a
supplement or post-effective amendment if necessary, such information as
such selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information relating
to the "Plan of Distribution" of the Transfer Restricted Notes,
information with respect to the principal amount of Transfer Restricted
Notes being sold to such underwriter(s), the purchase price being paid
therefor and any other terms of the offering of the Transfer Restricted
Notes to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment;
(viii) use its best efforts to cause the Transfer Restricted
Notes covered by the Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Holders of a majority
in aggregate principal amount of Senior Notes covered thereby or the
underwriter(s), if any;
(ix) furnish to each selling Holder of Transfer Restricted
Securities included in a Shelf Registration Statement and each of the
underwriter(s), if any, without charge, at least one copy of the Shelf
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including, if the Holder so requests in writing, all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(ix) furnish to each Participating Broker-Dealer or Purchasers
which so requests, without charge, at least one copy of the Exchange Offer
Registration Statement, as first file with the Commission, and of each
amendment thereto, including, if so requested in writing, all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) deliver to each Participating Broker-Dealer and each selling
Holder of Transfer Restricted Securities included in a Shelf Registration
Statement and each of the underwriter(s), if any, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request;
the Company and the Guarantors hereby consent to the use of the Prospectus
and any amendment or supplement thereto by each of the Participating
Broker-Dealers, each such selling Holders and each of the
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<PAGE>
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Notes covered by the Prospectus or any amendment
or supplement thereto;
(xi) enter into, and cause the Guarantors to enter into, such
agreements (including an underwriting agreement), and make, and cause the
Guarantors to make, such representations and warranties, and take all such
other reasonable actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Notes by Holders
selling pursuant to any Shelf Registration Statement or by any
Participating Broker-Dealer contemplated by this Agreement, all to such
extent as may be reasonably requested by any Purchaser, by any
Participating Broker-Dealer who so requests in writing, by any Holder of
Transfer Restricted Notes included in a Shelf Registration Statement or by
any underwriter of such Holder's Transfer Restricted Notes, in each case
in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement; and, if requested in writing by
any Purchaser, by any Participating Broker-Dealer, by any Holder of
Transfer Restricted Notes included in a Shelf Registration Statement or by
any underwriter of such Holder's Transfer Restricted Notes, the Company
and the Guarantors shall:
(A) furnish to each Purchaser, each Participating Broker-Dealer
who so requests in writing and each selling Holder of Transfer
Restricted Notes included in a Shelf Registration Statement and each
underwriter of such Holder's Transfer Restricted Notes, if any, in
such substance and scope as they may request and as are customarily
made by issuers to underwriters in primary underwritten offerings,
upon the date of the Consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, as applicable:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of the Company and each of the Guarantors,
confirming, as of the date thereof, the matters set forth in
paragraphs (b), (c), (f) and (d) of Section 7 of the Purchase
Agreement and such other matters as such parties may reasonably
request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantors, covering the matters set forth in
paragraph (g) of Section 7 of the Purchase Agreement and such
other matter as such parties may reasonably request, including
the authorization, execution and delivery of the Exchange Notes
and a statement to the effect that such counsel has participated
in conferences with officers and other representatives of the
Company, representatives of the independent public accountants
for the Company, the Purchasers' representatives and the
Purchasers' counsel in connection with the preparation of such
Registration Statement and the related Prospectus and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of
such statements; and that such counsel advises that, on the
basis of the foregoing (relying as to materiality to a large
extent upon facts provided to such counsel by officers and other
representatives of the Company and without independent check or
verification), no facts came to such counsel's attention that
caused such counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or any
post-effective amendment thereto became effective, and, in the
case of the Exchange Offer Registration Statement, as of the
date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
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<PAGE>
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 7(q) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 9 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
the Guarantors contemplated in clause (A)(1) above cease to be true and
correct, the Company or the Guarantors shall so advise the Purchasers, any
Participating Broker-Dealers, each selling Holder of Transfer Restricted
Notes included in a Shelf Registration Statement the underwriters, if any,
of such Holder's Transfer Restricted Notes promptly and, if requested by
such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Notes,
cooperate with, and cause the Guarantors to cooperate with, the selling
Holders, the underwriter(s), if any, and their respective counsel in
connection with the registration and qualification of the Transfer
Restricted Notes under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Notes covered
by the Shelf Registration Statement; provided, however, that neither the
Company nor any of the Guarantors shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation in any jurisdiction where it is not now so subject;
(xiii) cooperate with, and cause the Guarantors to cooperate
with, the selling Holders and the underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Notes to be sold and not bearing any restrictive legends; and
enable such Transfer Restricted Notes to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of Transfer
Restricted Notes made by such underwriter(s);
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(xiv) shall issue, upon the request of any Holder of Senior
Notes covered by a Shelf Registration Statement, Exchange Notes, having an
aggregate principal amount equal to the aggregate principal amount of
Senior Notes being sold by such Holder; such Exchange Notes to be
registered in the name of the purchaser(s) of such Senior Notes, as the
case may be; in return, the Senior Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xv) use its best efforts to cause the Transfer Restricted Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriter(s), if any, to
consummate the disposition of such Transfer Restricted Notes, subject to
the proviso contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Notes, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted Notes
not later than the effective date of the Registration Statement and
provide the Trustee under the Indenture with printed certificates for the
Transfer Restricted Notes which are in a form eligible for deposit with
The Depository Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations of
the NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Notes to consummate the disposition of such Transfer Restricted
Notes;
(xix) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable after the
effective date of the applicable Registration Statement, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) and Section 11(a) of the Securities Act;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, and cause the
Guarantors to cooperate, with the Trustee and the Holders of Senior Notes
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute, and cause the Guarantors to execute, and use its best efforts to
cause the Trustee to execute, all documents that may be required to effect
such changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely
manner; and
(xxi) use its best efforts to cause all Transfer Restricted
Notes covered by the Registration Statement to be listed on each
securities exchange on which similar debt securities issued by the Company
if any are then listed if requested by the Holders of a majority in
aggregate principal amount of Senior Notes or the managing underwriter(s),
if any.
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<PAGE>
(d) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 7(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Notes pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 7(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted Notes
that was current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 7(c)(iii)(D) hereof to and
including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 7(c)(xvi) hereof or shall have received the
Advice.
SECTION 8. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and each Guarantor's
performance of or compliance with this Agreement will be borne by the Company or
the respective Guarantor, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by any Purchaser or Holder with the NASD
(and, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that may be required by the rules and regulations
of the NASD)); (ii) all fees and expenses of compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Exchange Notes to be issued in the Exchange Offer
and printing of Prospectuses), messenger and delivery services and telephone;
(iv) all fees and disbursements of counsel for the Company, the Guarantors and,
subject to Section 8(b) below, the Holders of Transfer Restricted Notes; (v) all
application and filing fees in connection with listing the Exchange Notes on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, but excluding fees and expenses of counsel
to the underwriters or the Holders (other than fees and expenses set forth in
clauses (ii) and (vi) above) and underwriting discounts and commissions,
brokerage, finder's and similar fees, and transfer taxes, if any, relating to
the sale or disposition of Transfer Restricted Notes by a Holder.
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Purchasers and the Holders of Transfer Restricted Notes being tendered in the
Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in
the Exchange Offer Registration Statement or registered pursuant to the Shelf
Registration Statement, as applicable, for the reasonable fees and disbursements
of not more than one counsel, who shall be Latham & Watkins or such
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other counsel as may be chosen by the Holders of a majority in principal amount
of the Transfer Restricted Notes for whose benefit such Registration Statement
is being prepared.
SECTION 9. INDEMNIFICATION AND CONTRIBUTION
(a) The Issuers jointly and severally agree to indemnify and hold harmless
each Holder, the directors, and each person who controls any Holder within the
meaning of either the Securities Act or the Exchange Act against any and all
losses, claims, damages, liabilities, joint or several, or judgments (including,
without limitation, the reasonable legal and other expenses incurred in
connection with any action, suit or proceeding or any claim asserted) to which
they or any of them may become subject under the Securities Act, the Exchange
Act or other Federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or judgments (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, Prospectus (or any amendment or supplement thereto), or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and agree to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
in the case of a Shelf Registration Statement, that the Issuers will not be
liable in any such case to any Holder (or person who controls such Holder) to
the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement or in any amendment
thereto, in reliance upon and in conformity with written information furnished
to the Issuers solely by or on behalf of a Holder specifically for inclusion
therein.
The foregoing indemnity with respect to any untrue statement contained in
or omission from any preliminary prospectus shall not inure to the benefit of
any Holder (or person controlling such Holder) on account of any such losses,
claims, damages, liabilities or judgments (or actions in respect thereof)
arising from the sale of the Transfer Restricted Securities by such Holder to
any person if a copy of the final Prospectus (as supplemented or amended) shall
not have been delivered or sent to such person at or prior to the written
confirmation of the resale by the Holder of such Transfer Restricted Notes to
such person and the untrue statement or omission contained in such Preliminary
Prospectus was corrected in the Final Prospectus (as supplemented or amended),
provided that the Company has delivered the Final Prospectus (as supplemented or
amended) to such Holder in requisite quantity on a timely basis to permit such
delivery or sending.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have to the persons referred to above in this Section
9(a).
(b) In the event of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities included therein severally and not jointly agrees
to indemnify and hold harmless the Issuers, their directors, officers, and each
person, if any, who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act to the same extent as the foregoing indemnity
from the Issuers to each Initial Purchaser set forth in subsection (a) but only
with respect to claims and actions based on information relating to such Holder
furnished in writing by such Holder expressly for use in any Registration
Statement. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the proceeds received by such Holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation. This indemnity agreement will be in addition
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to any liability which any Initial Purchaser may otherwise have to the persons
referred to above in this Section 9(b).
(c) Promptly after receipt by an indemnified party under this Section 9 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 9, notify the indemnifying party in writing of the commencement thereof,
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however that such counsel shall be
reasonably satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the indemnified
party in an action, the indemnified party shall have the right to employ not
more than one separate counsel (in addition to any local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would, in the opinion of legal counsel to the
indemnified party, present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have been informed in writing by legal counsel that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) (a "Settlement") unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
An indemnifying party shall be liable for any Settlement effected with the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed, and an indemnifying party shall indemnify and
hold harmless any indemnified party from and against any loss, claim, damage,
liability or expense by reason of any Settlement effected with its written
consent.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 9 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, the Issuers and the Holders agree to contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending the
same) (collectively "Losses") to which the Issuers and one or more of the
Holders may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Issuers and by the Holders from the offering
of the Securities; provided, however, that in no case shall (x) the Issuers be
responsible for any amount in excess of an amount equal to the proportion of the
gross proceeds received by the Issuers upon the original issuance of the Senior
Notes representing the Transfer Restricted Notes to be sold by the relevant
Holders and (y) any Holder (except as may be provided in any agreement among the
Holders relating to the offering of the Securities) be responsible for any
amount in excess of the total proceeds received by such Holder
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upon its resale of Transfer Restricted Notes pursuant to a Registration
Statement hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Issuers and the Holders shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Issuers and of the Holders
in connection with the statements or omissions which resulted in such Losses as
well as any other relevant equitable considerations. Benefits received by the
Issuers shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses), and benefits received by the Holders shall be
deemed to be equal to the total proceeds received by such Holder upon its resale
of Transfer Restricted Notes pursuant to a Registration Statement hereunder.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by the Issuers or the
Holders. The Issuers and the Holders agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of this
Section 9, each person who controls an Holder within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of an Holder shall have the same rights to contribution as such Holder,
and each person who controls the Issuers within the meaning of either the
Securities Act or the Exchange Act and each officer and director of the Issuers
shall have the same rights to contribution as the Issuers, subject in each case
to the applicable terms and conditions of this paragraph (d).
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
(a) No Holder may participate in any Underwritten Registration
hereunder unless such Holder (i) agrees to sell such Holder's Transfer
Restricted Notes on the basis provided in any underwriting arrangements approved
by the Persons entitled hereunder to approve such arrangements specified in
Section 11(b) hereof and (ii) completes and executes all reasonable
questionnaires, powers of attorney, indemnities, underwriting agreements,
lock-up letters and other documents required under the terms of such
underwriting arrangements.
(b) The Holders of Transfer Restricted Notes covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Notes in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Notes included in such
offering; provided, that such investment bankers and managers must be reasonably
satisfactory to the Issuers; and provided, further, that in any event, any of
the Purchasers shall be deemed to be reasonably satisfactory to the Issuers.
SECTION 11. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
all rights provided herein, in the Indentures, the Purchase Agreement or granted
by law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Guarantors agree that monetary damages (including the liquidated damages
contemplated hereby) would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
19
<PAGE>
(b) No Inconsistent Agreements. None of the Company or the Guarantors
has entered into, nor shall it enter into on or after the date of this
Agreement, any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof.
(c) Adjustments Affecting the Senior Notes. The Company shall not
take any action, or permit any change to occur, with respect to the Senior Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless (i) in the case of Section 6 hereof and this
Section 11(d)(i), the Company has obtained the written consent of each Holder
affected thereby and (ii) in the case of all other provisions hereof, the
Company has obtained the written consent of Holders of at least a majority in
aggregate principal amount of the outstanding Transfer Restricted Notes affected
by such amendment, modification, supplement, waiver or consent; provided,
however, that no amendment, modification, supplement, waiver or consent to any
departure from the provisions of Section 5 hereof shall be effective as against
any Holder of Transfer Restricted Notes unless consented to in writing by such
Holder. Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders whose
securities are being tendered pursuant to the Exchange Offer and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being tendered pursuant to such Exchange Offer may be given by the Holders
of a majority of the outstanding principal amount of Transfer Restricted Notes
subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records
of the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Riddell Sports Inc.
900 Third Avenue, 27th Floor
New York, NY 10022
Telecopier No.: (212) 826-4300
Attention: David Groelinger, Chief Financial Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 735-2000
Attention: Sheldon Adler
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage
20
<PAGE>
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Notes; provided, however, that nothing
herein shall be deemed to permit any assignment, transfer or other disposition
of Transfer Restricted Notes in violation of the terms of the Purchase
Agreement. If any transferee of any Holder shall acquire Transfer Restricted
Notes, in any manner, whether by operation of law or otherwise, such Transfer
Restricted Notes shall be held subject to all of the terms of this Agreement,
and by taking and holding such Transfer Restricted Notes such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(g) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Issuers, on the one
hand, and the Purchasers, on the other hand, and shall have the right to enforce
such agreements directly to the extent it deems such enforcement necessary or
advisable to protect its rights or the rights of Holders hereunder. In addition,
by acquiring Transfer Restricted Notes, each Holder will be bound by the
obligations of Holders set forth herein.
(h) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(k) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Notes. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
21
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
RIDDELL SPORTS INC.
By: /s/ David Groelinger
----------------------------
Name: David Groelinger
Title: Executive Vice President
RIDDELL GUARANTORS:
RIDDELL, INC.
ALL AMERICAN SPORTS CORPORATION
EQUILINK LICENSING CORPORATION
PROACQ CORP.
RHC LICENSING CORPORATION
RIDMARK CORPORATION
CHEER ACQUISITION CORP.
By: /s/ David Groelinger
----------------------------
Name: David Groelinger
Title: Vice President
VARSITY GUARANTORS:
VARSITY SPIRIT CORPORATION
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
VARSITY USA, INC.
VARSITY/INTROPA TOURS, INC.
INTERNATIONAL LOGOS, INC.
By: /s/ John M. Nichols
----------------------------
Name: John M. Nichols
Title: Senior Vice President
<PAGE>
Confirmed and accepted as of the date
first written above:
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ David B. Stith
----------------------------
Name: David B. Stith
Title: Managing Director
FIRST CHICAGO CAPITAL MARKETS, INC.
By: /s/ Brad A. Bernstein
----------------------------
Name: Brad A. Bernstein
Title: Managing Director
23
<PAGE>
CREDIT AGREEMENT
among
RIDDELL SPORTS INC.
as Borrower,
AND
THE SUBSIDIARIES OF RIDDELL SPORTS INC.
as Guarantors,
AND
THE LENDERS IDENTIFIED HEREIN,
AND
NBD BANK,
as Administrative Agent
AND
NATIONSBANK, N.A.,
as Documentation Agent
DATED AS OF JUNE 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
1.1 Definitions..........................................................................................1
1.2 Computation of Time Periods and Other Definitional Provisions.......................................23
1.3 Accounting Terms....................................................................................23
SECTION 2 CREDIT FACILITIES.....................................................................................24
2.1 Revolving Loans.....................................................................................24
2.2 Letter of Credit Subfacility........................................................................26
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT..........................................32
3.1 Interest............................................................................................32
3.2 Place and Manner of Payments........................................................................33
3.3 Prepayments.........................................................................................33
3.4 Fees................................................................................................34
3.5 Payment in full at Maturity.........................................................................35
3.6 Computations of Interest and Fees...................................................................35
3.7 Pro Rata Treatment..................................................................................36
3.8 Sharing of Payments.................................................................................37
3.9 Capital Adequacy....................................................................................38
3.10 Inability To Determine Interest Rate...............................................................38
3.11 Illegality.........................................................................................39
3.12 Requirements of Law................................................................................39
3.13 Taxes..............................................................................................40
3.14 Compensation.......................................................................................43
3.15 Substitution of Lender.............................................................................43
SECTION 4 GUARANTY..............................................................................................44
4.1 Guaranty of Payment.................................................................................44
4.2 Obligations Unconditional...........................................................................44
4.3 Modifications.......................................................................................45
4.4 Waiver of Rights....................................................................................46
4.5 Reinstatement.......................................................................................46
4.6 Remedies............................................................................................46
4.7 Limitation of Guaranty..............................................................................47
4.8 Rights of Contribution..............................................................................47
SECTION 5 CONDITIONS PRECEDENT..................................................................................47
5.1 Closing Conditions..................................................................................47
5.2 Conditions to All Extensions of Credit..............................................................51
</TABLE>
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<TABLE>
<S> <C>
SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................52
6.1 Financial Condition.................................................................................52
6.2 No Material Change..................................................................................52
6.3 Organization and Good Standing......................................................................52
6.4 Due Authorization...................................................................................53
6.5 No Conflicts........................................................................................53
6.6 Consents............................................................................................53
6.7 Enforceable Obligations.............................................................................53
6.8 No Default..........................................................................................54
6.9 Ownership...........................................................................................54
6.10 Indebtedness.......................................................................................54
6.11 Litigation.........................................................................................54
6.12 Taxes..............................................................................................54
6.13 Compliance with Law................................................................................55
6.14 ERISA..............................................................................................55
6.15 Subsidiaries.......................................................................................56
6.16 Use of Proceeds; Margin Stock......................................................................57
6.17 Government Regulation..............................................................................57
6.18 Environmental Matters..............................................................................57
6.19 Intellectual Property..............................................................................59
6.20 Solvency...........................................................................................59
6.21 Investments........................................................................................59
6.22 Location of Collateral.............................................................................59
6.23 Disclosure.........................................................................................59
6.24 Licenses, etc......................................................................................60
6.25 No Burdensome Restrictions.........................................................................60
6.26 Collateral Documents...............................................................................60
SECTION 7 AFFIRMATIVE COVENANTS.................................................................................60
7.1 Information Covenants...............................................................................60
7.2 Financial Covenants.................................................................................64
7.3 Preservation of Existence and Franchises............................................................66
7.4 Books and Records...................................................................................66
7.5 Compliance with Law.................................................................................66
7.6 Payment of Taxes and Other Indebtedness.............................................................66
7.7 Insurance...........................................................................................66
7.8 Maintenance of Property.............................................................................67
7.9 Performance of Obligations..........................................................................68
7.10 Collateral.........................................................................................68
7.11 Use of Proceeds....................................................................................68
7.12 Audits/Inspections.................................................................................68
7.13 Additional Credit Parties..........................................................................69
7.14 Material License Agreements........................................................................69
7.15 Merger.............................................................................................70
7.16 Further Assurances Regarding Real Estate Collateral................................................70
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
SECTION 8 NEGATIVE COVENANTS....................................................................................71
8.1 Indebtedness........................................................................................71
8.2 Liens...............................................................................................72
8.3 Nature of Business..................................................................................72
8.4 Consolidation and Merger............................................................................73
8.5 Sale or Lease of Assets.............................................................................73
8.6 Sale Leasebacks.....................................................................................74
8.7 Advances, Investments and Loans.....................................................................74
8.8 Restricted Payments.................................................................................74
8.9 Transactions with Affiliates........................................................................74
8.10 Fiscal Year; Organizational Documents..............................................................75
8.11 Senior Notes/Subordinated Debt.....................................................................75
8.12 No Limitations.....................................................................................75
8.13 No Other Negative Pledges..........................................................................75
SECTION 9 EVENTS OF DEFAULT.....................................................................................76
9.1 Events of Default...................................................................................76
9.2 Acceleration; Remedies..............................................................................79
9.3 Allocation of Payments After Event of Default.......................................................80
SECTION 10 AGENCY PROVISIONS....................................................................................81
10.1 Appointment........................................................................................81
10.2 Delegation of Duties...............................................................................82
10.3 Exculpatory Provisions.............................................................................82
10.4 Reliance on Communications.........................................................................83
10.5 Notice of Default..................................................................................83
10.6 Non-Reliance on Agents and Other Lenders...........................................................83
10.7 Indemnification....................................................................................84
10.8 Agents in Their Individual Capacity................................................................84
10.9 Successor Agent....................................................................................85
SECTION 11 MISCELLANEOUS........................................................................................85
11.1 Notices............................................................................................85
11.2 Right of Set-Off...................................................................................85
11.3 Benefit of Agreement...............................................................................86
11.4 No Waiver; Remedies Cumulative.....................................................................88
11.5 Payment of Expenses; Indemnification...............................................................89
11.6 Amendments, Waivers and Consents...................................................................89
11.7 Counterparts.......................................................................................90
11.8 Headings...........................................................................................91
11.9 Defaulting Lender..................................................................................91
11.10 Survival of Indemnification and Representations and Warranties....................................91
11.11 Governing Law; Jurisdiction.......................................................................91
11.12 Waiver of Jury Trial..............................................................................92
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
11.13 Time..............................................................................................92
11.14 Severability......................................................................................92
11.15 Further Assurances................................................................................92
11.16 Confidentiality...................................................................................93
11.17 Entirety..........................................................................................93
11.18 Binding Effect....................................................................................93
11.19 Release of Collateral.............................................................................93
11.20 Consent to M.O.U..................................................................................94
</TABLE>
-iv-
<PAGE>
SCHEDULES
Schedule 1.1(a) Commitment Percentages
Schedule 5.1(f) Mortgaged Properties
Schedule 6.10 Indebtedness
Schedule 6.15 Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.19 Intellectual Property
Schedule 6.21 Investments
Schedule 6.22(a) Real Property Locations
Schedule 6.22(b) Personal Property Locations
Schedule 6.22(c) Chief Executive Offices
Schedule 6.24 Material License Agreements
Schedule 7.7 Insurance
Schedule 7.11 Use of Proceeds
Schedule 8.2 Liens
Schedule 11.1 Notices
Schedule 11.20 M.O.U.
EXHIBITS
Exhibit 2.1(b) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Notice of Continuation/Conversion
Exhibit 2.1(g) Form of Revolving Note
Exhibit 7.1(c) Form of Borrowing Base Certificate
Exhibit 7.1(d) Form of Officer's Certificate
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
-v-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Credit Agreement"), is entered into as of
June 19, 1997 among RIDDELL SPORTS INC., a Delaware corporation ("Borrower"),
each of Borrower's Material Subsidiaries (individually a "Guarantor" and
collectively the "Guarantors"), the Lenders (as defined herein), NBD BANK, as
Administrative Agent for the Lenders and NATIONSBANK, N.A., as Documentation
Agent for the Lenders.
RECITALS
WHEREAS, the Borrower and the Guarantors have requested the Lenders to
provide a senior secured revolving credit facility in an amount up to $40
million; and
WHEREAS, the Lenders party hereto have agreed to make the requested
senior secured revolving credit facility available to the Borrower on the terms
and conditions hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date, as provided in Section 7.13.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Administrative Agent" means NBD Bank (or any successor
thereto) or any successor administrative agent appointed pursuant to
Section 10.9.
<PAGE>
"Agents" mean the Administrative Agent, the Documentation
Agent and the Collateral Agent and any successors and assigns in such
capacity.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited
to all directors and officers of such Person), controlled by or under
direct or indirect common control with such Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such
corporation or (ii) to direct or cause direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Applicable Percentage" means the appropriate applicable
percentages corresponding to the Leverage Ratio in effect as of the
most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Applicable Applicable Applicable
Pricing Percentage For Percentage For Percentage for Applicable
Level Leverage Ratio Eurodollar Loans Base Rate Loans Letter of Credit Percentage For
Fees Commitment Fees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I (less than) 3.5 to 1.0 1.50% 0% 1.50% .40%
- --------------------------------------------------------------------------------------------------------------------------
II (less than) 4.0 to 1.0 but 1.75% .25% 1.75% .50%
(greater than or equal) 3.5 to 1.0
- --------------------------------------------------------------------------------------------------------------------------
III (less than) 4.5 to 1.0 but 2.00% .50% 2.00% .50%
(greater than or equal) 4.0 to 1.0
- --------------------------------------------------------------------------------------------------------------------------
IV (less than) 5.0 to 1.0 but 2.25% .75% 2.25% .50%
(greater than or equal) 4.5 to 1.0
- --------------------------------------------------------------------------------------------------------------------------
V (greater than or equal) 5.0 to 1.0 2.50% 1.00% 2.50% .50%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Applicable Percentage for Revolving Loans, the Letter of
Credit Fees and the Commitment Fees shall, in each case, be determined
and adjusted quarterly on the date (each a "Calculation Date") five
Business Days after the date by which the Borrower is required to
provide the officer's certificate in accordance with the provisions of
Section 7.1(d); provided that the initial Applicable Percentage for
Revolving Loans, the Letter of Credit Fees and the Commitment Fees
shall be based on Pricing Level IV (as shown above) and shall remain
at Pricing Level IV until June 30, 1998 and, thereafter, the Pricing
Level shall be determined by the then current Leverage Ratio; and
provided further that if the Borrower fails to provide the officer's
certificate required by Section 7.1(d) on or before the most recent
Calculation Date, the Applicable Percentage for Revolving Loans, the
Letter of Credit Fees and the Commitment Fees from such Calculation
Date shall be based on Pricing Level V until such time that an
appropriate officer's certificate is provided whereupon the Pricing
Level shall be determined by the then current Leverage Ratio. Each
Applicable Percentage shall be effective from one Calculation Date
until the next Calculation Date. Any adjustment in the Applicable
-2-
<PAGE>
Percentage shall be applicable to all existing Loans and Letters of
Credit as well as any new Loans made or Letters of Credit issued.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of
the United States Code, as amended, modified, succeeded or replaced
from time to time.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Administrative Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is
unable after due inquiry to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Administrative Agent
to obtain sufficient quotations in accordance with the terms hereof,
the Base Rate shall be determined without regard to clause (a) of the
first sentence of this definition until the circumstances giving rise
to such inability no longer exist. Any change in the Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or
the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Beginning Net Worth" means 80% of the Net Worth determined
as of September 30, 1997.
"Borrower" means Riddell Sports Inc., a Delaware corporation,
together with any successors and permitted assigns.
"Borrowing Base Assets" means, at any date of determination,
the sum of (a) 80% of Eligible Accounts Receivable plus (b) 50% of
Eligible Inventory plus (c) 35% of Eligible Work in Process plus (d)
at the request of the Borrower, for any one period of 90 consecutive
days ending prior to December 31, 1998, $5,000,000 (the
"Overadvance"); provided that the Borrower must provide written notice
to the Agents of the commencement of such 90 day period (and forward
to the Agents the fee set forth in Section 3.4(d)), and the Borrower
may only choose one 90 day period for such Overadvance.
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized
or required by law or other governmental action to close in Detroit,
Michigan, Charlotte, North Carolina or New York, New York; provided
that in the case of Eurodollar Loans, such day is also a day
-3-
<PAGE>
on which dealings between banks are carried on in U.S. dollar deposits
in the London interbank market.
"Calculation Date" has the meaning set forth in the
definition of Applicable Percentage.
"Capital Expenditures" means all expenditures of the Credit
Parties and their Subsidiaries which, in accordance with GAAP, would
be classified as capital expenditures, including, without limitation,
Capital Leases.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as
lessee which, in accordance with GAAP, is or should be accounted for
as a capital lease on the balance sheet of that Person.
"Cash Equivalents" means (a) securities issued or directly
and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time and demand deposits and
certificates of deposit of (i) any Lender, (ii) any domestic
commercial bank having capital and surplus in excess of $500,000,000
or (iii) any bank whose short-term commercial paper rating from S&P is
at least A-1 or the equivalent thereof or from Moody's is at least P-1
or the equivalent thereof (any such bank being an "Approved Bank"), in
each case with maturities of not more than 270 days from the date of
acquisition, (c) commercial paper and variable or fixed rate notes
issued by any Approved Bank (or by the parent company thereof) or any
variable rate notes issued by, or guaranteed by, any domestic
corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing
within six months of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including any of the Lenders)
or recognized securities dealer having capital and surplus in excess
of $500,000,000 for direct obligations issued by or fully guaranteed
by the United States of America in which the Borrower shall have a
perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at
least 100% of the amount of the repurchase obligations and (e)
Investments, classified in accordance with GAAP as current assets, in
money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $500,000,000 and the
portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).
-4-
<PAGE>
"Change of Control" means either of the following events: (a)
any "person" or "group" (within the meaning of Section 13(d) or 14(d)
of the Exchange Act), in each case, other than the Principals and the
Related Parties has become, directly or indirectly, the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of
all shares that any such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time),
by way of merger, consolidation or otherwise, of 35% or more of the
voting power of the Voting Stock of the Borrower on a fully-diluted
basis, after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities of the Borrower
(whether or not such securities are then currently convertible or
exercisable) or (b) a change in control (as defined in the
documentation evidencing the Senior Notes or the Subordinated Debt)
occurs.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986 and the rules
and regulations promulgated thereunder, as amended, modified,
succeeded or replaced from time to time.
"Collateral" means all collateral described in and covered by
the Collateral Documents.
"Collateral Agent" means NBD Bank (or any successor thereto)
or any successor collateral agent appointed pursuant to Section 10.9.
"Collateral Assignments of License Agreements" means any
collateral assignment of a Material License Agreement executed and
delivered by a Credit Party in favor of the Collateral Agent, for the
benefit of the Lenders, to secure its obligations under the Credit
Documents, as such may be amended, modified, extended, renewed,
restated or replaced from time to time.
"Collateral Documents" means the Security Agreements, the
Pledge Agreements, the Mortgage Documents, the Collateral Assignments
of License Agreements and such other documents executed and delivered
in connection with the attachment and perfection of the Lenders'
security interests in the assets of the Credit Parties, including
without limitation, the Mortgage Policies, UCC financing statements
and collateral assignments of certain license agreements and
intellectual property.
"Commitment Fees" means the fees payable to the Lenders
pursuant to Section 3.4(a).
"Commitments" means the commitment of each Lender with
respect to the Revolving Committed Amount.
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"Coverage Ratio" means, for the applicable period, the ratio
of (a) EBITDA minus Capital Expenditures to (b) cash Interest Expense.
"Credit Documents" means this Credit Agreement, the Notes,
any Joinder Agreement, the Collateral Documents, the LOC Documents,
and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.
"Credit Parties" means the Borrower and the Guarantors and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a)
all of the obligations of the Credit Parties to the Lenders (including
the Issuing Lender) and the Agents, whenever arising, under this
Credit Agreement, the Notes, the Collateral Documents or any of the
other Credit Documents to which the Borrower or any other Credit Party
is a party and (b) all liabilities and obligations owing from such
Credit Party to any Lender, or any Affiliate of a Lender, arising
under Hedging Agreements.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, (a)
has failed to make a Loan or purchase a Participation Interest
required pursuant to the terms of this Credit Agreement (but only for
so long as such Loan is not made or such Participation Interest is not
purchased), (b) has failed to pay to the Agents or any Lender an
amount owed by such Lender pursuant to the terms of this Credit
Agreement (but only for so long as such amount has not been repaid) or
(c) has been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or to a receiver, trustee or similar official.
"Documentation Agent" means NationsBank, N.A. (or any
successor thereto) or any successor documentation agent appointed
pursuant to Section 10.9.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"EBITDA" means, for any period, with respect to the Credit
Parties and their Subsidiaries on a consolidated basis, the sum of (a)
Net Income for such period (excluding the effect of any extraordinary
or other non-recurring gains (including any gain from the sale of
property) or non-cash losses) plus (b) an amount which, in the
determination of Net Income for such period has been deducted for (i)
Interest Expense for such period, (ii) total Federal, state, foreign
or other income taxes for such period,
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(iii) all depreciation and amortization for such period, all as
determined in accordance with GAAP, (iv) Transaction Costs and any
amounts paid in connection with or pursuant to the M.O.U. or the
transactions contemplated thereby, including, without limitation,
reasonable attorneys fees and disbursements and (v) without
duplication, any write down of intangible assets not to exceed
$5,000,000, in the aggregate.
"Effective Date" means the date on which the conditions set
forth in Section 5.1 shall have been fulfilled (or waived in the sole
discretion of the Lenders) and on which the initial Loans shall have
been made and/or the initial Letters of Credit shall have been issued.
"Eligible Assignee" means (a) any Lender or Affiliate or
subsidiary of a Lender and (b) any other commercial bank, financial
institution, institutional lender or "accredited investor" (as defined
in Regulation D of the Securities and Exchange Commission).
"Eligible Accounts Receivable" means, as of any date of
determination, and without duplication, the aggregate book value of
all accounts receivable, receivables, and obligations for payment
created or arising from the sale or shipment (if such shipment is
pursuant to a purchase order to Varsity Spirit Corporation or All
American Sports Corporation) of inventory or the rendering of services
in the ordinary course of business (collectively, the "Receivables"),
owned by or owing to the Credit Parties and in which the Lenders have
a first priority perfected security interest, net of any service
charges included in such aggregate value and sales adjustments
consistent with a Credit Party's internal policies and in any event in
accordance with GAAP, but excluding in any event (i) Receivables
subject to any Lien, other than any Lien described in clauses (a)
through (d) of the definition of Permitted Liens, (ii) Receivables
which are (A) if owing to a Credit Party other than Varsity Spirit
Corporation, more than 90 days past due and (B) if owing to Varsity
Spirit Corporation, more than 120 days past due; it being understood
that, for purposes of this clause (ii), any Receivables owing from
schools which are stated to have a due date between April 1 and
October 1 of any year shall be deemed to have a due date of October 1
of such year, and Receivables supported by a valid, existing and
enforceable irrevocable letter of credit or performance bond
acceptable to the Agents shall not be deemed to have a due date, (iii)
Receivables evidenced by notes, chattel paper or other instruments,
unless such notes, chattel paper or instruments have been delivered to
and are in the possession of the Collateral Agent, (iv) Receivables
owing by an account debtor which is subject to any bankruptcy or
insolvency proceeding of any kind, (v) Receivables owing by an account
debtor located outside of the United States or Canada (unless (A)
payment for the goods shipped is secured by an irrevocable letter of
credit or (B) export insurance is obtained, in each case in a form and
from an institution acceptable to the Agents), (vi) Receivables which
are contingent or subject to offset, deduction, counterclaim, dispute
or other defense to payment, in each case to the extent of such
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offset, deduction, counterclaim, dispute or other defense, (vii)
Receivables for which any direct or indirect Subsidiary of the
Borrower or any Affiliate of the Borrower is the account debtor,
(viii) Receivables representing a sale to the government of the United
States of America or any subdivision thereof, but not including any
state, county or municipal government as long as there are no
restrictions as to the assignability or collection as to such
Receivables, (ix) Receivables owing from any National Football League
team subject to the Promotional Rights Agreement dated June 1, 1990
between Riddell, Inc. and NFL Properties, Inc. or any replacement or
substitution agreement thereof or any similar agreement entered into
by the Borrower or any of its Subsidiaries, (x) all Receivables from
an account debtor who has more than 50% of its Receivables owing to
the Credit Parties that are more than 90 days past due and (xi)
Receivables which fail to meet such other specifications and
requirements as may from time to time be established by the Agents in
their reasonable discretion.
"Eligible Inventory" means, as of any date of determination
and without duplication, the lower of the aggregate book value (based
on a FIFO or a moving average cost valuation, consistently applied) or
fair market value (provided that the value of any inventory sold
between Credit Parties shall be calculated using the value of the
inventory prior to any such sale between Credit Parties) of all raw
materials and finished goods inventory owned by any Credit Party and
in which the Lenders have a first priority perfected security interest
less appropriate reserves determined in accordance with GAAP, but
excluding in any event (i) inventory subject to any Lien, other than
any Lien described in clauses (a) through (d) of the definition of
Permitted Liens, (ii) inventory which is not in good condition or
fails to meet standards for sale or use imposed by governmental
agencies, departments or divisions having regulatory authority over
such goods, (iii) inventory which is discontinued or not useable or
saleable at prices approximating their cost in the ordinary course of
the applicable Credit Party's business (including without duplication
the amount of any reserves for obsolescence, unsalability or decline
in value), (iv) inventory located outside of the United States or
Canada, (v) subsequent to the date 90 days after the Closing Date,
inventory located at a location not owned or leased by the applicable
Credit Party unless the Agents have received a waiver and estoppel
agreement, reasonably satisfactory to the Agents, from the
owner/operator of such location, and, if deemed appropriate by the
Collateral Agent, a UCC financing statement has been filed with
respect to such location, (vi) subsequent to the date 90 days after
the Closing Date, inventory located at a location leased by the
applicable Credit Party with respect to which the Collateral Agent
shall not have received a landlord's waiver and estoppel agreement
reasonably satisfactory to the Agents, (vii)
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inventory which is subject to a Material License Agreement unless (A)
the Material License Agreement is in full force and effect and (B) the
Agents have received (x) a Collateral Assignment of License Agreement
for such Material License Agreement and (y) a consent to such
Collateral Assignment of License Agreement from all other parties to
such Material License Agreement, in a form reasonably satisfactory to
the Agents, (viii) inventory which is leased or on consignment, (ix)
inventory which constitutes supplies and packaging, letter inventory,
parade inventory or screws or washers and (x) inventory which fails to
meet such other specifications and requirements as may from time to
time be established by the Agents in their reasonable discretion; it
being agreed that the value of Eligible Inventory shall not include
any capitalized procurement costs other than shipping costs and
customs duty and other landing costs for imported goods.
"Eligible Work in Process" means the book value of all work
in process of Riddell, Inc. (and only Riddell, Inc.) in which the
Lenders have a first priority perfected security interest, as such
work in process relates to materials but specifically excluding any
labor or overhead attributed to such work in process.
"Environmental Claim" means any investigation, written
notice, violation, written demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim whether administrative, judicial, or
private in nature arising (a) pursuant to, or in connection with, an
actual or alleged violation of, any Environmental Law, (b) in
connection with any Hazardous Material, (c) from any assessment,
abatement, removal, remedial, corrective, or other response action in
connection with an Environmental Law or other order of a Governmental
Authority or (d) from any actual or alleged damage, injury, threat, or
harm to health, safety, natural resources, or the environment.
"Environmental Laws" means any current or future legal
requirement of any Governmental Authority pertaining to (a) the
protection of health, safety, and the indoor or outdoor environment,
(b) the conservation, management, or use of natural resources and
wildlife, (c) the protection or use of surface water and groundwater
or (d) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation or handling of, or
exposure to, any hazardous or toxic substance or material or (e)
pollution (including any release to land surface water and
groundwater) and includes, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986,
42 USC 9601 et seq., Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and Hazardous and Solid
Waste Amendment of 1984, 42 USC 6901 et seq., Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et
seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq., Toxic
Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous
Materials Transportation Act, 49 USC App. 1801 et seq., Occupational
Safety and Health Act of 1970, as amended, 29 USC 651 et seq., Oil
Pollution Act of 1990, 33 USC 2701 et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 USC 11001 et seq., National
Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking
Water Act of 1974, as amended, 42 USC
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300(f) et seq., any analogous implementing or successor law, and any
amendment, rule, regulation, order, or directive issued thereunder.
"Equity Issuance" means any issuance by the Borrower to any
Person of (a) shares of its capital stock or other equity interests,
(b) any shares of its capital stock or other equity interests pursuant
to the exercise of options or warrants or (c) any shares of its
capital stock or other equity interests pursuant to the conversion of
any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with any Credit Party or
any of its Subsidiaries within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes any Credit Party or
any of its Subsidiaries and which is treated as a single employer
under Sections 414(b), (c), (m), or (o) of the Code.
"Eurodollar Loan" means a Loan bearing interest based at a
rate determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = London Interbank Offered Rate
-----------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available
from time to time to a Lender. The Eurodollar
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Rate shall be adjusted automatically on and as of the effective date
of any change in the Eurodollar Reserve Percentage.
"Event of Default" means any of the events or circumstances
described in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as
amended, modified, succeeded or replaced from time to time.
"Extension of Credit" means, as to any Lender, the making of
a Loan by such Lender (or a participation therein by a Lender) or the
issuance of, or participation in, a Letter of Credit by such Lender.
"Federal Funds Rate" means for any day the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next
preceding Business Day and (b) if no such rate is so published on such
next preceding Business Day, the Federal Funds Rate for such day shall
be the average rate quoted to the Administrative Agent on such day on
such transactions as determined by the Administrative Agent.
"Fee Letter" means that certain letter agreement between the
Borrower and the Agents dated as of the Closing Date.
"Funded Debt" means, without duplication, the sum of (a) all
Indebtedness of the Credit Parties and their Subsidiaries for borrowed
money, (b) all purchase money Indebtedness of the Credit Parties and
their Subsidiaries, (c) the principal portion of all obligations of
the Borrower and its Subsidiaries under Capital Leases, (d) all
obligations, contingent or otherwise, relative to the face amount of
all letters of credit (other than letters of credit supporting trade
payables in the ordinary course of business), whether or not drawn,
and banker's acceptances issued for the account of such Person (it
being understood that, to the extent an undrawn letter of credit
supports another obligation consisting of Indebtedness, in calculating
aggregated Indebtedness only such other obligation shall be included),
(e) all Guaranty Obligations of the Credit Parties and their
Subsidiaries with respect to Funded Debt of another Person, (f) all
Funded Debt of another entity secured by a Lien on any property of the
Credit Parties and their Subsidiaries whether or not such Funded Debt
has been assumed by a Credit Party or any of its Subsidiaries, (g) all
Funded Debt of any partnership or unincorporated joint venture
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to the extent a Credit Party or one of its Subsidiaries is legally
obligated or has a reasonable expectation of being liable with respect
thereto, net of any assets of such partnership or joint venture and
(h) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product where such transaction is
considered borrowed money indebtedness for tax purposes but is
classified as an operating lease in accordance with GAAP.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section
1.3.
"Governmental Authority" means any Federal, state, local,
provincial or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantor" means each of the Material Subsidiaries of the
Borrower and each Additional Credit Party which has executed a Joinder
Agreement, together with their successors and assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing any Indebtedness of any other Person in any
manner, whether direct or indirect, and including without limitation
any obligation, whether or not contingent, (a) to purchase any such
Indebtedness or other obligation or any property constituting security
therefor, (b) to advance or provide funds or other support for the
payment or purchase of such indebtedness or obligation or to maintain
working capital, solvency or other balance sheet condition of such
other Person (including, without limitation, maintenance agreements,
comfort letters, take or pay arrangements, put agreements or similar
agreements or arrangements) for the benefit of the holder of
Indebtedness of such other Person, (c) to lease or purchase property,
securities or services primarily for the purpose of assuring the owner
of such Indebtedness or (d) to otherwise assure or hold harmless the
owner of such Indebtedness or obligation against loss in respect
thereof. The amount of any Guaranty Obligation hereunder shall
(subject to any limitations set forth therein) be deemed to be an
amount equal to the outstanding principal amount (or maximum principal
amount, if larger) of the Indebtedness in respect of which such
Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedging Agreements" means, collectively, interest rate
protection agreements, foreign currency exchange agreements, commodity
purchase or option agreements or other interest or exchange rate or
commodity price hedging agreements, in each case, entered into or
purchased by a Credit Party.
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"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made (c)
all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person to
the extent of the value of such property (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations,
other than intercompany items, of such Person issued or assumed as the
deferred purchase price of property or services purchased by such
Person which would appear as liabilities on a balance sheet of such
Person, (e) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (f) all Guaranty Obligations of such Person, (g) the
principal portion of all obligations of such Person under (i) Capital
Leases and (ii) any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product
of such Person where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP, (h) all net obligations of such Person in
respect of Hedging Agreements, (i) the maximum amount of all
performance and standby letters of credit issued or bankers'
acceptances facilities created for the account of such Person and,
without duplication, all drafts drawn thereunder (to the extent
unreimbursed), (j) all preferred stock issued by such Person and
required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due within one year of the date of
determination and (k) the aggregate amount of uncollected accounts
receivable of such Person subject at such time to a sale of
receivables (or similar transaction) regardless of whether such
transaction is effected without recourse to such Person or in a manner
that would not be reflected on the balance sheet of such Person in
accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any partnership or unincorporated joint venture in
which such Person is legally obligated.
"Interest Expense" means, for any period, with respect to the
Credit Parties and their Subsidiaries on a consolidated basis, all net
interest expense, including the interest component under Capital
Leases, as determined in accordance with GAAP.
"Interest Payment Date" means (a) as to Base Rate Loans, the
tenth day of each month and the Revolving Loan Maturity Date and (b)
as to Eurodollar Loans, the last day of each applicable Interest
Period and the Revolving Loan Maturity Date and in addition where the
applicable Interest Period for a Eurodollar Loan is greater than three
months, then also the date three months from the beginning of the
Interest Period and each three months thereafter.
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"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Revolving Loan Maturity
Date and (c) where an Interest Period begins on a day for which there
is no numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities
or otherwise) of assets, shares of capital stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests
or other securities of such other Person or (b) any deposit with, or
advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other
assets in the ordinary course of business) or (c) any other capital
contribution to or investment in such Person, including, without
limitation, any Guaranty Obligation (including any support for a
Letter of Credit issued on behalf of such Person) incurred for the
benefit of such Person.
"Issuing Lender" means NBD Bank or any successor
Administrative Agent.
"Issuing Lender Fees" has the meaning set forth in Section
3.4(b).
"Joinder Agreement" means a Joinder Agreement substantially
in the form of Exhibit 7.13.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender
by way of assignment in accordance with the terms hereof, together
with their successors and permitted assigns.
"Letter of Credit" means a Letter of Credit issued for the
account of a Credit Party by the Issuing Lender pursuant to Section
2.2, as such Letter of Credit may be amended, modified, extended,
renewed or replaced.
"Letter of Credit Fees" has the meaning assigned to such term
in Section 3.4(b).
"Leverage Ratio" means, as of the end of each fiscal quarter,
the ratio of (a) total Funded Debt on such date to (b) EBITDA for the
twelve month period ending on such date.
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"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory
or otherwise), preference, priority or charge of any kind, including,
without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, and any lease in
the nature thereof.
"Loan" or "Loans" means the Revolving Loans (or a portion of
any Revolving Loan), individually or collectively, as appropriate.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (a) the rights and obligations of the parties concerned
or at risk or (b) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (b) the aggregate amount of all drawings
under Letters of Credit honored by an Issuing Lender but not
theretofore reimbursed.
"LOC Participants" means the Lenders.
"London Interbank Offered Rate" means, with respect to any
Eurodollar Loan for the Interest Period applicable thereto, the rate
of interest per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page)
as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified
on Telerate Page 3750, the applicable rate shall be the arithmetic
mean of all such rates. If, for any reason, such rate is not
available, the term "London Interbank Offered Rate" shall mean, with
respect to any Eurodollar Loan for the Interest Period applicable
thereto, the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars
at approximately 11:00 A.M. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such
Interest Period; provided, however, if more than one rate is specified
on Reuters Screen LIBO Page, the applicable rate shall be the
arithmetic mean of all such rates.
"Mandatory Borrowing" has the meaning set forth in Section
2.2(e).
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"Material Adverse Effect" means a material adverse effect on
(a) the operations, financial condition, business or prospects of the
Credit Parties and their Subsidiaries taken as a whole, (b) the
ability of the Borrower or the Credit Parties, taken as a whole, to
perform its or their respective obligations under this Credit
Agreement or any of the other Credit Documents, or (c) the validity or
enforceability of this Credit Agreement, any of the other Credit
Documents, or the rights and remedies of the Lenders hereunder or
thereunder taken as a whole.
"Material License Agreements" means (a) all License
Agreements set forth on Schedule 6.24 and (b) all other License
Agreements entered into by a Credit Party in which such Credit Party
either guaranties or actually pays royalties to the licensor party to
such License Agreement in an amount equal to or greater than $100,000
per year.
"Material Subsidiary" means, as of any date of determination,
all Subsidiaries, direct or indirect, of the Borrower that, together
with its Subsidiaries on a consolidated basis, owns assets equal to or
greater than five percent (5%) of the total assets of the Borrower and
its Subsidiaries on a consolidated basis; provided that at no time
shall the then Credit Parties, in the aggregate, own less than ninety
percent (90%) of the total assets of the Borrower and its Subsidiaries
on a consolidated basis. As of the Effective Date, the Material
Subsidiaries are Riddell, Inc., Equilink Licensing Corporation, RHC
Licensing Corporation, Ridmark Corporation, All American Sports
Corporation, Cheer Acquisition Corp., Varsity Spirit Corporation,
Varsity Spirit Fashions & Supplies, Inc., International Logos, Inc.,
Varsity/Intropa Tours, Inc., and Varsity USA, Inc.
"M.O.U." means the Memorandum of Understanding entered into
as of the 3rd day of June, 1997, by and among Riddell Sports Inc., RHC
Licensing Corporation, Riddell, Inc., Equilink Licensing Corporation,
Ridmark Corporation, MacMark Corporation, NBD Bank N.A., MLC Partners
Limited Partnership, Robert Nederlander, Leonard Toboroff, John
McConnaughy, Jr., Frederic H. Brooks, Connecticut Economics
Corporation, Robert Weisman, Bruce H. Levitt, as Bankruptcy Trustee of
M Holdings Corporation, Paul Swanson, as Bankruptcy Trustee of MGS
Acquisition, Inc., Official Unsecured Creditors Committee of MacGregor
Sporting Goods, Inc. and MacGregor Sports, Inc., Official Unsecured
Creditors' Committee of MacGregor Sporting Goods, Inc., M Holdings
Corporation, f/k/a MacGregor Sporting Goods, Inc., Innovative
Promotions, Inc., Ernest Wood, Jr., Harry Wood, Pursuit Athletic
Footwear, Inc., and Riddell Athletic Footwear, Inc. in the form set
forth on Schedule 11.20 and any non-material modifications or
amendments thereto.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
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"Mortgage Documents" means the Mortgages, the Mortgage
Policies and such other documents and agreements executed or delivered
in connection with the Real Properties.
"Mortgage Policies" has the meaning set forth in Section
5.1(f).
"Mortgages" has the meaning set forth in Section 5.1(f).
"Mortgaged Properties" has the meaning set forth in Section
5.1(f).
"Multiemployer Plan" means a Plan covered by Title IV of
ERISA which is a multiemployer plan as defined in Section 3(37) or
4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan covered by Title IV of
ERISA, other than a Multiemployer Plan, which any Credit Party or any
of its Subsidiaries or any ERISA Affiliate and at least one employer
other than a Credit Party or any of its Subsidiaries or any ERISA
Affiliate are contributing sponsors.
"Net Cash Proceeds" means the gross cash proceeds received
from an Equity Issuance net of (a) transaction costs payable to third
parties and (b) a good faith estimate of the taxes payable with
respect to such proceeds.
"Net Income" means, for any period, the net income after
taxes for such period of the Credit Parties and their Subsidiaries on
a consolidated basis, as determined in accordance with GAAP.
"Net Worth" means, as of any date, shareholders' equity or
net worth of the Credit Parties and their Subsidiaries on a
consolidated basis, as determined in accordance with GAAP plus,
without duplication, any reduction in Net Worth as a result of (a) a
write down in the value of intangibles not to exceed $5 million in the
aggregate, (b) the sum of all amounts paid pursuant to or in
connection with the M.O.U. or the transactions contemplated thereby
and (c) Transaction Costs.
"Non-Excluded Taxes" has the meaning set forth in Section
3.13.
"Non-Material Subsidiary" means, as of any date of
determination, all Subsidiaries of the Borrower, direct or indirect,
other than Material Subsidiaries.
"Note" or "Notes" means the Revolving Loan Notes,
individually or collectively, as appropriate.
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"Notice of Borrowing" means a request by the Borrower for a
Revolving Loan, in the form of Exhibit 2.1(b).
"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest
Period or to convert a Eurodollar Loan to a Base Rate Loan or a Base
Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.1(e).
"Overadvance" has the meaning set forth in the definition of
Borrowing Base Assets.
"Participation Interest" means the Extension of Credit by a
Lender by way of a purchase of a participation in Letters of Credit or
LOC Obligations as provided in Section 2.2 or in any Loans as provided
in Section 3.8.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
"Permitted Investments" means Investments which are (a) cash
or Cash Equivalents, (b) accounts receivable created, acquired or made
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms, (c) inventory, raw materials
and general intangibles (to the extent such general intangible is not
a Capital Expenditure) acquired in the ordinary course of business,
(d) Investments by one Credit Party in another Credit Party, (e)
Investments by a Credit Party in a Non-Material Subsidiary, not to
exceed $250,000, in the aggregate, at any one time, (f) loans to
directors, officers or employees in the ordinary course of business
for reasonable business expenses, not to exceed, in the aggregate,
$250,000 at any one time; (g) Investments in Capital Expenditures and
(g) other Investments not to exceed, in the aggregate, $2,500,000 at
any one time.
"Permitted Liens" means (a) Liens securing Credit Party
Obligations, (b) Liens for taxes not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and
as to which the property subject to any such Lien is not yet subject
to foreclosure, sale, collection, levy or loss on account thereof),
(c) Liens in respect of property imposed by law arising in the
ordinary course of business such as materialmen's, mechanics',
warehousemen's, carrier's, landlords' and other nonconsensual
statutory Liens which are not yet due and payable or which are being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and
as to which the property subject to any such Lien is not yet subject
to foreclosure, sale or loss on account thereof), (d) pledges or
deposits made in the ordinary course of business to secure payment of
worker's compensation insurance,
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unemployment insurance, pensions or social security programs, (e)
Liens arising from good faith deposits in connection with or to secure
performance of tenders, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
incurred in the ordinary course of business (other than obligations in
respect of the payment of borrowed money), (f) Liens arising from good
faith deposits in connection with or to secure performance of
statutory obligations and surety and appeal bonds, (g) easements,
rights-of-way, restrictions (including zoning restrictions), matters
of plat, minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the
use of the encumbered property for its intended purposes, (h) judgment
Liens that would not constitute an Event of Default, (i) Liens in
connection with Indebtedness permitted by Section 8.1(g), (j) Liens
arising by virtue of any statutory or common law provision relating to
banker's liens, rights of setoff or similar rights as to deposit
accounts or other funds maintained with a creditor depository
institution, (k) Liens existing on the date hereof and identified on
Schedule 8.2; provided that no such Lien shall extend to any property
other than the property subject thereto on the Closing Date (l)
Permitted Encumbrances (as defined in any Mortgage Document) and (m)
Liens on Unrestricted Margin Stock.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated), or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section
3(5) of ERISA.
"Pledge Agreements" means any Pledge Agreement executed and
delivered by a Credit Party in favor of the Collateral Agent, for the
benefit of the Lenders, to secure its obligations under the Credit
Documents, as amended, modified, extended, renewed or replaced from
time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by the Administrative Agent at its principal office
in Detroit, Michigan (or such other principal office of the
Administrative Agent as communicated in writing to the Borrower and
the Lenders) as its Prime Rate. Any change in the interest rate
resulting from a change in the Prime Rate shall become effective as of
12:01 a.m. of the Business Day on which each change in the Prime Rate
is announced by the Administrative Agent. The Prime Rate is a
reference rate used by the Administrative Agent in determining
interest rates on certain loans and is not intended to be the lowest
rate of interest charged on any extension of credit to any debtor.
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"Principals" means Robert E. Nederlander, Leonard Toboroff,
John McConnaughy, Jr., David Mauer, Dan Cougill, David Groelinger or
Jeffrey G. Webb.
"Real Properties" means the Mortgaged Properties and such
other real properties as the Credit Parties may lease from third
parties from time to time.
"Regulation D, G, U, or X" means Regulation D, G, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Related Party" with respect to any Principal means (a) any
spouse or former spouse or immediate family member of such Principal,
(b) the estate or any heir of such Principal, (c) any Subsidiary of
any of the Principals or any other Related Party or (d) any trust, the
beneficiaries of whom are Principals or Related Parties.
"Reportable Event" means a "reportable event" as defined in
Section 4043 of ERISA with respect to which the notice requirements to
the PBGC have not been waived.
"Required Lenders" means Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes at least 51% of the
Credit Exposure of all Lenders at such time; provided, however, that
if any Lender shall be a Defaulting Lender at such time then there
shall be excluded from the determination of Required Lenders the
aggregate principal amount of Credit Exposure of such Lender at such
time. For purposes of the preceding sentence, the term "Credit
Exposure" as applied to each Lender shall mean (a) at any time prior
to the termination of the Commitments, the sum of the Revolving
Commitment Percentage of such Lender multiplied by the Revolving
Committed Amount and (b) at any time after the termination of the
Commitments, the sum of (i) the principal balance of the outstanding
Loans of such Lender plus (ii) such Lender's Participation Interests
in the face amount of the outstanding Letters of Credit.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or
a court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
"Responsible Officer" means the Chief Executive Officer, the
Chief Financial Officer, the Treasurer, the Chief Accounting Officer
or the General Counsel of the Borrower and such other officers of the
Borrower who may be involved in administrating and complying with the
Credit Documents and communicating with the Agents with respect
thereto.
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"Revolving Loan Commitment Percentage" means, for each
Lender, the percentage identified as its Revolving Commitment
Percentage on Schedule 1.1(a), as such percentage may be modified in
connection with any assignment made in accordance with the provisions
of Section 11.3.
"Revolving Committed Amount" means (a) from the Closing Date
to September 30, 1997, FORTY MILLION DOLLARS ($40,000,000) and (b)
from October 1, 1997 to the Revolving Loan Maturity Date, THIRTY FIVE
MILLION DOLLARS ($35,000,000) or such lesser amount as the Revolving
Committed Amount may be reduced pursuant to Section 2.1(d).
"Revolving Loan Maturity Date" means June 30, 2002.
"Revolving Loans" means the Revolving Loans made to the
Borrower pursuant to Section 2.1.
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the Lenders evidencing the
Revolving Loans provided pursuant to Section 2.1, individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, supplemented, extended, renewed or replaced from time to
time and as evidenced in the form of Exhibit 2.1(g).
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of
such division in the business of rating securities.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Security Agreements" means any security agreement executed
and delivered by a Credit Party in favor of the Collateral Agent for
the benefit of the Lenders to secure its obligations under the Credit
Documents, as such may be amended, modified, extended, renewed,
restated or replaced from time to time.
"Senior Notes" means those certain notes issued by the
Borrower pursuant to that certain Indenture dated June 19, 1997, in
the amount of $115 million and maturing July 15, 2007, the terms of
which are acceptable to the Agents.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
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"Solvent" means, with respect to any Person as of a
particular date, that on such date (a) such Person is able to pay its
debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (b) such
Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature in their ordinary course, (c) such Person is
not engaged in a business or a transaction, and is not about to engage
in a business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration
to the prevailing practice in the industry in which such Person is
engaged or is to engage, (d) the fair value of the assets of such
Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person and (e) the
present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In
computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which,
in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"Subordinated Debt" means those certain convertible
subordinated notes issued by the Borrower, in the aggregate amount of
$7.5 million, and maturing November 1, 2004.
"Subordinated Secured Note" means that certain Subordinated
Secured Note dated as of November 30, 1995 in the original face amount
of $2,950,000 executed by Riddell Sports Inc. and Riddell, Inc. in
favor of James R. Arnold, Perry Arnold and Martha Arnold.
"Subsidiary" means, as to any Person, (a) any corporation
more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the
time, any class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at
the time owned by such Person directly or indirectly through
Subsidiaries, and (b) any partnership, association, joint venture or
other entity in which such person directly or indirectly through
Subsidiaries has more than a 50% equity interest at any time.
"Termination Event" means (a) with respect to any Single
Employer Plan, the occurrence of a Reportable Event or the substantial
cessation of operations (within the meaning of Section 4062(e) of
ERISA); (b) the withdrawal of any Credit Party or any of its
Subsidiaries or any ERISA Affiliate from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of
a Multiple Employer Plan; (c) the distribution of a notice of intent
to terminate or the actual termination of a Plan pursuant to Section
4041(a)(2) or
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4041A of ERISA; (d) the institution of proceedings to terminate or the
actual termination of a Plan by the PBGC under Section 4042 of ERISA;
(e) any event or condition which might reasonably constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan; or (f) the complete or partial
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate from a Multiemployer Plan.
"Transaction Costs" means all usual and necessary legal,
administrative and contractual obligations incurred by the Borrower in
connection with the consummation of (a) the acquisition of Varsity
Spirit Corporation, (b) the issuance of the Senior Notes and (c) the
Credit Documents.
"Unrestricted Margin Stock" means the capital stock of
Varsity Spirit Corporation that constitutes "margin stock" (as defined
in Regulation U of the Board of Governors of the Federal Reserve
System as from time to time in effect), if, and to the extent that the
value of such margin stock exceeds 25% of the total assets of the
Borrower and its Subsidiaries; provided that it is understood that
upon completion of the merger of Cheer Acquisition Corp. into Varsity
Spirit Corporation there shall be no Unrestricted Margin Stock
outstanding.
"Unused Commitment" means, for any period, the amount by
which (a) the then applicable aggregate Revolving Committed Amount
exceeds (b) the daily average sum for such period of the outstanding
aggregate principal amount of all Revolving Loans plus the aggregate
amount of LOC Obligations outstanding.
"Voting Stock" of a corporation means all classes of the
capital stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
1.2 Computation of Time Periods and Other Definitional Provisions.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Agreement unless otherwise specifically provided.
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP as of the Closing Date.
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SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and
conditions set forth herein, each Lender severally agrees to make
revolving loans (each a "Revolving Loan" and collectively the
"Revolving Loans") to the Borrower, in Dollars, at any time and from
time to time, during the period from and including the Effective Date
to but not including the Revolving Loan Maturity Date (or such earlier
date if the Revolving Committed Amount has been terminated as provided
herein); provided, however, that (i) the sum of the aggregate amount
of Revolving Loans outstanding plus the aggregate amount of LOC
Obligations outstanding shall not exceed the Revolving Committed
Amount and (ii) with respect to each individual Lender, the Lender's
pro rata share of outstanding Revolving Loans plus such Lender's pro
rata share of outstanding LOC Obligations shall not exceed such
Lender's Revolving Loan Commitment Percentage of the Revolving
Committed Amount. Subject to the terms of this Credit Agreement
(including Section 3.3), the Borrower may borrow, repay and reborrow
Revolving Loans.
(b) Method of Borrowing for Revolving Loans. By no later than
11:00 a.m. (i) on the date of the requested borrowing of Revolving
Loans that will be Base Rate Loans or (ii) three Business Days prior
to the date of the requested borrowing of Revolving Loans that will be
Eurodollar Loans, the Borrower shall submit a written Notice of
Borrowing in the form of Exhibit 2.1(b) to the Administrative Agent
setting forth (A) the amount requested, (B) whether such Revolving
Loans shall accrue interest at the Adjusted Base Rate or the Adjusted
Eurodollar Rate, (C) with respect to Revolving Loans that will be
Eurodollar Loans, the Interest Period applicable thereto and (D)
certification that the Borrower has complied in all respects with
Section 5.2.
(c) Funding of Revolving Loans. Upon receipt of a Notice of
Borrowing, the Administrative Agent shall promptly inform the Lenders
as to the terms thereof. Each Lender shall make its Revolving Loan
Commitment Percentage of the requested Revolving Loans available to
the Administrative Agent by 1:00 p.m. on the date specified in the
Notice of Borrowing by deposit, in Dollars, of immediately available
funds at the offices of the Administrative Agent at its principal
office in Detroit, Michigan or at such other address as the
Administrative Agent may designate in writing. The amount of the
requested Revolving Loans will then be made available to the Borrower
by the Administrative Agent by crediting the account of the Borrower
on the books of such office of the Administrative Agent, to the extent
the amount of such Revolving Loans are made available to the
Administrative Agent.
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No Lender shall be responsible for the failure or delay by
any other Lender in its obligation to make Revolving Loans hereunder;
provided, however, that the failure of any Lender to fulfill its
obligations hereunder shall not relieve any other Lender of its
obligations hereunder. Unless the Administrative Agent shall have been
notified by any Lender prior to the date of any such Revolving Loan
that such Lender does not intend to make available to the
Administrative Agent its portion of the Revolving Loans to be made on
such date, the Administrative Agent may assume that such Lender has
made such amount available to the Administrative Agent on the date of
such Revolving Loans, and the Administrative Agent in reliance upon
such assumption, may (in its sole discretion but without any
obligation to do so) make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to
the Administrative Agent, the Administrative Agent shall be able to
recover such corresponding amount from such Lender. If such Lender
does not pay such corresponding amount forthwith upon the
Administrative Agent's demand therefor, the Administrative Agent will
promptly notify the Borrower, and the Borrower shall immediately pay
such corresponding amount to the Administrative Agent. The
Administrative Agent shall also be entitled to recover from the Lender
or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount
was made available by the Administrative Agent to the Borrower to the
date such corresponding amount is recovered by the Administrative
Agent at a per annum rate equal to (i) from the Borrower at the
applicable rate for such Revolving Loan pursuant to the Notice of
Borrowing and (ii) from a Lender at the Federal Funds Rate.
(d) Reductions of Revolving Committed Amount. Upon at least
three Business Days' notice, the Borrower shall have the right to
permanently reduce all or part of the aggregate unused amount of the
Revolving Committed Amount at any time or from time to time; provided
that (i) each partial reduction shall be in an aggregate amount at
least equal to $5,000,000 and in integral multiples of $1,000,000
above such amount and (ii) no reduction shall be made which would
reduce the Revolving Committed Amount to an amount less than the
aggregate amount of outstanding Revolving Loans plus the aggregate
amount of outstanding LOC Obligations. Any reduction in (or
termination of) the Revolving Committed Amount shall be permanent and
may not be reinstated. The Administrative Agent shall immediately
notify the Lenders of any reduction in the Revolving Committed Amount.
(e) Continuations and Conversions. Subject to the terms of
Section 5.2, the Borrower shall have the option, on any Business Day,
to continue existing Eurodollar Loans for a subsequent Interest
Period, to convert Base Rate Loans into Eurodollar Loans or to convert
Eurodollar Loans into Base Rate Loans; provided, however, that (i)
each such continuation or conversion must be requested by the Borrower
pursuant to a written Notice of Continuation/Conversion, in the form
of Exhibit 2.1(e), in compliance with the
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terms set forth below, (ii) except as provided in Section 3.11,
Eurodollar Loans may only be continued or converted into Base Rate
Loans on the last day of the Interest Period applicable thereto, (iii)
Eurodollar Loans may not be continued nor may Base Rate Loans be
converted into Eurodollar Loans during the existence and continuation
of an Event of Default and (iv) any request to continue a Eurodollar
Loan that fails to comply with the terms hereof or any failure to
request a continuation of a Eurodollar Loan at the end of an Interest
Period shall constitute a conversion to a Base Rate Loan on the last
day of the applicable Interest Period. Each continuation or conversion
must be requested by the Borrower no later than 11:00 a.m. (A) on the
date for a requested conversion of a Eurodollar Loan to a Base Rate
Loan or (B) three Business Days prior to the date for a requested
continuation of a Eurodollar Loan or conversion of a Base Rate Loan to
a Eurodollar Loan, in each case pursuant to a written Notice of
Continuation/Conversion submitted to the Administrative Agent which
shall set forth (x) whether the Borrower wishes to continue or convert
such Loans and (y) if the request is to continue a Eurodollar Loan or
convert a Base Rate Loan to a Eurodollar Loan, the Interest Period
applicable thereto.
(f) Minimum Amounts. Each request for a borrowing, conversion
or continuation shall be subject to the requirements that (i) each
Eurodollar Loan shall be in a minimum amount of $1,000,000 and in
integral multiples of $100,000 in excess thereof, (ii) each Base Rate
Loan shall be in a minimum amount of the lesser of $100,000 (and
integral multiples of $50,000 in excess thereof) or the remaining
amount available under the Revolving Committed Amount and (iii) no
more than ten Eurodollar Loans shall be outstanding hereunder at any
one time. For the purposes of this Section, all Eurodollar Loans with
the same Interest Periods that begin and end on the same date shall be
considered as one Eurodollar Loan, but Eurodollar Loans with different
Interest Periods, even if they begin on the same date, shall be
considered as separate Eurodollar Loans.
(g) Notes. The Revolving Loans made by each Lender shall be
evidenced by a duly executed promissory note of the Borrower to each
applicable Lender in the face amount of its Revolving Loan Commitment
Percentage of the Revolving Committed Amount in substantially the form
of Exhibit 2.1(g).
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require (so long as such terms and
conditions do not impose any financial obligation on or require any
Lien (not otherwise contemplated by this Agreement) to be given by any
Credit Party or conflict with any obligation of, or detract from any
action which may be taken by, any Credit Party or their Subsidiaries
under this Agreement), the Issuing Lender shall from time to time upon
request issue (from the Effective Date to the
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Revolving Loan Maturity Date and in a form reasonably acceptable to
the Issuing Lender), in Dollars, and the LOC Participants shall
participate in, letters of credit (the "Letters of Credit") for the
account of the Borrower; provided, however, that (i) the aggregate
amount of LOC Obligations shall not at any time exceed FIVE MILLION
DOLLARS ($5,000,000), (ii) the sum of the aggregate amount of LOC
Obligations outstanding plus Revolving Loans outstanding shall not
exceed the Revolving Committed Amount and (iii) with respect to each
individual LOC Participant, the LOC Participant's pro rata share of
outstanding Revolving Loans plus its pro rata share of outstanding LOC
Obligations shall not exceed such LOC Participant's Revolving Loan
Commitment Percentage of the Revolving Committed Amount. The issuance
and expiry date of each Letter of Credit shall be a Business Day.
Except as otherwise expressly agreed upon by all the LOC Participants,
no Letter of Credit shall have an original expiry date more than one
year from the date of issuance, or as extended, shall have an expiry
date extending beyond the Revolving Loan Maturity Date. Each Letter of
Credit shall be either (x) a standby letter of credit issued to
support the obligations (including pension or insurance obligations),
contingent or otherwise, of the Borrower or any of its Subsidiaries,
or (y) a commercial letter of credit in respect of the purchase of
goods or services by the Borrower or any of its Subsidiaries in the
ordinary course of business. Each Letter of Credit shall comply with
the related LOC Documents.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Lender at least
three Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon
request, provide to the Administrative Agent for dissemination to the
Lenders a detailed report specifying the Letters of Credit which are
then issued and outstanding and any activity with respect thereto
which may have occurred since the date of the prior report, and
including therein, among other things, the account party, the
beneficiary, the face amount, and the expiry date as well as any
payments or expirations which may have occurred. The Issuing Lender
will further provide to the Administrative Agent, promptly upon
request, copies of the Letters of Credit and the other LOC Documents.
(c) Participations. Each LOC Participant, upon issuance of a
Letter of Credit, shall be deemed to have purchased without recourse a
risk participation from the Issuing Lender in such Letter of Credit
and each LOC Document related thereto and the rights and obligations
arising thereunder and any collateral relating thereto, in each case
in an amount equal to its Revolving Loan Commitment Percentage of the
obligations under such Letter of Credit, and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its Revolving Loan Commitment Percentage of the
obligations arising under such Letter of Credit. Without limiting the
scope and nature of each LOC Participant's participation in any Letter
of Credit, to the extent that the Issuing Lender has
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not been reimbursed as required hereunder or under any such Letter of
Credit, each such LOC Participant shall pay to the Issuing Lender its
Revolving Loan Commitment Percentage of such unreimbursed drawing in
same day funds on the day of notification by the Issuing Lender of an
unreimbursed drawing pursuant to the provisions of subsection (d)
hereof. The obligation of each LOC Participant to so reimburse the
Issuing Lender shall be absolute and unconditional and shall not be
affected by the occurrence of a Default, an Event of Default or any
other occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Borrower or any other Credit
Party to reimburse the Issuing Lender under any Letter of Credit,
together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the
Borrower. Unless the Borrower shall immediately notify the Issuing
Lender of its intent to otherwise reimburse the Issuing Lender, the
Borrower shall be deemed to have requested a Revolving Loan at the
Adjusted Base Rate in the amount of the drawing as provided in
subsection (e) hereof, the proceeds of which will be used to satisfy
the reimbursement obligations. The Borrower shall reimburse the
Issuing Lender on the day of drawing under any Letter of Credit either
with the proceeds of a Revolving Loan obtained hereunder or otherwise
in same day funds as provided herein or in the LOC Documents. If the
Borrower shall fail to reimburse the Issuing Lender as provided
hereinabove, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the Base Rate plus the
Applicable Percentage for the Base Rate Loans that are Revolving Loans
plus two percent (2%). The Borrower's reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of (but without waiver of) any rights of set-off,
counterclaim or defense to payment the applicable account party or the
Borrower may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any
other Person, including without limitation, any defense based on any
failure of the applicable account party, the Borrower or any other
Credit Party to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing
Lender will promptly notify the LOC Participants of the amount of any
unreimbursed drawing and each LOC Participant shall promptly pay to
the Administrative Agent for the account of the Issuing Lender, in
Dollars and in immediately available funds, the amount of such LOC
Participant's Revolving Loan Commitment Percentage of such
unreimbursed drawing. Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such
notice is received at or before 2:00 p.m., otherwise such payment
shall be made at or before 12:00 Noon on the Business Day next
succeeding the day such notice is received. If such LOC Participant
does not pay such amount to the Issuing Lender in full upon such
request, such LOC Participant shall, on demand, pay to the
Administrative Agent for the account of the Issuing Lender interest on
the unpaid amount during the period from the date the LOC Participant
received the notice regarding the unreimbursed
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drawing until such LOC Participant pays such amount to the Issuing
Lender in full at a rate per annum equal to, if paid within two
Business Days of the date of drawing, the Federal Funds Rate and
thereafter at a rate equal to the Base Rate. Each LOC Participant's
obligation to make such payment to the Issuing Lender, and the right
of the Issuing Lender to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever
and without regard to the termination of this Credit Agreement or the
Commitments hereunder, the existence of a Default or Event of Default
or the acceleration of the obligations hereunder and shall be made
without any offset, abatement, withholding or reduction whatsoever.
Simultaneously with the making of each such payment by a LOC
Participant to the Issuing Lender, such LOC Participant shall,
automatically and without any further action on the part of the
Issuing Lender or such LOC Participant, acquire a participation in an
amount equal to such payment (excluding the portion of such payment
constituting interest owing to the Issuing Lender) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest
thereon and in the related LOC Documents, and shall have a claim
against the Borrower and the other Credit Parties with respect
thereto.
(e) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Revolving Loan borrowing to reimburse a drawing under a Letter of
Credit, the Administrative Agent shall give notice to the applicable
Lenders that a Revolving Loan has been requested or deemed requested
in connection with a drawing under a Letter of Credit, in which case a
Revolving Loan borrowing comprised solely of Base Rate Loans (each
such borrowing, a "Mandatory Borrowing") shall be immediately made
from all applicable Lenders (without giving effect to any termination
of the Commitments pursuant to Section 9.2) pro rata based on each
Lender's respective Revolving Loan Commitment Percentage and the
proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective LOC Obligations. Each such Lender hereby
irrevocably agrees to make such Revolving Loans immediately upon any
such request or deemed request on account of each such Mandatory
Borrowing in the amount and in the manner specified in the preceding
sentence and on the same such date notwithstanding (i) the amount of
Mandatory Borrowing may not comply with the minimum amount for
borrowings of Revolving Loans otherwise required hereunder, (ii)
whether any conditions specified in Section 5 are then satisfied,
(iii) whether a Default or Event of Default then exists, (iv) failure
of any such request or deemed request for Revolving Loans to be made
by the time otherwise required hereunder, (v) the date of such
Mandatory Borrowing, or (vi) any reduction in the Revolving Committed
Amount or any termination of the Commitments. In the event that any
Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with
respect to the Borrower or any other Credit Party), then each such
Lender hereby agrees that it shall forthwith fund (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for
any payments received from
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the Borrower on or after such date and prior to such purchase) its
Participation Interest in the outstanding LOC Obligations; provided,
further, that in the event any Lender shall fail to fund its
Participation Interest on the day the Mandatory Borrowing would
otherwise have occurred, then the amount of such Lender's unfunded
Participation Interest therein shall bear interest payable to the
Issuing Lender upon demand, at the rate equal to, if paid within two
Business Days of such date, the Federal Funds Rate, and thereafter at
a rate equal to the Base Rate.
(f) Modification and Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Letter of Credit shall, for purposes hereof, be treated in all
respects the same as the issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Lender may
have the Letters of Credit be subject to The Uniform Customs and
Practice for Documentary Credits, as published as of the date of issue
by the International Chamber of Commerce (Publication No. 500 or the
most recent publication, the "UCP"), in which case the UCP may be
incorporated therein and deemed in all respects to be a part thereof.
(h) Responsibility of Issuing Lender. It is expressly
understood and agreed as between the Lenders that the obligations of
the Issuing Lender hereunder to the LOC Participants are only those
expressly set forth in this Credit Agreement and that the Issuing
Lender shall be entitled to assume that the conditions precedent set
forth in Section 5 have been satisfied unless it shall have acquired
actual knowledge that any such condition precedent has not been
satisfied; provided, however, that nothing set forth in this Section
2.2 shall be deemed to prejudice the right of any LOC Participant to
recover from the Issuing Lender any amounts made available by such LOC
Participant to the Issuing Lender pursuant to this Section 2.2 in the
event that it is determined by a court of competent jurisdiction that
the payment with respect to a Letter of Credit constituted gross
negligence or willful misconduct on the part of the Issuing Lender.
(i) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall govern.
(j) Indemnification of Issuing Lender.
(i) In addition to its other obligations under this
Credit Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the
Issuing Lender to
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honor a drawing under a Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present
or future de jure or de facto government or governmental
authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between the Borrower and the Issuing Lender,
the Borrower shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof.
The Issuing Lender shall not be responsible for (except in
the case of (A), (B) and (C) below if the Issuing Lender has
actual knowledge to the contrary): (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) failure of the beneficiary of
a Letter of Credit to comply fully with conditions required
in order to draw upon a Letter of Credit; (D) errors,
omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in
interpretation of technical terms; (F) any loss or delay in
the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (G) any consequences arising from
causes beyond the control of the Issuing Lender, including,
without limitation, any Government Acts. None of the above
shall affect, impair, or prevent the vesting of the Issuing
Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Issuing Lender, under or
in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not
put the Issuing Lender under any resulting liability to the
Borrower or any other Credit Party. It is the intention of
the parties that this Credit Agreement shall be construed and
applied to protect and indemnify the Issuing Lender against
any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the
Borrower, including, without limitation, any and all risks of
the acts or omissions, whether rightful or wrongful, of any
present or future Government Acts. The Issuing Lender shall
not, in any way, be liable for any failure by the Issuing
Lender or anyone else to pay any drawing under any Letter of
Credit as a result of any Government Acts or any other cause
beyond the control of the Issuing Lender.
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(iv) Nothing in this subsection (j) is intended to
limit the reimbursement obligation of the Borrower contained
in this Section 2.2. The obligations of the Borrower under
this subsection (j) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (j), the Borrower shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender arising solely out
of the gross negligence or willful misconduct of the Issuing
Lender, as determined by a court of competent jurisdiction.
Nothing in this Agreement shall relieve the Issuing Lender of
any liability to the Borrower in respect of any action taken
by the Issuing Lender which action constitutes gross
negligence or willful misconduct of the Issuing Lender or a
violation of the UCP or Uniform Commercial Code (as
applicable), as determined by a court of competent
jurisdiction.
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
3.1 Interest.
(a) Interest Rate. All Base Rate Loans shall accrue interest
at the Adjusted Base Rate and all Eurodollar Loans shall accrue
interest at the Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Loans and any other amounts
owing hereunder or under the other Credit Documents (including without
limitation fees and expenses) shall bear interest, payable on demand,
at a per annum rate equal to 2% plus the rate which would otherwise be
applicable (or if no rate is applicable, then the rate for Revolving
Loans that are Base Rate Loans plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and
payable in arrears on each Interest Payment Date. If an Interest
Payment Date falls on a date which is not a Business Day, such
Interest Payment Date shall be deemed to be the next succeeding
Business Day, except that in the case of Eurodollar Loans where the
next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding day.
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3.2 Place and Manner of Payments.
All payments of principal, interest, fees, expenses and other amounts
to be made by a Credit Party under this Agreement shall be received not later
than 2:00 p.m. on the date when due, in Dollars and in immediately available
funds, by the Administrative Agent at its offices in Detroit, Michigan.
Payments received after such time shall be deemed to have been received on the
next Business Day. The Borrower shall, at the time it makes any payment under
this Agreement, specify to the Administrative Agent, the Loans, Letters of
Credit, fees or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that it fails to specify, or if such
application would be inconsistent with the terms hereof, the Administrative
Agent shall, subject to Section 3.7, distribute such payment to the Lenders in
such manner as the Administrative Agent may deem appropriate). The
Administrative Agent will distribute such payments to the applicable Lenders if
any such payment is received prior to 2:00 p.m.; otherwise the Administrative
Agent will distribute such payment to the applicable Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest
and fees for the period of such extension), except that in the case of
Eurodollar Loans, if the extension would cause the payment to be made in the
next following calendar month, then such payment shall instead be made on the
next preceding Business Day.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the
Administrative Agent and any prepayment of Eurodollar Loans will be
subject to Section 3.14 and (ii) each such partial prepayment of Loans
shall be in the minimum principal amount of $1,000,000 and integral
multiples of $100,000 in excess thereof.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time the
sum of the aggregate amount of Revolving Loans outstanding
plus LOC Obligations outstanding exceeds the Revolving
Committed Amount, the Borrower shall immediately make a
principal payment to the Administrative Agent in the manner
and in an amount necessary to be in compliance with Section
2.1.
(ii) Application of Prepayments. All amounts
required to be paid pursuant to Section 3.3(b)(i) shall be
applied first to Revolving Loans and second to a cash
collateral account in respect of LOC Obligations. Within the
parameters
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of the application set forth above, prepayments
shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period
maturities. All prepayments hereunder shall be subject to
Section 3.14.
3.4 Fees.
(a) Commitment Fees. In consideration of the Revolving
Committed Amount being made available by the Lenders hereunder, the
Borrower agrees to pay to the Administrative Agent, for the pro rata
benefit of each applicable Lender (based on each Lender's Revolving
Loan Commitment Percentage of the Revolving Committed Amount), a fee
equal to the Applicable Percentage for Commitment Fees multiplied by
the Unused Commitment (the "Commitment Fees"). The Commitment Fees
accrued prior to the Closing Date shall be paid on the Closing Date
and future Commitment Fees shall commence to accrue on the Effective
Date and shall be due and payable in arrears on the last day of each
fiscal quarter of the Borrower (as well as on the Revolving Loan
Maturity Date and on any date that the Revolving Committed Amount is
reduced) for the immediately preceding fiscal quarter (or portion
thereof), beginning with the first of such dates to occur after the
Closing Date.
(b) Letter of Credit Fees.
(i) Letter of Credit Fees. In consideration of the
issuance of Letters of Credit hereunder, the Borrower agrees
to pay to the Issuing Lender for the pro rata benefit of the
applicable Lenders (based on each Lender's Revolving Loan
Commitment Percentage of the Revolving Committed Amount), a
fee (the "Letter of Credit Fees") equal to the Applicable
Percentage for the Letter of Credit Fees on the average daily
maximum amount available to be drawn under each such Letter
of Credit from the date of issuance to the date of
expiration. The Letter of Credit Fees will be payable in
arrears on the last day of each fiscal quarter of the
Borrower (as well as on the Revolving Loan Maturity Date) for
the immediately preceding fiscal quarter (or portion
thereof), beginning with the first of such dates to occur
after the Closing Date.
(ii) Issuing Lender Fees. In addition to the Letter
of Credit Fees payable pursuant to subsection (i) above, the
Borrower shall pay to the Issuing Lender for its own account,
without sharing by the other Lenders, (A) a fee equal to
one-fourth of one percent (.25%) per annum on the total sum
of all Letters of Credit issued by the Issuing Lender, such
fee to be paid in arrears on the last day of each fiscal
quarter of the Borrower (as well as on the Revolving Loan
Maturity Date) and (B) the customary charges from time to
time to the Issuing Lender for its services in connection
with the issuance, amendment, payment, transfer,
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administration, cancellation and conversion of, and drawings
under, such Letters of Credit (collectively, the "Issuing
Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, an annual fee in accordance
with the terms of the Fee Letter.
(d) Overadvance Fee. If the Borrower provides to the Agents
written notice that it desires to commence the 90 day period for the
Overadvance (as set forth in the definition of Borrowing Base Assets),
the Borrower shall simultaneous with such notice pay to the Lenders a
nonrefundable fee of $12,500 to be shared pro rata by the Lenders
(based on each Lender's Revolving Loan Commitment Percentage of the
Revolving Committed Amount).
3.5 Payment in full at Maturity.
On the Revolving Loan Maturity Date, the entire outstanding principal
balance of all Revolving Loans and all LOC Obligations, together with accrued
but unpaid interest and all other sums owing with respect thereto, shall be due
and payable in full, unless accelerated sooner pursuant to Section 9.
3.6 Computations of Interest and Fees.
(a) All computations of interest and fees hereunder shall be
made on the basis of the actual number of days elapsed over a year of
360 days. Interest shall accrue from and include the date of borrowing
(or continuation or conversion) but exclude the date of payment.
(b) It is the intent of the Lenders and the Credit Parties to
conform to and contract in strict compliance with applicable usury law
from time to time in effect. All agreements between the Lenders and
the Borrower are hereby limited by the provisions of this paragraph
which shall override and control all such agreements, whether now
existing or hereafter arising and whether written or oral. In no way,
nor in any event or contingency (including but not limited to
prepayment or acceleration of the maturity of any obligation), shall
the interest taken, reserved, contracted for, charged, or received
under this Credit Agreement, under the Notes or otherwise, exceed the
maximum nonusurious amount permissible under applicable law. If, from
any possible construction of any of the Credit Documents or any other
document, interest would otherwise be payable in excess of the maximum
nonusurious amount, any such construction shall be subject to the
provisions of this paragraph and such documents shall be automatically
reduced to the maximum nonusurious amount permitted under applicable
law, without the necessity of execution of any amendment or new
document. If any Lender shall ever receive anything of value which is
characterized as interest on the Loans under applicable
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law and which would, apart from this provision, be in excess of the
maximum lawful amount, an amount equal to the amount which would have
been excessive interest shall, without penalty, be applied to the
reduction of the principal amount owing on the Loans and not to the
payment of interest, or refunded to the Borrower or the other payor
thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal amount of the Loans. The right
to demand payment of the Loans or any other indebtedness evidenced by
any of the Credit Documents does not include the right to accelerate
the payment of any interest which has not otherwise accrued on the
date of such demand, and the Lenders do not intend to charge or
receive any unearned interest in the event of such demand. All
interest paid or agreed to be paid to the Lenders with respect to the
Loans shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term
(including any renewal or extension) of the Loans so that the amount
of interest on account of such indebtedness does not exceed the
maximum nonusurious amount permitted by applicable law.
3.7 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Revolving Loan borrowing (including, without
limitation, each Mandatory Borrowing), each payment or prepayment of
principal of any Loan, each payment of fees (other than the Issuing
Lender Fees retained by the Issuing Lender for its own account and the
Administrative Fees retained by the Administrative Agent for its own
account), each reduction of the Revolving Committed Amount, and each
conversion or continuation of any Loan, shall (except as otherwise
provided in Section 3.11) be allocated pro rata among the relevant
Lenders in accordance with the respective Revolving Loan Commitment
Percentages of such Lenders (or, if the Commitments of such Lenders
have expired or been terminated, in accordance with the respective
principal amounts of the outstanding Loans and Participation Interests
of such Lenders); provided that, if any Lender shall have failed to
pay its applicable pro rata share of any Revolving Loan, then any
amount to which such Lender would otherwise be entitled pursuant to
this subsection (a) shall instead be payable to the Administrative
Agent until the share of such Loan not funded by such Lender has been
repaid; provided further, that in the event any amount paid to any
Lender pursuant to this subsection (a) is rescinded or must otherwise
be returned by the Administrative Agent, each Lender shall, upon the
request of the Administrative Agent, repay to the Administrative Agent
the amount so paid to such Lender, with interest for the period
commencing on the date such payment is returned by the Administrative
Agent until the date the Administrative Agent receives such repayment
at a rate per annum equal to, during the period to but excluding the
date two Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus two percent (2%) per annum; and
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(b) Letters of Credit. Each payment of unreimbursed drawings
in respect of LOC Obligations shall be allocated to each LOC
Participant pro rata in accordance with its Revolving Loan Commitment
Percentage; provided that, if any LOC Participant shall have failed to
pay its applicable pro rata share of any drawing under any Letter of
Credit, then any amount to which such LOC Participant would otherwise
be entitled pursuant to this subsection (b) shall instead be payable
to the Issuing Lender until the share of such unreimbursed drawing not
funded by such Lender has been repaid; provided further, that in the
event any amount paid to any LOC Participant pursuant to this
subsection (b) is rescinded or must otherwise be returned by the
Issuing Lender, each LOC Participant shall, upon the request of the
Issuing Lender, repay to the Administrative Agent for the account of
the Issuing Lender the amount so paid to such LOC Participant, with
interest for the period commencing on the date such payment is
returned by the Issuing Lender until the date the Issuing Lender
receives such repayment at a rate per annum equal to, during the
period to but excluding the date two Business Days after such request,
the Federal Funds Rate, and thereafter, the Base Rate plus two percent
(2%) per annum.
3.8 Sharing of Payments.
The Lenders agree among themselves that, except to the extent
otherwise provided herein, in the event that any Lender shall obtain payment in
respect of any Loan, unreimbursed drawing with respect to any LOC Obligations
or any other obligation owing to such Lender under this Credit Agreement
through the exercise of a right of setoff, banker's lien or counterclaim, or
pursuant to a secured claim under Section 506 of the Bankruptcy Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Lender under any applicable bankruptcy, insolvency or other similar law
or otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
pay in cash or purchase from the other Lenders a participation in such Loans,
LOC Obligations, and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all
Lenders share such payment in accordance with their respective ratable shares
as provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by payment in cash or a
repurchase of a participation theretofore sold, return its share of that
benefit (together with its share of any accrued interest payable with respect
thereto) to each Lender whose payment shall have been rescinded or otherwise
restored. The Borrower agrees that any Lender so purchasing such a
participation may, to the fullest extent permitted by law, exercise all rights
of payment, including setoff, banker's lien or counterclaim, with respect to
such participation as fully as if such Lender were a holder of such Loan, LOC
Obligation or other obligation in the amount of such participation. Except as
otherwise expressly provided in this Credit Agreement, if any Lender or an
Agent shall fail to remit to an Agent or any other Lender an amount payable by
such Lender or such Agent to
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such Agent or such other Lender pursuant to this Credit Agreement on the date
when such amount is due, such payments shall be made together with interest
thereon for each date from the date such amount is due until the date such
amount is paid to such Agent or such other Lender at a rate per annum equal to
the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.8 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders under this Section 3.8 to share in the benefits
of any recovery on such secured claim.
3.9 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or
administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by such Lender, or its parent corporation, with any
request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Lender's (or
parent corporation's) capital or assets as a consequence of its commitments or
obligations hereunder to a level below that which such Lender, or its parent
corporation, could have achieved but for such adoption, effectiveness, change
or compliance (taking into consideration such Lender's (or parent
corporation's) policies with respect to capital adequacy), then, upon notice
from such Lender to the Borrower, the Borrower shall be obligated to pay to
such Lender such additional amount or amounts as will compensate such Lender on
an after-tax basis (after taking into account applicable deductions and credits
in respect of the amount indemnified) for such reduction. Each determination by
any such Lender of amounts owing under this Section shall, absent manifest
error, be conclusive and binding on the parties hereto. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.10 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Administrative
Agent shall have determined in good faith (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, the Administrative
Agent shall give telecopy or telephonic notice thereof to the Borrower and the
Lenders as soon as practicable thereafter, and will also give prompt written
notice to the Borrower when such conditions no longer exist. If such notice is
given (a) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as Base Rate Loans, (b) any Loans that were to
have been converted on the first day of such Interest Period to or continued as
Eurodollar Loans shall be converted to or continued as Base Rate Loans and (c)
any
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outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Agent, no further Eurodollar Loans shall be made or continued as such, nor
shall the Borrower have the right to convert Base Rate Loans to Eurodollar
Loans.
3.11 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 occurring after the Closing Date shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Credit Agreement,
(a) such Lender shall promptly give written notice of such circumstances to the
Borrower and the Administrative Agent (which notice shall be withdrawn whenever
such circumstances no longer exist), (b) the commitment of such Lender
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and,
until such time as it shall no longer be unlawful for such Lender to make or
maintain Eurodollar Loans, such Lender shall then have a commitment only to
make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's
Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Base Rate Loans on the respective last days or 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 Section 3.14.
3.12 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, 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, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by Section 3.13 (including
Non-Excluded Taxes imposed solely by reason of any failure of such
Lender to comply with its obligations under Section 3.13(b)) and
changes in taxes measured by or imposed upon the overall net income,
or franchise tax (imposed in lieu of such net income tax), of such
Lender or its applicable lending office, branch, or any affiliate
thereof);
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(b) 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
(c) shall impose on such Lender any other condition
(excluding any tax of any kind whatsoever);
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, upon notice to the Borrower from such Lender,
through the Administrative Agent, in accordance herewith, the Borrower shall be
obligated to promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender on an after-tax basis (after taking into
account applicable deductions and credits in respect of the amount indemnified)
for such increased cost or reduced amount receivable, provided that, in any
such case, the Borrower may elect to convert the Eurodollar Loans made by such
Lender hereunder to Base Rate Loans by giving the Administrative Agent at least
one Business Day's notice of such election, in which case the Borrower shall
promptly pay to such Lender, upon demand, without duplication, such amounts, if
any, as may be required pursuant to Section 3.14. If any Lender becomes
entitled to claim any additional amounts pursuant to this Section 3.12, it
shall provide prompt notice thereof to the Borrower, through the Administrative
Agent, certifying (x) that one of the events described in this Section 3.12 has
occurred and describing in reasonable detail the nature of such event, (y) as
to the increased cost or reduced amount resulting from such event and (z) as to
the additional amount demanded by such Lender and a reasonably detailed
explanation of the calculation thereof. Such a certificate as to any additional
amounts payable pursuant to this Section 3.12 submitted by such Lender, through
the Administrative Agent, to the Borrower shall be conclusive and binding on
the parties hereto in the absence of manifest error. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.13 Taxes.
(a) Except as provided below in this Section 3.13, all
payments made by the Borrower under this Credit 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 court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or
affiliate thereof, and all franchise taxes, branch taxes, taxes on
doing business or taxes
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on the overall capital or net worth of any Lender or its applicable
lending office, or any branch or affiliate thereof, in each case
imposed in lieu of net income taxes: (i) by the jurisdiction under the
laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes. 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 an Agent or any Lender hereunder or under any
Notes, (A) the amounts so payable to an Agent or such Lender shall be
increased to the extent necessary to yield to an 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 Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded
Taxes and 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 Section 3.13 whenever
any Non-Excluded Taxes are payable by the Borrower, and (B) as
promptly as possible after requested the Borrower shall send to such
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
Agents and any Lender for any incremental taxes, interest or penalties
that may become payable by an Agent or any Lender as a result of any
such failure. The agreements in this subsection shall survive the
termination of this Credit 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) (A) on or before the date of any payment by the
Borrower under this Credit Agreement or Notes to such Lender,
deliver to the Borrower and the Administrative Agent (x) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, certifying that it is entitled to receive
payments under this Credit Agreement and any Notes without
deduction or withholding of any United States federal income
taxes and (y) an Internal Revenue Service Form W-8 or W-9, or
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successor applicable form, as the case may be, certifying
that it is entitled to an exemption from United States backup
withholding tax;
(B) 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
(C) 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; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (A) represent to the Borrower (for the
benefit of the Borrower and the Agents) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) agree to furnish to the Borrower, on or
before the date of any payment by the Borrower, with a copy
to the Administrative Agent, two accurate and complete
original signed copies of Internal Revenue Service Form W-8,
or successor applicable form certifying to such Lender's
legal entitlement at the date of such certificate to an
exemption from U.S. withholding tax under the provisions of
Section 881(c) of the Internal Revenue Code with respect to
payments to be made under this Credit Agreement and any Notes
(and to deliver to the Borrower and the Administrative Agent
two further copies of such form on or before the date it
expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recently provided form
and, if necessary, obtain any extensions of time reasonably
requested by the Borrower or the Administrative Agent for
filing and completing such forms), and (C) agree, to the
extent legally entitled to do so, upon reasonable request by
the Borrower, to provide to the Borrower (for the benefit of
the Borrower and the Agents) such other forms as may be
reasonably required in order to establish the legal
entitlement of such Lender to an exemption from withholding
with respect to payments under this Credit Agreement and any
Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Lender hereunder
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 then such Lender shall be exempt from such requirements. Each
Person that shall become a Lender or a participant of a Lender
pursuant to Section 11.3 shall, upon the effectiveness of the related
transfer, be required to provide all of the
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forms, certifications and statements required pursuant to this
subsection (b); provided that in the case of a participant of a
Lender, the obligations of such participant of a Lender pursuant to
this subsection (b) shall be determined as if the participant of a
Lender were a Lender except that such participant of a Lender shall
furnish all such required forms, certifications and statements to the
Lender from which the related participation shall have been purchased.
3.14 Compensation.
The Borrower promises 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 after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement and (c) the making of a prepayment of Eurodollar 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 (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 the applicable
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 Eurodollar Loans provided
for herein (excluding, however, the Applicable Percentage included therein, if
any) minus (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
Eurodollar market. The agreements in this Section shall survive the termination
of this Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
3.15 Substitution of Lender.
If (a) the obligation of any Lender to make Eurodollar Loans has been
suspended pursuant to Section 3.11 or (b) any Lender has demanded compensation
under Section 3.9, 3.11, 3.12, 3.13 or 3.14, the Borrower shall have the right,
with the assistance of the Administrative Agent, to seek a mutually
satisfactory substitute lender or lenders. Any substitution under this Section
3.15 may be accomplished, at the Borrower's option, either (i) by the replaced
Lender assigning its rights and obligations hereunder to a replacement lender
or lenders pursuant to Section 11.3(b) at a mutually agreeable price or (ii) by
the Borrower prepaying all outstanding Loans and LOC Obligations from the
replaced Lender and terminating such Lender's Commitment on a date specified in
a notice delivered to the Administrative Agent and the replaced Lender at least
three Business Days before the date so specified (and compensating such Lender
for any resulting funding losses as provided in Section 3.14) and concurrently
a replacement Lender or Lenders
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assuming a Commitment in an amount equal to the Commitment being terminated and
making Loans in the same aggregate amount and having the same maturity date or
dates, respectively, as the Loans being prepaid, all pursuant to documents
reasonably satisfactory to the Administrative Agent (and in the case of any
document to be signed by the replaced Lender, reasonably satisfactory to such
Lender). No such substitution shall relieve the Borrower of its obligations to
compensate and/or indemnify the replaced Lender as required by Section 3.9,
3.11, 3.12, 3.13 or 3.14 with respect to the period before it is replaced and
to pay all accrued interest, accrued fees and other amounts owing to the
replaced Lender hereunder.
SECTION 4
GUARANTY
4.1 Guaranty of Payment.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Lender, each Affiliate of
Lender that enters into a Hedging Agreement and the Agents the prompt payment
of the Credit Party Obligations in full when due (whether at stated maturity,
as a mandatory prepayment, by acceleration or otherwise). The Guarantors
additionally, jointly and severally, unconditionally guarantee to each Lender,
each Affiliate of a Lender that enters into a Hedging Agreement and the Agents
the timely performance of all other obligations under the Credit Documents and
such Hedging Agreements. This Guaranty is a guaranty of payment and not of
collection and is a continuing guaranty and shall apply to all Credit Party
Obligations whenever arising.
4.2 Obligations Unconditional.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Credit Documents or the Hedging Agreements, or any
other agreement or instrument referred to therein, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor. Each Guarantor agrees that this Guaranty may be enforced
by the Lenders without the necessity at any time of resorting to or exhausting
any other security or collateral and without the necessity at any time of
having recourse to the Notes or any other of the Credit Documents or any
collateral, if any, hereafter securing the Credit Party Obligations or
otherwise and each Guarantor hereby waives the right to require the Lenders to
proceed against the Borrower or any other Person (including a co-guarantor) or
to require the Lenders to pursue any other remedy or enforce any other right.
Each Guarantor further agrees that it shall have no right of subrogation,
indemnity, reimbursement or contribution against the Borrower or any other
Guarantor of the Credit Party Obligations for amounts paid under this Guaranty
until such time as the Lenders
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(and any Affiliates of Lenders entering into Hedging Agreements) have been paid
in full, all Commitments under the Credit Agreement have been terminated and no
Person or Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received
under the Credit Documents. Each Guarantor further agrees that nothing
contained herein shall prevent the Lenders from suing on the Notes or any of
the other Credit Documents or any of the Hedging Agreements or foreclosing its
security interest in or Lien on any collateral, if any, securing the Credit
Party Obligations or from exercising any other rights available to it under
this Credit Agreement, the Notes, any other of the Credit Documents, or any
other instrument of security, if any, and the exercise of any of the aforesaid
rights and the completion of any foreclosure proceedings shall not constitute a
discharge of any of any Guarantor's obligations hereunder; it being the purpose
and intent of each Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances. Neither any
Guarantor's obligations under this Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of the Borrower or by reason of the bankruptcy or insolvency of the
Borrower. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Credit Party Obligations and notice of or
proof of reliance of by any Agent or any Lender upon this Guarantee or
acceptance of this Guarantee. The Credit Party Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee. All
dealings between the Borrower and any of the Guarantors, on the one hand, and
the Agents and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee.
4.3 Modifications.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Credit
Party Obligations or the properties subject thereto; (c) the time or place of
payment of the Credit Party Obligations may be changed or extended, in whole or
in part, to a time certain or otherwise, and may be renewed or accelerated, in
whole or in part; (d) the Borrower and any other party liable for payment under
the Credit Documents may be granted indulgences generally; (e) any of the
provisions of the Notes or any of the other Credit Documents may be modified,
amended or waived; (f) any party (including any co-guarantor) liable for the
payment thereof may be granted indulgences or be released; and (g) any deposit
balance for the credit of the Borrower or any other party liable for the
payment of the Credit Party Obligations or liable upon any security therefor
may be released, in whole or in part, at, before or after the stated, extended
or accelerated maturity of the Credit Party Obligations, all without notice to
or further assent by such Guarantor, which shall remain bound thereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release.
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4.4 Waiver of Rights.
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Credit Party Obligations; (c)
protest and notice of dishonor or of default (except as specifically required
in the Credit Agreement) with respect to the Credit Party Obligations or with
respect to any security therefor; (d) notice of the Lenders obtaining,
amending, substituting for, releasing, waiving or modifying any security
interest, lien or encumbrance, if any, hereafter securing the Credit Party
Obligations, or the Lenders' subordinating, compromising, discharging or
releasing such security interests, liens or encumbrances, if any; (e) all other
notices to which such Guarantor might otherwise be entitled; and (f) demand for
payment under this Guaranty.
4.5 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment
by or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit
Party Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agents and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by an
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.6 Remedies.
The Guarantors agree that, as between the Guarantors, on the one hand,
and the Agents and the Lenders, on the other hand, the Credit Party Obligations
may be declared to be forthwith due and payable as provided in Section 9 (and
shall be deemed to have become automatically due and payable in the
circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in
accordance with the terms of the Security Agreements and the other Collateral
Documents and that the Lenders may exercise their remedies thereunder in
accordance with the terms thereof.
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4.7 Limitation of Guaranty.
Notwithstanding any provision to the contrary contained herein or in
any of the other Credit Documents, to the extent the obligations of any
Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of such
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
4.8 Rights of Contribution.
The Credit Parties agree among themselves that, in connection with
payments made hereunder, each Credit Party shall have contribution rights
against the other Credit Parties as permitted under applicable law. Such
contribution rights shall be subordinate and subject in right of payment to the
obligations of the Credit Parties under the Credit Documents and no Credit
Party shall exercise such rights of contribution until all Credit Party
Obligations have been paid in full and the Commitments terminated.
SECTION 5
CONDITIONS PRECEDENT
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
make the initial Extension of Credit is subject to satisfaction of the
following conditions:
(a) Executed Credit Documents. Receipt by the Agents of duly
executed copies of: (i) this Credit Agreement; (ii) the Notes; (iii)
the Collateral Documents; and (iv) all other Credit Documents, each in
form and substance reasonably acceptable to the Agents in their sole
discretion.
(b) Corporate Documents. Receipt by the Agents of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and
certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Effective Date.
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(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Effective Date.
(iii) Resolutions. Copies of resolutions of the
Board of Directors of each Credit Party approving and
adopting the Credit Documents to which it is a party, the
transactions contemplated therein and authorizing execution
and delivery thereof, certified by a secretary or assistant
secretary of such Credit Party to be true and correct and in
force and effect as of the Effective Date.
(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing would
have a Material Adverse Effect on the business or operations
of a Credit Party in such jurisdiction and (B) to the extent
available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Effective Date.
(c) Opinion of Counsel. Receipt by the Agents of an opinion,
or opinions (which shall cover, among other things, authority,
legality, validity, binding effect, enforceability and attachment and
perfection of liens), reasonably satisfactory to the Agents, addressed
to the Agents on behalf of the Lenders and dated as of the Effective
Date, from legal counsel to the Credit Parties.
(d) Acquisition. Receipt by the Agents of evidence that the
Borrower, through a wholly owned Subsidiary, has acquired, on terms
acceptable to the Agents, at least 51% of the shares of Varsity Spirit
Corporation for a price not to exceed $18.90 per share.
(e) Personal Property Collateral. The Collateral Agent shall
have received, in form and substance reasonably satisfactory to the
Collateral Agent:
(i) searches of Uniform Commercial Code ("UCC")
filings in the jurisdiction of the chief executive office of
each Credit Party and each jurisdiction where any Collateral
is located or where a filing would need to be made in order
to perfect the Lenders' security interest in the Collateral,
copies of the financing
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statements on file in such jurisdictions and evidence that no
Liens exist other than Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Collateral
Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral;
(iii) searches of ownership of intellectual property
in the appropriate governmental offices as requested by the
Collateral Agent; and
(iv) all stock certificates evidencing the stock
pledged to the Collateral Agent pursuant to the Pledge
Agreements, together with duly executed in blank undated
stock powers attached thereto.
(f) Real Property Collateral. The Collateral Agent shall have
received, in form and substance reasonably satisfactory to the
Collateral Agent:
(i) fully executed and notarized mortgages, deeds of
trust or deeds to secure debt (each a "Mortgage" and
collectively the "Mortgages") encumbering the fee interest of
the Credit Parties in each real property asset owned by a
Credit Party set forth on Schedule 5.1(f) (each a "Mortgaged
Property" and collectively the "Mortgaged Properties"),
together with such UCC-1 financing statements as the
Collateral Agent shall deem appropriate with respect to each
such Mortgaged Property; and
(ii) an opinion of counsel in the state in which
each Mortgaged Property is located with respect to the
enforceability of the form of Mortgage, standard remedies
with respect thereto and sufficiency of the form of UCC-1
financing statements to be recorded or filed in such state
and such other matters as the Collateral Agent may request,
in form and substance reasonably satisfactory to the
Collateral Agent.
(g) Evidence of Insurance. Receipt by the Agents of copies of
insurance policies or certificates of insurance of the Credit Parties
evidencing liability and casualty insurance meeting the requirements
set forth in the Credit Documents, including, but not limited to,
naming the Collateral Agent as additional insured on behalf of the
Lenders.
(h) Senior Notes. Receipt by the Agents of evidence that the
Senior Notes have been issued, on terms acceptable to the Agents, and
that the Borrower shall have received at least $115 million less
Transactions Costs incurred in connection therewith.
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(i) Government Consent. Receipt by the Agents of evidence
that all governmental, shareholder and third party consents and
approvals necessary or desireable in connection with the acquisition
of Varsity Spirit Corporation and the related financings and other
transactions contemplated hereby have been received and no condition
or Requirement of Law exists which could reasonably be likely to
restrain, prevent or impose any material adverse conditions on the
acquisition or ownership of Varsity Spirit Corporation or the
financings or other transactions contemplated hereby.
(j) Litigation. There shall not exist any pending or
threatened action, suit, investigation or proceeding against a Credit
Party or any of their Subsidiaries that would have or would reasonably
be expected to have a Material Adverse Effect.
(k) Officer's Certificates. The Agents shall have received a
certificate or certificates executed by the chief financial officer of
the Borrower on behalf of the Borrower as of the Effective Date
stating that (i) the Borrower and each of the Borrower's Subsidiaries
are in compliance with all existing material financial obligations,
(ii) no action, suit, investigation or proceeding is pending or
threatened in any court or before any arbitrator or governmental
instrumentality that purports to effect the Borrower, any of the
Borrower's Subsidiaries or any transaction contemplated by the Credit
Documents, if such action, suit, investigation or proceeding could
have or could be reasonably expected to have a Material Adverse
Effect, (iii) the financial statements and information delivered to
the Agents on or before the Effective Date were prepared in good faith
and using reasonable assumptions and (iv) immediately after giving
effect to this Credit Agreement, the other Credit Documents and all
the transactions contemplated therein to occur on such date, (A) the
Borrower and each of the Borrower's Subsidiaries is Solvent, (B) no
Default or Event of Default exists, (C) all representations and
warranties contained herein and in the other Credit Documents are true
and correct in all material respects, and (D) the Credit Parties are
in compliance with each of the financial covenants set forth in
Section 7.2.
(l) Fees and Expenses. Payment by the Credit Parties of (i)
an upfront fee in accordance with the terms of the Fee Letter and (ii)
all other fees and expenses owed by them to the Lenders and the
Agents, including, without limitation, any accrued Commitment Fees.
(m) Borrowing Base Report. A Borrowing Base Report, in the
form of Exhibit 7.1(c), dated as of May 31, 1997.
(n) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably and timely
requested by any Lender, including, but not limited to, information
regarding litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), real estate leases, material
contracts, debt
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agreements, property ownership and contingent liabilities of the
Borrower and its Subsidiaries.
5.2 Conditions to All Extensions of Credit.
In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make Loans nor shall an Issuing Lender be
required to issue or extend a Letter of Credit unless:
(a) Notice. The Borrower shall have delivered (i) in the case
of any new Revolving Loan, a Notice of Borrowing, duly executed and
completed, by the time specified in Section 2.1 and (ii) in the case
of any Letter of Credit, the Issuing Lender shall have received an
appropriate request for issuance in accordance with the provisions of
Section 2.2;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in any Credit Document are true
and correct in all material respects at and as if made as of such date
except to the extent they expressly relate to an earlier date;
(c) No Default. No Default or Event of Default shall exist or
be continuing either prior to or after giving effect thereto;
(d) No Material Adverse Effect. Since the Effective Date,
there shall not have occurred any Material Adverse Effect; and
(e) Availability. Immediately after giving effect to the
making of a Revolving Loan (and the application of the proceeds
thereof) or to the issuance of a Letter of Credit, as the case may be,
the sum of the Revolving Loans outstanding plus LOC Obligations
outstanding shall not exceed the Revolving Commitment Amount.
The delivery of each Notice of Borrowing and each request for a Letter of
Credit shall constitute a representation and warranty by the Borrower of the
correctness of the matters specified in subsections (b), (c), (d) and (e)
above.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agents and each Lender
that:
6.1 Financial Condition.
(a) The financial statements delivered to the Lenders prior
to the Effective Date and pursuant to Section 7.1(a) and (b): (i) have
been prepared in accordance with GAAP and (ii) present fairly the
consolidated and consolidating (as applicable) financial condition,
results of operations and cash flows of the Credit Parties and their
Subsidiaries as of such date and for such periods.
(b) The financial statements delivered to the Lenders prior
to the Effective Date with respect to Varsity Spirit Corporation (i)
have been prepared in accordance with GAAP and (ii) present fairly the
financial condition, results of operations and cash flows of Varsity
Spirit Corporation as of such dates and for such periods.
(c) Since December 31, 1996, there has been no sale, transfer
or other disposition by any Credit Party or any of their Subsidiaries
of any material part of the business or property of the Credit
Parties, taken as a whole, and no purchase or other acquisition by any
of them of any business or property (including any capital stock of
any other Person) material in relation to the consolidated financial
condition of the Credit Parties, taken as a whole, in each case,
which, is not (i) reflected in the most recent financial statements
delivered to the Lenders pursuant to Section 7.1 or in the notes
thereto or (ii) otherwise permitted by the terms of this Credit
Agreement and communicated to the Administrative Agent.
6.2 No Material Change.
Since the Effective Date, there has been no development or event
relating to or affecting a Credit Party or any of their Subsidiaries which has
had or would be reasonably expected to have a Material Adverse Effect.
6.3 Organization and Good Standing.
Each Credit Party (a) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State (or other
jurisdiction) of its incorporation, (b) is duly qualified and in good standing
as a foreign corporation and authorized to do business in every jurisdiction
unless the failure to be so qualified, in good standing or authorized would
have a Material Adverse Effect and (c) has the requisite corporate power and
authority to own its properties and to carry on its business as now conducted
and as proposed to be conducted.
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6.4 Due Authorization.
Each Credit Party (a) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and
therein provided for and (b) is duly authorized to, and has been authorized by
all necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws, (b) violate, contravene or materially conflict with
any Requirement of Law or any other law, regulation (including, without
limitation, Regulation U or Regulation X), order, writ, judgment, injunction,
decree or permit applicable to it, (c) violate, contravene or conflict with
contractual provisions of, or cause an event of default under, any indenture,
loan agreement, mortgage, deed of trust, contract or other agreement or
instrument to which it is a party or by which it may be bound, the violation of
which could have or might be reasonably expected to have a Material Adverse
Effect, or (d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Credit Documents) upon or
with respect to its properties.
6.6 Consents.
Except for consents, approvals and authorizations which have been
obtained, no consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or
third party in respect of any Credit Party is required in connection with the
execution, delivery or performance of this Credit Agreement or any of the other
Credit Documents by such Credit Party.
6.7 Enforceable Obligations.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with
their respective terms, except as may be limited by bankruptcy or insolvency
laws or similar laws affecting creditors' rights generally or by general
equitable principles.
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6.8 No Default.
No Credit Party, nor any of their Subsidiaries, is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage,
security agreement or other agreement or obligation to which it is a party or
by which any of its properties is bound which default would have or would be
reasonably expected to have a Material Adverse Effect. No Default or Event of
Default has occurred or exists except as previously disclosed in writing to the
Lenders.
6.9 Ownership.
Each Credit Party, and each of its Subsidiaries, is the owner of, and
has good and marketable title to, all of its respective assets and none of such
assets is subject to any Lien other than Permitted Liens.
6.10 Indebtedness.
The Credit Parties and their Subsidiaries have no Indebtedness except
(a) as disclosed in the financial statements referenced in Section 6.1, (b) as
set forth on Schedule 6.10 and (c) as otherwise permitted by this Credit
Agreement. There are no mandatory principal payments due with respect to the
Senior Notes or the Subordinated Debt prior to the Revolving Loan Maturity
Date.
6.11 Litigation.
Except for any litigation outstanding as set forth in the M.O.U.,
there are no actions, suits or legal, equitable, arbitration or administrative
proceedings, pending or, to the knowledge of any Credit Party, threatened
against, the Borrower or any of its Subsidiaries which could have or might be
reasonably expected to have a Material Adverse Effect.
6.12 Taxes.
Each Credit Party, and each of its Subsidiaries, has filed, or caused
to be filed, all material tax returns (federal, state, local and foreign)
required to be filed and paid (a) all material amounts of taxes shown thereon
to be due (including interest and penalties) and (b) all material other taxes,
fees, assessments and other governmental charges (including mortgage recording
taxes, documentary stamp taxes and intangibles taxes) owing by it, except for
such taxes (i) which are not yet delinquent or (ii) that are being contested in
good faith and by proper proceedings, and against which adequate reserves are
being maintained in accordance with GAAP. No Credit Party is aware of any
material proposed tax assessments against it.
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6.13 Compliance with Law.
Each Credit Party, and each of its Subsidiaries, is in compliance with
all Requirements of Law and all other laws, rules, regulations, orders and
decrees (including without limitation Environmental Laws) applicable to it, or
to its properties, unless such failure to comply would not have or would not be
reasonably expected to have a Material Adverse Effect. No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect.
6.14 ERISA.
Except as would not result or be reasonably expected to result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no Termination Event
has occurred, and, to the best knowledge of the Credit Parties, no
event or condition has occurred or exists as a result of which any
Termination Event could reasonably be expected to occur, with respect
to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether
or not waived, has occurred with respect to any Plan; (iii) each Plan
has been maintained, operated, and funded in compliance with its own
terms and in material compliance with the provisions of ERISA, the
Code, and any other applicable federal or state laws; and (iv) no lien
in favor or the PBGC or a Plan has arisen or is reasonably likely to
arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions
used to fund such Plans), whether or not vested, did not, as of the
last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the current value of the
assets of such Plan allocable to such accrued liabilities.
(c) Neither the Borrower, nor any of its Subsidiaries nor any
ERISA Affiliate has incurred, or, to the best knowledge of the Credit
Parties, are reasonably expected to incur, any withdrawal liability
under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower, any of its Subsidiaries nor any ERISA Affiliate
has received any notification that any Multiemployer Plan is in
reorganization (within the meaning of Section 4241 of ERISA), is
insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no
Multiemployer Plan is, to the best knowledge of the Credit Parties,
reasonably expected to be in reorganization, insolvent, or terminated.
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(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or is reasonably likely to subject the Borrower or any of its
Subsidiaries or any ERISA Affiliate to any liability under Sections
406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or
under any agreement or other instrument pursuant to which the Borrower
or any of its Subsidiaries or any ERISA Affiliate has agreed or is
required to indemnify any person against any such liability.
(e) The present value (determined using actuarial and other
assumptions which are reasonable with respect to the benefits provided
and the employees participating) of the liability of the Borrower and
its Subsidiaries and each ERISA Affiliate for post-retirement welfare
benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA), net of all assets under all such Plans allocable to such
benefits, are reflected on the Financial Statements in accordance with
FASB 106.
(f) Each Plan which is a welfare plan (as defined in Section
3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of
the Code apply has been administered in compliance in all material
respects with such sections.
6.15 Subsidiaries.
Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of each Credit Party. Information on Schedule 6.15 includes
jurisdiction of incorporation, the number of shares of each class of capital
stock or other equity interests outstanding, the number and percentage of
outstanding shares of each class owned (directly or indirectly) by such Credit
Party; and the number and effect, if exercised, of all outstanding options,
warrants, rights of conversion or purchase and all other similar rights with
respect thereto. The outstanding capital stock and other equity interests of
all such Subsidiaries is validly issued, fully paid and non-assessable and is
owned by each such Credit Party, directly or indirectly, free and clear of all
Liens (other than those arising under or contemplated in connection with the
Credit Documents). Other than as set forth in Schedule 6.15, neither any Credit
Party nor any Subsidiary thereof has outstanding any securities convertible
into or exchangeable for its capital stock nor does any such Person have
outstanding any rights to subscribe for or to purchase or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to
its capital stock. Schedule 6.15 may be updated from time to time by the
Borrower by giving written notice thereof to the Administrative Agent.
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6.16 Use of Proceeds; Margin Stock.
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.11. None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X or Regulation G, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
U, Regulation X, Regulation G or Regulation T. None of the Credit Parties owns
any "margin stock".
6.17 Government Regulation.
No Credit Party, nor any of its Subsidiaries, is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Investment Company Act of 1940 or the Interstate Commerce Act, each as
amended. In addition, no Credit Party is an "investment company" registered or
required to be registered under the Investment Company Act of 1940, as amended,
or controlled by such a company, or a "holding company," or a "Subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "Subsidiary" or a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended. No director, executive officer or
principal shareholder of the Borrower or any of its Subsidiaries is a director,
executive officer or principal shareholder of any Lender. For the purposes
hereof the terms "director", "executive officer" and "principal shareholder"
(when used with reference to any Lender) have the respective meanings assigned
thereto in Regulation O issued by the Board of Governors of the Federal Reserve
System.
6.18 Environmental Matters.
(a) Except as set forth on Schedule 6.18:
(i) Each of the Real Properties and all operations
at the Real Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the
businesses operated by the Borrower or any of their
Subsidiaries (the "Businesses"), and there are no conditions
relating to the Businesses or Real Properties that would be
reasonably expected to give rise to liability under any
applicable Environmental Laws.
(ii) No Credit Party has received any written notice
of, or inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or
potential liability regarding Hazardous Materials or
compliance with Environmental Laws with regard to any of the
Real Properties or
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the Businesses, nor does the Borrower or any of its
Subsidiaries have knowledge or reason to believe that any
such notice is being threatened.
(iii) Hazardous Materials have not been transported
or disposed of from the Real Properties, or generated,
treated, stored or disposed of at, on or under any of the
Real Properties or any other location, in each case by, or on
behalf or with the permission of, the Borrower or any of its
Subsidiaries in a manner that would reasonably be expected to
give rise to a Material Adverse Effect.
(iv) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower or any of its Subsidiaries, threatened, under any
Environmental Law to which the Borrower or any of its
Subsidiaries is or will be named as a party, nor are there
any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Borrower or any of its
Subsidiaries, the Real Properties or the Businesses, in any
amount reportable under the federal Comprehensive
Environmental Response, Compensation and Liability Act or any
analogous state law, except releases in compliance with any
Environmental Laws.
(v) There has been no release or threat of release
of Hazardous Materials at or from the Real Properties, or
arising from or related to the operations (including, without
limitation, disposal) of the Borrower or any of its
Subsidiaries in connection with the Real Properties or
otherwise in connection with the Businesses.
(vi) None of the Real Properties contains, or has
previously contained, any Hazardous Materials at, on or under
the Real Properties in amounts or concentrations that, if
released, constitute or constituted a violation of, or could
give rise to liability under, Environmental Laws and could
reasonably be expected to have a Material Adverse Effect.
(vii) No Credit Party, nor any of its Subsidiaries,
has assumed any liability of any Person (other than another
Credit Party, or one of its Subsidiaries) under any
Environmental Law.
(b) The Borrower has adopted procedures that are designed to
(i) ensure that each Credit Party, any of its operations and each of
the properties owned or leased by each Credit Party remains in
compliance with applicable Environmental Laws and (ii) minimize any
liabilities or potential liabilities that each Credit Party, any of
its operations and each of the properties owned or leased by each
Credit Party may have under applicable Environmental Laws.
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6.19 Intellectual Property.
Each Credit Party owns, or has the legal right to use, all patents,
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal
right to use would not have or be reasonably expected to have a Material
Adverse Effect. Set forth on Schedule 6.19 is a list of all Intellectual
Property owned by each Credit Party or that any Credit Party has the right to
use. Except as provided on Schedule 6.19, no claim has been asserted and 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, nor does any Credit Party know of any such claim, and to the Credit
Parties' knowledge the use of such Intellectual Property by the Borrower or any
of their Subsidiaries does not infringe on the rights of any Person, except for
such claims and infringements that in the aggregate, would not have or be
reasonably expected to have a Material Adverse Effect. Schedule 6.19 may be
updated from time to time by the Borrower by giving written notice thereof to
the Administrative Agent.
6.20 Solvency.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.
6.21 Investments.
All Investments of each Credit Party and its Subsidiaries are (a) as
set forth on Schedule 6.21, (b) Permitted Investments or (c) otherwise
permitted by the terms of this Credit Agreement.
6.22 Location of Collateral.
Set forth on Schedule 6.22(a) is a list of all Mortgaged Properties
with street address, county and state where located. Set forth on Schedule
6.22(b) is a list of all locations where any personal property of a Credit
Party is located, including county and state where located. Set forth on
Schedule 6.22(c) is the chief executive office and principal place of business
of each Credit Party. Schedule 6.22(a), 6.22(b) and 6.22(c) may be updated from
time to time by the Borrower by giving written notice thereof to the
Administrative Agent.
6.23 Disclosure.
Neither this Agreement nor any financial statements delivered to the
Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Credit Party in connection with the transactions
contemplated hereby contains any untrue statement of a
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material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein, taken as a whole, not misleading.
6.24 Licenses, etc.
The Credit Parties have obtained and hold in full force and effect,
all franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other rights,
consents and approvals which are necessary for the operation of their
respective businesses as presently conducted, except where the failure to
obtain same would not have a Material Adverse Effect. Set forth on Schedule
6.24 is a list of all Material License Agreements to which a Credit Party is a
party, as such schedule may be updated from time to time by the Borrower giving
written notice thereof to the Administrative Agent.
6.25 No Burdensome Restrictions.
No Credit Party, nor any of their Subsidiaries, is a party to any
agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or
regulation which, individually or in the aggregate, would have or be reasonably
expected to have a Material Adverse Effect.
6.26 Collateral Documents.
The Collateral Documents create valid security interests in, and Liens
on, the Collateral purported to be covered thereby, which security interests
and Liens are and will remain perfected security interests and Liens, prior to
all other Liens other than Permitted Liens. Each of the representations and
warranties made by the Borrower and its Subsidiaries in the Collateral
Documents is true and correct in all material respects.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest and fees and other obligations hereunder, have been paid in full
and the Commitments and Letters of Credit hereunder shall have terminated:
7.1 Information Covenants.
The Borrower will furnish, or cause to be furnished, to the
Administrative Agent and each of the Lenders:
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(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Borrower, a consolidated and consolidating balance sheet and income
statement of the Borrower and its Subsidiaries, as of the end of such
fiscal year, together with related consolidated and consolidating
statements of operations and consolidated statements of retained
earnings and of cash flows for such fiscal year, setting forth in
comparative form consolidated and consolidating figures for the
preceding fiscal year, all such consolidated financial information
described above to be in reasonable form and detail and audited by
independent certified public accountants of recognized national
standing reasonably acceptable to the Agents and whose opinion shall
be to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 60 days after the close of each of the first three
fiscal quarter of the Borrower, (i) a consolidated and consolidating
balance sheet and income statement of the Borrower and its
Subsidiaries, as of the end of such fiscal quarter, together with
related consolidated and consolidating statements of operations and
consolidated statements of retained earnings and of cash flows for
such fiscal quarter in each case setting forth in comparative form
consolidated and consolidating figures for (A) the corresponding
period of the preceding fiscal year and (B) management's proposed
budget for such period, all such financial information described above
to be in reasonable form and detail and reasonably acceptable to the
Agent, and accompanied by a certificate of the chief financial officer
or the chief accounting officer of the Borrower to the effect that
such quarterly financial statements fairly present in all material
respects the financial condition of the Borrower and its Subsidiaries
and have been prepared in accordance with GAAP, subject to changes
resulting from audit and normal year-end audit adjustments and (ii) a
management discussion and analysis of operating results for such
fiscal quarter.
(c) Borrowing Base Report. (i) on the 25th day of each month,
a Borrowing Base Report, as of the end of the immediately preceding
month and (ii) on the last day of each month a Borrowing Base Report,
as of the 15th day of such month with respect to Eligible Receivables
and as of the end of the immediately preceding month with respect to
Eligible Inventory and Eligible Work in Process, in each case in
substantially in the form of Exhibit 7.1(c) and certified by the chief
financial officer of the Borrower to be true and correct as of the
date thereof. Notwithstanding the above, the Borrowing Base Report
delivered on June 30, 1997 shall reflect Eligible Receivables as of
June 19, 1997.
(d) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit 7.1(d), (i) demonstrating
compliance
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with the financial covenants contained in Section 7.2 by calculation
thereof as of the end of each such fiscal period, (ii) demonstrating
compliance with any other terms of the Credit Agreement as requested
by the Agents and (iii) stating that no Default or Event of Default
exists, or if any Default or Event of Default does exist, specifying
the nature and extent thereof and what action the Borrower proposes to
take with respect thereto.
(e) Annual Business Plan and Budgets. Within 90 days after
the end of each fiscal year of the Borrower, an annual business plan
and budget of the Borrower and its Subsidiaries on a consolidated
basis containing, among other things, pro forma financial projections
for the next fiscal year.
(f) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating
that they have reviewed this Credit Agreement and stating further
whether, in the course of their audit, they have (based on the
financial statements prepared in accordance with then existing GAAP)
become aware of any Default or Event of Default and, if any such
Default or Event of Default exists, specifying the nature and extent
thereof.
(g) Auditor's Reports. Promptly upon receipt thereof, a copy
of any "management letter" submitted by independent accountants to the
Borrower or any of its Subsidiaries in connection with any annual,
interim or special audit of the books of the Borrower or any of its
Subsidiaries.
(h) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as the Borrower or any of its Subsidiaries shall send to its
shareholders generally or to a holder of the Subordinated Debt in its
capacity as such a holder and (b) upon the written request of an
Agent, all reports and written information to and from the United
States Environmental Protection Agency, or any state or local agency
responsible for environmental matters, the United States Occupational
Health and Safety Administration, or any state or local agency
responsible for health and safety matters, or any successor agencies
or authorities concerning environmental, health or safety matters.
(i) Notices. Upon a Responsible Officer obtaining knowledge
thereof, the Borrower will give written notice to the Administrative
Agent immediately of (a) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Borrower proposes to take with
respect thereto, and (b) the occurrence of any of the following with
respect to the Borrower or any of its Subsidiaries (i) the pendency or
commencement of any litigation, arbitral or governmental proceeding
against the Borrower or any of its Subsidiaries which
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if adversely determined would have or would be reasonably expected to
have a Material Adverse Effect, or (ii) the institution of any
proceedings against the Borrower or any of its Subsidiaries with
respect to, or the receipt of notice by such Person of potential
liability or responsibility for violation, or alleged violation of any
federal, state or local law, rule or regulation, including but not
limited to, Environmental Laws, the violation of which would have or
would be reasonably expected to have a Material Adverse Effect.
(j) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, Borrower will give written
notice to the Administrative Agent and each of the Lenders promptly
(and in any event within five Business Days) of: (i) any event or
condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, a Termination Event; (ii)
with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against the Borrowers or any of their ERISA Affiliates, or of a
determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the Borrower or any of its
Subsidiaries or ERISA Affiliates is required to contribute to each
Plan pursuant to its terms and as required to meet the minimum funding
standard set forth in ERISA and the Code with respect thereto; or (iv)
any change in the funding status of any Plan that could have a
Material Adverse Effect; together, with a description of any such
event or condition or a copy of any such notice and a statement by the
principal financial officer of the Borrower briefly setting forth the
details regarding such event, condition, or notice, and the action, if
any, which has been or is being taken or is proposed to be taken by
the Credit Parties with respect thereto. Promptly upon request, the
Borrower shall furnish the Administrative Agent and each of the
Lenders with such additional information concerning any Plan as may be
reasonably requested, including, but not limited to, copies of each
annual report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section
3(39) of ERISA).
(k) Environmental.
(i) Subsequent to a notice from any Governmental
Authority that would reasonably cause concern or during the
existence of an Event of Default, and upon the written
request of an Agent, the Borrower will furnish or cause to be
furnished to the Administrative Agent, at the Borrower's
expense, a report of an environmental assessment of
reasonable scope, form and depth, including, where
appropriate, invasive soil or groundwater sampling, by a
consultant reasonably acceptable to the Agents as to the
nature and extent of the presence of any Hazardous Materials
on any property owned, leased or operated by a Credit Party
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and as to the compliance by the Credit Parties with
Environmental Laws. If the Borrower fails to deliver such an
environmental report within seventy-five (75) days after
receipt of such written request then the Agents may arrange
for same, and the Borrower hereby grants to the Agents and
their representatives access to the Real Properties and a
license of a scope reasonably necessary to undertake such an
assessment (including, where appropriate, invasive soil or
groundwater sampling). The reasonable cost of any assessment
arranged for by the Agents pursuant to this provision will be
payable by the Borrower on demand and added to the
obligations secured by the Collateral Documents.
(ii) Each Credit Party will conduct and complete all
investigations, studies, sampling, and testing and all
remedial, removal, and other actions necessary to address all
Hazardous Materials on, from, or affecting any real property
owned or leased by a Credit Party to the extent necessary to
be in compliance with all Environmental Laws and all other
applicable federal, state, and local laws, regulations, rules
and policies and with the orders and directives of all
Governmental Authorities exercising jurisdiction over such
real property to the extent any failure would have or be
reasonably expected to have a Material Adverse Effect.
(l) Other Information. With reasonable promptness upon any
such request, such other information regarding the business,
properties or financial condition of the Credit Parties and their
Subsidiaries as an Agent may reasonably request.
7.2 Financial Covenants.
(a) Leverage Ratio. The Leverage Ratio shall be less than or
equal to the ratios set forth below for the last day of each fiscal
quarter within the period set forth below:
(i) From the Effective Date to June 30, 1997,
8.0 to 1.0;
(ii) From July 1, 1997 to September 30, 1997,
7.40 to 1.0;
(iii) From October 1, 1997 to June 30, 1998, 6.50
to 1.0;
(iv) From July 1, 1998 to September 30, 1999,
5.50 to 1.0;
(v) From October 1, 1999 to September 30, 2000,
4.50 to 1.0;
(vi) From October 1, 2000 to September 30, 2001,
3.50 to 1.0; and
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(vii) From October 1, 2001 thereafter, 3.0 to
1.0.
(b) Coverage Ratio. The Coverage Ratio, for the twelve month
period ending on such date, shall be greater than or equal to the
ratios set forth below for the last day of each fiscal quarter within
the period set forth below:
(i) From the Effective Date to September 30,
1998, 1.25 to 1.0;
(ii) From October 1, 1998 to September 30, 1999,
1.50 to 1.0;
(iii) From October 1, 1999 to September 30, 2000,
2.0 to 1.0; and
(iv) From October 1, 2000 thereafter, 2.5 to
1.0.
(c) Net Worth. For the dates set forth below, Net Worth shall
be greater than or equal to the sum of (i) 75% of the Net Cash
Proceeds from each Equity Issuance subsequent to the Effective Date
plus (ii) the amount set forth below:
Date Amount
---- ------
December 31, 1997 Beginning Net Worth
March 31, 1998 Beginning Net Worth minus $4 million
June 30, 1998 Beginning Net Worth minus $1 million
September 30, 1998 Beginning Net Worth plus $5 million
December 31, 1998 Beginning Net Worth plus $1 million
March 31, 1999 Beginning Net Worth minus $2 million
June 30, 1999 Beginning Net Worth plus $1 million
September 30, 1999 Beginning Net Worth plus $7.5 million
December 31, 1999 Beginning Net Worth plus $4.5 million
March 31, 2000 Beginning Net Worth plus $1.5 million
June 30, 2000 Beginning Net Worth plus $4.5 million
September 30, 2000 Beginning Net Worth plus $10.5 million
December 31, 2000 Beginning Net Worth plus $7.5 million
March 31, 2001 Beginning Net Worth plus $4.5 million
June 30, 2001 Beginning Net Worth plus $8 million
September 30, 2001 Beginning Net Worth plus $14 million
December 31, 2001 Beginning Net Worth plus $11 million
March 31, 2002 Beginning Net Worth plus $8 million
June 30, 2002 Beginning Net Worth plus $12 million
(d) Net Income. For the fiscal quarters ending June 30, 1997
and September 30, 1997, the sum of Net Income plus (i) any amounts
deducted in determining Net Income representing any amounts paid
pursuant to or in connection with the M.O.U. or the transactions
contemplated thereby and (ii) Transaction Costs shall be greater than
zero.
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7.3 Preservation of Existence and Franchises.
Each of the Credit Parties will do all things necessary to preserve
and keep in full force and effect its existence, rights, franchises and
authority except as permitted by Section 8.4.
7.4 Books and Records.
Each of the Credit Parties will keep complete and accurate books and
records of its transactions in accordance with good accounting practices on the
basis of GAAP (including the establishment and maintenance of appropriate
reserves).
7.5 Compliance with Law.
Each of the Credit Parties will comply with all material laws, rules,
regulations and orders, and all applicable material restrictions imposed by all
Governmental Authorities, applicable to it and its property (including, without
limitation, Environmental Laws).
7.6 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will pay, settle or discharge (a) all
taxes, assessments and governmental charges or levies imposed upon it, or upon
its income or profits, or upon any of its properties, before they shall become
delinquent, (b) all lawful claims (including claims for labor, materials and
supplies) which, if unpaid, might give rise to a Lien upon any of its
properties, and (c) all of its other Indebtedness as it shall become due,
including, without limitation, the Subordinated Secured Note; provided,
however, that a Credit Party shall not be required to pay any such tax,
assessment, charge, levy, claim or Indebtedness which is being contested in
good faith by appropriate proceedings and as to which adequate reserves
therefor have been established in accordance with GAAP, unless the failure to
make any such payment (i) would give rise to an immediate right to foreclose or
collect on a Lien securing such amounts or (ii) would have a Material Adverse
Effect.
7.7 Insurance.
Each of the Credit Parties will at all times maintain in full force
and effect insurance (including worker's compensation insurance, liability
insurance, casualty insurance and business interruption insurance) in such
amounts, covering such risks and liabilities and with such deductibles or
self-insurance retentions as are in accordance with normal industry practice.
All policies shall have the Collateral Agent, on behalf of the Lenders, as an
additional insured.
In the event there occurs any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Administrative Agent generally
describing the nature and extent of such damage or
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destruction. Subsequent to any loss, damage to or destruction of the Collateral
of any Credit Party or any part thereof, such Credit Party, whether or not the
insurance proceeds, if any, received on account of such damage or destruction
shall be sufficient for that purpose, at such Credit Party's cost and expense,
will promptly repair or replace the Collateral of such Credit Party so lost,
damaged or destroyed; provided, however, that such Credit Party need not repair
or replace the Collateral of such Credit Party so lost, damaged or destroyed to
the extent the failure to make such repair or replacement (a) is desirable to
the proper conduct of the business of such Credit Party in the ordinary course
and otherwise is in the best interest of such Credit Party and (b) would not
materially impair the rights and benefits of the Agents or the Lenders under
this Credit Agreement or any other Credit Document. In the event a Credit Party
shall receive any insurance proceeds, as a result of any loss, damage or
destruction of Collateral, in a net amount in excess of $1,000,000, such Credit
Party will immediately pay over such proceeds to the Administrative Agent as
cash collateral for the Credit Party Obligations. The Administrative Agent
agrees to release such insurance proceeds to such Credit Party for replacement
or restoration of the portion of the Collateral of such Credit Party lost,
damaged or destroyed if (A) within 15 days from the date the Administrative
Agent receives such insurance proceeds, the Administrative Agent has received
written application for such release from such Credit Party together with
evidence reasonably satisfactory to it that the Collateral lost, damaged or
destroyed has been or will be replaced or restored to its condition (or by
Collateral having a value at least equal to the condition of the asset subject
to the loss, damage or destruction) immediately prior to the loss, destruction
or other event giving rise to the payment of such insurance proceeds and (B) on
the date of such release no Default or Event of Default exists. If the
conditions in the preceding sentence are not met, the Administrative Agent may
or, upon the request of the Required Lenders, shall at any time after the first
Business Day subsequent to the date 30 days after it received such insurance
proceeds, apply such insurance proceeds as a mandatory prepayment of the Credit
Party Obligations for application in accordance with the terms of Section
3.3(b)(ii). All insurance proceeds shall be subject to the security interest of
the Lenders under the Collateral Documents.
The present insurance coverage of the Borrower and its Subsidiaries is outlined
as to carrier, policy number, expiration date, type and amount on Schedule 7.7,
as Schedule 7.7 may be amended from time to time by written notice to the
Administrative Agent.
7.8 Maintenance of Property.
Each of the Credit Parties will maintain and preserve its properties
and equipment in good repair, working order and condition, normal wear and tear
excepted, and will make, or cause to be made, in such properties and equipment
from time to time all repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto as may be needed or proper, to the extent
and in the manner customary for companies in similar businesses.
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7.9 Performance of Obligations.
Each of the Credit Parties will perform in all material respects all
of its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party
or by which it is bound.
7.10 Collateral.
If, subsequent to the Closing Date, a Credit Party shall (a) acquire
any real property or (b) acquire any intellectual property or any securities or
other personal property required to be delivered to the Collateral Agent as
Collateral hereunder or under any of the Collateral Documents, or (c) enter
into any Material License Agreement, the Borrower shall immediately notify the
Collateral Agent of same. Each Credit Party shall take such action (including,
but not limited to, the actions set forth in Sections 5.1(e) and (f)), as
requested by the Collateral Agent and at its own expense, to ensure that (i)
the Lenders have a perfected Lien in all owned real property (unless the
Borrower has exercised its rights pursuant to Section 11.19) and such personal
property of the Credit Parties as set forth in the Security Agreements (whether
now owned or hereafter acquired), subject only to Permitted Liens and (ii) the
Lenders have collateral assignments of all Material License Agreements and the
right to use all intellectual property of the Credit Parties as set forth in
the Security Agreements. Each Credit Party shall adhere to the covenants
regarding the location of personal property as set forth in the Security
Agreements.
7.11 Use of Proceeds.
The Credit Parties will use the proceeds of the Loans solely (a) to
refinance or repay existing Indebtedness owing from the Credit Parties to NBD
Bank, NationsBank, N.A. and the other creditors set forth on Schedule 7.11
(together with the amounts owed to each), (b) to assist in financing the
acquisition of Varsity Spirit Corporation (to the extent the proceeds of the
Senior Notes are insufficient with respect thereto), (c) to pay related fees
and expenses in connection with the foregoing, (d) to provide working capital,
(e) to make Capital Expenditures permitted under this Credit Agreement and (f)
for general corporate purposes. The Credit Parties will use the Letters of
Credit solely for the purposes set forth in Section 2.2(a).
7.12 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will permit representatives appointed by an Agent, including, without
limitation, independent accountants, agents, attorneys and appraisers to visit
and inspect such Credit Party's property, including its books and records, its
accounts receivable and inventory, its facilities and its other business
assets, and to make photocopies or photographs thereof and to write down and
record any information such representative obtains and shall permit an Agent or
its representatives to investigate and verify the accuracy of information
provided to the Lenders, including, without limitation, the performance of
collateral valuation reviews from time to time to assess the
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composition of the Borrowing Base Assets, and to discuss all such matters with
the officers, employees and representatives of the Credit Parties. The Borrower
agrees that the Collateral Agent may conduct such collateral reviews, at the
Borrower's expense, as it reasonably deems appropriate; provided that absent an
Event of Default such reviews shall not occur more frequently than twice a
year.
7.13 Additional Credit Parties.
At the time any Person becomes a Material Subsidiary of a Credit
Party, the Borrower shall so notify the Administrative Agent and promptly
thereafter (but in any event within 30 days after the date thereof) shall cause
such Person to execute a Joinder Agreement in substantially the same form as
Exhibit 7.13, (b) cause all of the capital stock of such Person to be delivered
to the Collateral Agent (together with undated stock powers signed in blank)
and pledged to the Collateral Agent pursuant to an appropriate pledge agreement
in substantially the form of the Pledge Agreements and otherwise in a form
reasonably acceptable to the Collateral Agent, (c) pledge such of its assets to
the Lenders pursuant to a security agreement in substantially the form of the
Security Agreements and otherwise in a form reasonably acceptable to the
Collateral Agent, and collaterally assign any Material License Agreements to
which it is a party, (d) if such Person has any Subsidiaries, (i) deliver all
of the capital stock of such Subsidiaries (together with undated stock powers
signed in blank) to the Collateral Agent and (ii) execute a pledge agreement in
substantially the form of the Pledge Agreements and otherwise in a form
reasonably acceptable to the Collateral Agent, (e) if such Person owns any real
property, execute any and all necessary mortgages, deeds of trust, deeds to
secure debt or other appropriate real estate collateral documentation in a form
substantially similar to the Mortgages, with appropriate covenants as necessary
unless the Borrower has previously exercised its rights pursuant to Section
11.19 and (f) deliver such other documentation as the Collateral Agent may
reasonably request in connection with the foregoing, including, without
limitation, appropriate UCC-1 financing statements, real estate title insurance
policies, environmental reports, certified resolutions and other organizational
and authorizing documents of such Person and favorable opinions of counsel to
such Person (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above), all
in form, content and scope reasonably satisfactory to the Agents.
7.14 Material License Agreements.
The Credit Parties will notify the Agents promptly regarding (a)
failure to comply with the terms of any Material License Agreement, (b) failure
to keep each Material License Agreement in full force and effect and (c) any
modification or amendment to any Material License Agreement other than royalty
rate increases or minimum guaranteed amounts thereunder.
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7.15 Merger.
As soon as practicable after the Closing Date, cause the merger of
Cheer Acquisition Corp. with and into Varsity Spirit Corporation, and deliver
to the Agents such evidence of same as the Agents may reasonably request,
including, without limitation, a legal opinion from counsel to the Credit
Parties.
7.16 Further Assurances Regarding Real Estate Collateral.
As soon as possible after the Effective Date but in any event no later
than July 31, 1997, the Credit Parties shall provide, or cause to be delivered,
to the Collateral Agent:
(a) ALTA or other appropriate form mortgagee title insurance
policies (the "Mortgage Policies") issued by a title insurer
reasonably satisfactory to the Collateral Agent (the "Title Insurance
Company"), in an amount reasonably satisfactory to the Collateral
Agent with respect to each Mortgaged Property, assuring the Collateral
Agent that the applicable Mortgages create valid and enforceable
mortgage liens on the respective Mortgaged Properties, free and clear
of all defects and encumbrances except Permitted Liens which Mortgage
Policies shall be in form and substance reasonably satisfactory to the
Collateral Agent and containing such endorsements as shall be
reasonably satisfactory to the Collateral Agent and for any other
matters that the Collateral Agent may request, and providing
affirmative insurance and such reinsurance as the Collateral Agent may
request, all of the foregoing in form and substance reasonably
satisfactory to the Agents;
(b) Surveys. Maps or plats of an as-built survey of the sites
of the Mortgaged Properties certified to the Collateral Agent and the
Title Insurance Company in a manner reasonably satisfactory to them,
dated a date satisfactory to the Collateral Agent and the Title
Insurance Company by an independent professional licensed land
surveyor reasonably satisfactory to the Collateral Agent and the Title
Insurance Company, which maps or plats and the surveys on which they
are based shall be sufficient to delete any standard printed survey
exception contained in the applicable title policy and be made in
accordance with the Minimum Standard Detail Requirements for Land
Title Surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping
in 1992, and, without limiting the generality of the foregoing, there
shall be surveyed and shown on such maps, plats or surveys the
following: (A) the locations on such sites of all the buildings,
structures and other improvements and the established building setback
lines; (B) the lines of streets abutting the sites and width thereof;
(C) all access and other easements appurtenant to the sites necessary
to use the sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the
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surveyor; (E) any encroachments on any adjoining property by the
building structures and improvements on the sites; and (F) if the site
is described as being on a filed map, a legend relating the survey to
said map;
(c) Flood Certificates. Certification from a registered
engineer or land surveyor or other evidence reasonably acceptable to
the Collateral Agent that none of the improvements on the Mortgaged
Properties are located within any area designated by the Director of
the Federal Emergency Management Agency as a "special flood hazard"
area or if any improvements on the Mortgaged Properties are located
within a "special flood hazard" area, evidence of a flood insurance
policy from a company and in an amount reasonably satisfactory to the
Collateral Agent for the applicable portion of the premises, naming
the Collateral Agent, for the benefit of the Lenders, as mortgagee;
and
(d) Environmental Reports. If requested by the Agents,
environmental assessment reports and related documents with respect to
all Mortgaged Properties.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments and Letters of Credit hereunder shall have terminated:
8.1 Indebtedness.
No Credit Party will, nor will it permit any of its Subsidiaries to,
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) the Senior Notes;
(c) the Subordinated Debt;
(d) Indebtedness existing as of the Closing Date (other than
the Senior Notes or the Subordinated Debt) as referenced in Section
6.10 (and renewals, refinancings, replacements or extensions thereof
on terms and conditions no more favorable, in the aggregate, to such
Person than such existing Indebtedness and in a principal amount not
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in excess of that outstanding as of the date of such renewal,
refinancing, replacement or extension);
(e) Indebtedness in respect of current accounts payable and
accrued expenses incurred in the ordinary course of business and to
the extent not current, accounts payable and accrued expenses that are
subject to bona fide dispute;
(f) Indebtedness owing by one Credit Party to another Credit
Party or from a Non-Material Subsidiary to a Credit Party;
(g) purchase money Indebtedness (including Capital Leases)
incurred by the Borrower or any of its Subsidiaries to finance the
purchase of fixed assets (including equipment); provided that (i) the
total of all such Indebtedness for all such Persons taken together
shall not exceed an aggregate principal amount of $2,000,000 at any
one time outstanding (including any such Indebtedness referred to in
subsection (c) above); (ii) such Indebtedness when incurred shall not
exceed the purchase price of the asset(s) financed; and (iii) no such
Indebtedness shall be refinanced for a principal amount in excess of
the principal balance outstanding thereon at the time of such
refinancing;
(h) Indebtedness arising from Hedging Agreements entered into
in the ordinary course and not for speculative purposes;
(i) Indebtedness incurred in connection with the settlement
of product liability litigation not to exceed $3 million, in the
aggregate;
(j) from the Closing Date to September 30, 1999, other
unsecured Indebtedness not to exceed $2,000,000 at any one time; and
(k) from October 1, 1999 and thereafter, other unsecured
Indebtedness if the incurrence of such Indebtedness would not cause a
violation of Section 7.2(a).
8.2 Liens.
No Credit Party will, nor will it permit its Subsidiaries to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
No Credit Party will, nor will it permit its Subsidiaries to, alter
the character of its business from (a) the lines of businesses that any Credit
Party or one of its Subsidiaries was
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engaged in on the date hereof, (b) the businesses engaged in by an acquired
businesses; provided that a substantial portion of their business at the time
of acquisition was related or ancillary to a Credit Party or one of its
Subsidiaries then existing lines of businesses, (c) reasonable extensions of
the businesses referred to in clause (a) and (b) above, including, without
limitation, new products and services to its markets or new distribution
channels, (d) any other lines of business or activities that are related or
ancillary to the businesses referred to in clauses (a) - (c) above, and (e)
other unrelated lines of business; provided that the Credit Parties and their
Subsidiaries may not engage in lines of business unrelated to those engaged in
on the Closing Date (including, without limitation, the opening of retail
locations by a Credit Party that does not currently operate retail locations)
that, in the aggregate, exceed any of the following (i) 20% of total assets of
the Credit Parties and their Subsidiaries, (ii) 15% of total revenues of the
Credit Parties and their Subsidiaries or (iii) 25% total Net Income of the
Credit Parties and their Subsidiaries.
8.4 Consolidation and Merger.
No Credit Party will enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution); provided that notwithstanding the foregoing
provisions of this Section 8.4, any Credit Party may be merged or consolidated
with or into the Borrower or any other Credit Party if (a) such transaction is
between the Borrower and another Credit Party, the Borrower is the continuing
or surviving corporation; (b) the Administrative Agent is given prior written
notice of such action, and the Credit Parties execute and deliver such
documents, instruments and certificates as the Collateral Agent may request in
order to maintain the perfection and priority of the Liens on the assets of the
Credit Parties; and (c) after giving effect thereto no Default or Event of
Default exists.
8.5 Sale or Lease of Assets.
No Credit Party will, nor will it permit its Subsidiaries to, convey,
sell, lease, transfer or otherwise dispose of, in one transaction or a series
of transactions, all or any part of its business or assets whether now owned or
hereafter acquired, including, without limitation, inventory, receivables,
equipment, real property interests (whether owned or leasehold), and
securities, other than (a) any inventory sold or otherwise disposed of in the
ordinary course of business; (b) the sale, lease, transfer or other disposal by
a Credit Party (other than the Borrower) of any or all of its assets to the
Borrower or to another Credit Party; (c) obsolete, slow-moving, idle or
worn-out assets no longer used or useful in its business; (d) the transfer of
assets which constitute a Permitted Investment; (e) the issuance of capital
stock by the Borrower; (f) sales of Unrestricted Margin Stock for fair market
value in cash (provided that notwithstanding Section 8.7, the proceeds of such
sales may only be invested in cash and Cash Equivalents) and (g) other sales of
assets not to exceed $1,000,000, in the aggregate, during the term of this
Agreement.
Upon a sale of assets permitted by this Section 8.5(c) or (g), the
Collateral Agent shall promptly deliver to the Borrower, upon the Borrower's
request and at the Borrower's
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expense, such documentation as is reasonably necessary to evidence the release
of the Lenders' security interest in such assets, including, without
limitation, amendments or terminations of UCC financing statements.
8.6 Sale Leasebacks.
No Credit Party will, nor will it permit its Subsidiaries to, directly
or indirectly become or remain liable as lessee or as guarantor or other surety
with respect to any lease of any property (whether real or personal or mixed),
whether now owned or hereafter acquired, (a) which such Credit Party has sold
or transferred or is to sell or transfer to any other Person other than a
Credit Party or (b) which such Credit Party intends to use for substantially
the same purpose as any other property which has been sold or is to be sold or
transferred by such Credit Party to any Person in connection with such lease.
8.7 Advances, Investments and Loans.
No Credit Party will, nor will it permit its Subsidiaries to, make any
Investments except for Permitted Investments.
8.8 Restricted Payments.
No Credit Party will, nor will it permit its Subsidiaries to, directly
or indirectly, (a) declare or pay any dividends or make any other distribution
upon any shares of its capital stock of any class or (b) purchase, redeem or
otherwise acquire or retire or make any provisions for redemption, acquisition
or retirement of any shares of its capital stock of any class or any warrants
or options to purchase any such shares; provided that (i) any Subsidiary of the
Borrower may pay dividends to its parent and (ii) as long as no Event of
Default exists or is caused as a result thereof, the Borrower may make
purchases of (A) its capital stock from former or departing employees and (B)
its warrants from NBD Bank and M.L.C. Partners Limited Partnership.
8.9 Transactions with Affiliates.
Other than (a) transactions between Credit Parties or (b) non-material
transactions between Credit Parties and their Subsidiaries otherwise permitted
by 8.7, no Credit Party will, nor will it permit its Subsidiaries to, enter
into any transaction or series of transactions, whether or not in the ordinary
course of business, with any officer, director, shareholder, Subsidiary or
Affiliate other than on terms and conditions substantially as favorable as
would be obtainable in a comparable arm's-length transaction with a Person
other than an officer, director, shareholder, Subsidiary or Affiliate.
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8.10 Fiscal Year; Organizational Documents.
No Credit Party will, nor will it permit its Subsidiaries to, (a)
change its fiscal year or (b) in any manner that would reasonably be likely to
adversely affect the rights of the Lenders, change its articles or certificate
of incorporation or its bylaws.
8.11 Senior Notes/Subordinated Debt.
No Credit Party will, nor will it permit its Subsidiaries to, (a) make
or offer to make any voluntary or optional principal payments with respect to
the Senior Notes or Subordinated Debt, (b) redeem or offer to redeem any of the
Senior Notes or Subordinated Debt, or (c) deposit any funds intended to
discharge or defease any or all of the Senior Notes or Subordinated Debt.
Neither the terms of the Senior Notes nor the Subordinated Debt shall be
amended or modified in any manner without the prior written consent of the
Required Lenders.
8.12 No Limitations.
No Credit Party will, nor will it permit its Subsidiaries to, directly
or indirectly, create or otherwise cause, incur, assume, suffer or permit to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any such Person to (a) pay dividends or make any other
distribution on any of such Person's capital stock, (b) pay any Indebtedness
owed to the Borrower or any other Credit Party, (c) make loans or advances to
any other Credit Party or (d) transfer any of its property to any other Credit
Party, except for encumbrances or restrictions existing under or by reason of
(i) customary non-assignment or net worth provisions in any lease governing a
leasehold interest, (ii) any agreement or other instrument of a Person existing
at the time it becomes a Subsidiary of the Borrower; provided that such
encumbrance or restriction is not applicable to any other Person, or any
property of any other Person, other than such Person becoming a Subsidiary of
the Borrower and was not entered into in contemplation of such Person becoming
a Subsidiary of the Borrower, and (iii) this Credit Agreement and the other
Credit Documents.
8.13 No Other Negative Pledges.
No Credit Party will, nor will it permit its Subsidiaries to, enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of any
security for such obligation if security is given for some other obligation.
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SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall default in the payment
(i) when due of any principal of any of the Loans or any reimbursement
obligation arising from drawings under Letters of Credit or (ii)
within three Business Days of when due of any interest on the Loans or
any fees or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or
statement made or deemed to be made by any Credit Party herein, in any
of the other Credit Documents, or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall
prove untrue in any material respect on the date as of which it was
made or deemed to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.11, 7.12, or 8.1 through 8.13 inclusive; or
(ii) default in the due performance or observance by
it of any term, covenant or agreement contained in Sections
7.1 (other than Section 7.1(c)) and such default shall
continue unremedied for a period of ten days after notice
thereof is given by an Agent; or
(iii) default in the due performance or observance
by it of any term, covenant or agreement contained in Section
7.1(c) and such default shall continue unremedied for a
period of two Business Days after notice thereof is given by
an Agent; or
(iv) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i), (ii) or (iii)
of this Section 9.1) contained in this Credit Agreement and
such default shall continue unremedied for a period of at
least 30 days after the earlier
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of a Responsible Officer becoming aware of such default or
notice thereof given by an Agent.
(d) Other Credit Documents. (i) Any Credit Party shall
default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents and such default shall
continue unremedied for a period of at least 30 days after the earlier
of a Responsible Officer becoming aware of such default or notice
thereof given by the Agent, or (ii) any Credit Document shall fail to
be in full force and effect or any Credit Party shall so assert or any
Credit Document shall fail to give the Agents and/or the Lenders the
security interests, liens, rights, powers and privileges purported to
be created thereby.
(e) Guaranties. The guaranty given by the Credit Parties
hereunder or by any Additional Credit Party hereafter or any provision
thereof shall cease to be in full force and effect, or any guarantor
thereunder or any Person acting by or on behalf of such guarantor
shall deny or disaffirm such Guarantor's obligations under such
guaranty.
(f) Bankruptcy, etc. The occurrence of any of the following
with respect to the Borrower or any of its Subsidiaries (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Borrower or any of its Subsidiaries or for any
substantial part of its property or ordering the winding up or
liquidation of its affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect is commenced against the Borrower or any of its
Subsidiaries and such petition remains unstayed and in effect for a
period of 60 consecutive days; or (iii) the Borrower or any of its
Subsidiaries shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in
effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of such Person or any
substantial part of its property or make any general assignment for
the benefit of creditors; or (iv) the Borrower or any of its
Subsidiaries shall admit in writing its inability to pay its debts
generally as they become due or any action shall be taken by such
Person in furtherance of any of the aforesaid purposes.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) of the Borrower or any of its Subsidiaries in an aggregate
principal amount in excess of $2,000,000, including, without
limitation, the Senior Notes or the Subordinated Debt (i) a Credit
Party shall (A) default in any payment (beyond the applicable grace
period with respect thereto, if any)
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with respect to any such Indebtedness, or (B) default (after giving
effect to any applicable grace period) in the observance or
performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the
effect of which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee or
agent on behalf of such holders) to cause (determined without regard
to whether any notice or lapse of time is required) any such
Indebtedness to become due prior to its stated maturity; or (ii) any
such Indebtedness shall be declared due and payable, or required to be
prepaid other than by a regularly scheduled required prepayment prior
to the stated maturity thereof; or (iii) any such Indebtedness shall
mature and remain unpaid.
(h) Judgments. One or more judgments, orders, or decrees
shall be entered against any one or more of the Credit Parties and its
Subsidiaries involving a liability of $1,000,000 or more, in the
aggregate, (to the extent not paid or covered by insurance provided by
a carrier who has acknowledged coverage) and such judgments, orders or
decrees (i) are the subject of any enforcement proceeding commenced by
any creditor or (ii) shall continue unsatisfied, undischarged and
unstayed for a period ending on the first to occur of (A) the last day
on which such judgment, order or decree becomes final and unappealable
or (B) 60 days.
(i) ERISA. The occurrence of any of the following events or
conditions: (A) any "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether
or not waived, shall exist with respect to any Plan, or any lien shall
arise on the assets of the Borrower or any of its Subsidiaries or any
ERISA Affiliate in favor of the PBGC or a Plan; (B) a Termination
Event shall occur with respect to a Single Employer Plan, which is, in
the reasonable opinion of the Administrative Agent, likely to result
in the termination of such Plan for purposes of Title IV of ERISA; (C)
a Termination Event shall occur with respect to a Multiemployer Plan
or Multiple Employer Plan, which is, in the reasonable opinion of the
Administrative Agent, likely to result in (i) the termination of such
Plan for purposes of Title IV of ERISA, or (ii) the Borrower or any of
its Subsidiaries or any ERISA Affiliate incurring any liability in
connection with a withdrawal from, reorganization of (within the
meaning of Section 4241 of ERISA), or insolvency (within the meaning
of Section 4245 of ERISA) of such Plan; or (D) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) or breach of fiduciary responsibility shall occur
which may subject the Borrower or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l)
of ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Borrower or any of its Subsidiaries
or any ERISA Affiliate has agreed or is required to indemnify any
person against any such liability.
(j) Ownership. There shall occur a Change of Control.
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(k) Subordinated Debt. (i) Any Governmental Authority with
applicable jurisdiction determines that the Lenders are not holders of
Senior Indebtedness (as defined in the documentation evidencing the
Subordinated Debt) or Senior Debt (as defined in the Subordinated
Secured Note) or (ii) the subordination provisions creating the
Subordinated Debt or the Subordinated Secured Note shall, in whole or
in part, terminate, cease to be effective or cease to be legally
valid, binding and enforceable as to any holder of the Subordinated
Debt or the Subordinated Secured Note.
(l) Borrowing Base Assets. The sum of the amount of Revolving
Loans outstanding plus LOC Obligations outstanding, as of the date of
the Borrowing Base Report, shall exceed the Borrowing Base Assets, as
determined on two consecutive Borrowing Base Reports delivered by the
Borrower.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the
Administrative Agent shall, (x) upon the request and direction of the Required
Lenders or (y) on the day after an Event of Default has occurred and been
continuing for 90 days, unless otherwise consented to by all Lenders, by
written notice to the Borrower, take the following actions without prejudice to
the rights of the Agents or any Lender to enforce its claims against the Credit
Parties, except as otherwise specifically provided for herein:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration of Loans. Declare the unpaid principal of
and any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and
all other indebtedness or obligations of any and every kind owing by a
Credit Party to any of the Lenders hereunder to be due whereupon the
same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Credit Parties.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Administrative Agent additional cash, to be
held by the Administrative Agent, for the benefit of the Lenders, in a
cash collateral account as additional security for the LOC Obligations
in respect of subsequent drawings under all then outstanding Letters
of Credit in an amount equal to the maximum aggregate amount which may
be drawn under all Letters of Credits then outstanding.
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(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents, including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agents or the
Lenders, which notice or other action is expressly waived by the Credit
Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Administrative Agent, each Lender has, to the extent permitted by law, a
separate right of payment and shall be considered a separate "creditor" holding
a separate "claim" within the meaning of Section 101(5) of the Bankruptcy Code
or any other insolvency statute.
9.3 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by an Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agents in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agents with respect to the Collateral under or pursuant to the terms
of the Collateral Documents;
SECOND, to payment of any fees owed to an Agent or a Issuing
Lender;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to the Lenders hereunder;
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FIFTH, to the payment of the outstanding principal amount of
the Loans and unreimbursed drawings under Letters of Credit, to the
payment or cash collateralization of the outstanding LOC Obligations,
pro rata as set forth below;
SIXTH, to any principal amounts outstanding under Hedging
Agreements, pro rata, as set forth below;
SEVENTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "SIXTH" above; and
EIGHTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans,
LOC Obligations and obligations under Hedging Agreements held by such Lender
bears to the aggregate then outstanding Loans, LOC Obligations and obligations
under Hedging Agreements) of amounts available to be applied pursuant to
clauses "THIRD", "FOURTH," "FIFTH," "SIXTH" and "SEVENTH" above; and (c) to the
extent that any amounts available for distribution pursuant to clause "FIFTH"
above are attributable to the issued but undrawn amount of outstanding Letters
of Credit, such amounts shall be held by the Collateral Agent in a cash
collateral account and applied (x) first, to reimburse the Issuing Lender from
time to time for any drawings under such Letters of Credit and (y) then,
following the expiration of all Letters of Credit, to all other obligations of
the types described in clauses "FIFTH," "SIXTH" and "SEVENTH" above in the
manner provided in this Section 9.3.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Lender hereby designates and appoints NBD Bank as Administrative
Agent and Collateral Agent and NationsBank, N.A. as Documentation Agent of such
Lender to act as specified herein and the other Credit Documents, and each such
Lender hereby authorizes the Agents, as the agents for such Lender, to take
such action on its behalf under the provisions of this Credit Agreement and the
other Credit Documents and to exercise such powers and perform such duties as
are expressly delegated by the terms hereof and of the other Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any
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provision to the contrary elsewhere herein and in the other Credit Documents,
the Agents shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Credit Agreement or any of
the other Credit Documents, or shall otherwise exist against the Agents. The
provisions of this Section are solely for the benefit of the Agents and the
Lenders and none of the Credit Parties shall have any rights as a third party
beneficiary of the provisions hereof. In performing its functions and duties
under this Credit Agreement and the other Credit Documents, each Agent shall
act solely as an agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with
or for any Credit Party.
10.2 Delegation of Duties.
An Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
An Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
Neither the Agents nor any of their officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for
its or such Person's own gross negligence or willful misconduct) or responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any of the Credit Parties contained
herein or in any of the other Credit Documents or in any certificate, report,
document, financial statement or other written or oral statement referred to or
provided for in, or received by an Agent under or in connection herewith or in
connection with the other Credit Documents, or enforceability or sufficiency
therefor of any of the other Credit Documents, or for any failure of the
Borrower to perform its obligations hereunder or thereunder. The Agents shall
not be responsible to any Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Credit Documents or for any representations, warranties, recitals
or statements made herein or therein or made by the Borrower or any Credit
Party in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection
herewith or therewith furnished or made by an Agent to the Lenders or by or on
behalf of the Credit Parties to the Agents or any Lender or be required to
ascertain or inquire as to the performance or observance of any of the terms,
conditions, provisions, covenants or agreements contained herein or therein or
as to the use of the proceeds of the Loans or the use of the Letters of Credit
or of the existence or possible existence of any Default or Event of Default or
to inspect the properties, books or records of the Credit Parties. The Agents
are not trustees for the Lenders and owe no fiduciary duty to the Lenders.
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10.4 Reliance on Communications.
The Agents shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agents with reasonable care). The Agents may deem
and treat the Lenders as the owner of its interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent in accordance with Section
11.3(b). The Agents shall be fully justified in failing or refusing to take any
action under this Credit Agreement or under any of the other Credit Documents
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 Agents shall in all cases be fully protected in acting, or in refraining
from acting, hereunder or under any of the other Credit Documents in accordance
with a request of the Required Lenders (or to the extent specifically provided
in Section 11.6, all the Lenders) and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
10.5 Notice of Default.
An Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless such Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, 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 prompt 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.
10.6 Non-Reliance on Agents and Other Lenders.
Each Lender expressly acknowledges that neither the Agents nor any of
their officers, directors, employees, agents, attorneys-in-fact or affiliates
has made any representations or warranties to it and that no act by the Agents
or any affiliate thereof hereinafter taken, including any review of the affairs
of any Credit Party, shall be deemed to constitute any representation or
warranty by the Agents to any Lender. Each Lender represents to the Agents that
it has, independently and without reliance upon the Agents 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, assets, operations,
property, financial and other conditions,
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prospects and creditworthiness of the Credit Parties and made its own decision
to make its Loans hereunder and enter into this Credit Agreement. Each Lender
also represents that it will, independently and without reliance upon the
Agents 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 Credit
Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Credit Parties. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Administrative Agent hereunder, the Agents shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Credit Parties which may
come into the possession of the Agents or any of their officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify each 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 Commitments
(or if the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interest of
the Lenders), 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 payment in full of the Credit Party Obligations) be imposed
on, incurred by or asserted against an Agent in its capacity as such in any way
relating to or arising out of this Credit Agreement or the other Credit
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 an 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 from the gross negligence or willful
misconduct of an Agent. If any indemnity furnished to an Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section shall survive the payment of the Credit Party
Obligations and all other amounts payable hereunder and under the other Credit
Documents.
10.8 Agents in Their Individual Capacity.
Each Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though such Agent were not an Agent hereunder. With respect to
the Loans made and Letters of Credit issued and all obligations owing to it, an
Agent shall have the same rights and powers under this Credit
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Agreement as any Lender and may exercise the same as though they were not an
Agent, and the terms "Lender" and "Lenders" shall include each Agent in its
individual capacity.
10.9 Successor Agent.
Any Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 45 days after the notice of resignation, then the retiring Agent shall
select a successor Agent provided such successor is a Lender hereunder or a
commercial bank organized under the laws of the United States of America or of
any State thereof and has a combined capital and surplus of at least
$400,000,000. Upon the acceptance of any appointment as an Agent hereunder by a
successor, such successor Agent shall thereupon succeed to and become vested
with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations as an
Agent, as appropriate, under this Credit Agreement and the other Credit
Documents and the provisions of this Section 10.9 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was an Agent under
this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described in
Section 9.2, each Lender is authorized at any time and from time to time,
without presentment, demand, protest or other notice of any kind (all of which
rights being hereby expressly waived), to set-off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any
time held or owing by such
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Lender (including, without limitation, branches, agencies or Affiliates of such
Lender wherever located) to or for the credit or the account of any Credit
Party against obligations and liabilities of such Credit Party to the Lenders
hereunder, under the Notes, the other Credit Documents or otherwise,
irrespective of whether the Administrative Agent or the Lenders shall have made
any demand hereunder and although such obligations, liabilities or claims, or
any of them, may be contingent or unmatured, and any such set-off shall be
deemed to have been made immediately upon the occurrence of an Event of Default
even though such charge is made or entered on the books of such Lender
subsequent thereto. The Credit Parties hereby agree that any Person purchasing
a participation in the Loans and Commitments hereunder pursuant to Section
11.3(c) or 3.8 may exercise all rights of set-off with respect to its
participation interest as fully as if such Person were a Lender hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided that none of
the Credit Parties may assign and transfer any of its interests
(except as permitted by Section 8.4 or 8.5) without the prior written
consent of the Lenders; and provided further that the rights of each
Lender to transfer, assign or grant participations in its rights
and/or obligations hereunder shall be limited as set forth below in
subsections (b) and (c) of this Section 11.3. Notwithstanding the
above (including anything set forth in subsections (b) and (c) of this
Section 11.3), nothing herein shall restrict, prevent or prohibit any
Lender from (A) pledging its Loans hereunder to a Federal Reserve Bank
in support of borrowings made by such Lender from such Federal Reserve
Bank, or (B) granting assignments or participations in such Lender's
Loans and/or Commitments hereunder to its parent company and/or to any
Affiliate of such Lender or to any existing Lender or Affiliate
thereof.
(b) Assignments. Each Lender may, with the prior written
consent of the Borrower and the Agents (provided that no consent of
the Borrower shall be required during the existence and continuation
of an Event of Default), which consent shall not be unreasonably
withheld or delayed, assign all or a portion of its rights and
obligations hereunder pursuant to an assignment agreement
substantially in the form of Exhibit 11.3 to one or more Eligible
Assignees; provided that (i) any such assignment shall be in a minimum
aggregate amount of $5,000,000 of the Commitments and in integral
multiples of $1,000,000 above such amount (or the remaining amount of
Commitments held by such Lender), (ii) each such assignment shall be
of a constant, not varying, percentage of all of the assigning
Lender's rights and obligations under the Commitment being assigned
and (iii) an Agent may not, in the aggregate, (unless there exists an
Event of Default) assign more than 50% of its original Commitment as
of the Closing Date. Any assignment hereunder shall be effective upon
satisfaction of the conditions set forth above and delivery to the
Administrative Agent of a duly executed assignment agreement
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together with a transfer fee of $3,500 payable to the Administrative
Agent for its own account. Upon the effectiveness of any such
assignment, the assignee shall become a "Lender" for all purposes of
this Credit Agreement and the other Credit Documents and, to the
extent of such assignment, the assigning Lender shall be relieved of
its obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees that
upon notice of any such assignment and surrender of the appropriate
Note or Notes, it will promptly provide to the assigning Lender and to
the assignee separate promissory notes in the amount of their
respective interests substantially in the form of the original Note or
Notes (but with notation thereon that it is given in substitution for
and replacement of the original Note or Notes or any replacement notes
thereof).
By executing and delivering an assignment agreement in accordance with
this Section 11.3(b), the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) such assigning Lender
warrants that it is the legal and beneficial owner of the interest
being assigned thereby free and clear of any adverse claim and the
assignee warrants that it is an Eligible Assignee; (ii) except as set
forth in clause (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Credit Agreement, any of the other Credit
Documents or any other instrument or document furnished pursuant
hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit
Agreement, any of the other Credit Documents or any other instrument
or document furnished pursuant hereto or thereto or the financial
condition of any Credit Party or the performance or observance by any
Credit Party of any of its obligations under this Credit Agreement,
any of the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such
assignment agreement; (iv) such assignee confirms that it has received
a copy of this Credit Agreement, the other Credit Documents and such
other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such assignment
agreement; (v) such assignee will independently and without reliance
upon the Agents, such assigning Lender or any other Lender, and based
on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Credit Agreement and the other Credit
Documents; (vi) such assignee appoints and authorizes the Agents to
take such action on its behalf and to exercise such powers under this
Credit Agreement or any other Credit Document as are delegated to the
Agents by the terms hereof or thereof, together with such powers as
are reasonably incidental thereto; and (vii) such assignee agrees that
it will perform in accordance with their terms all the obligations
which by the terms of this Credit Agreement and the other Credit
Documents are required to be performed by it as a Lender.
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(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests
and obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender
hereunder, (ii) no such participant shall have, or be granted, rights
to approve any amendment or waiver relating to this Credit Agreement
or the other Credit Documents except to the extent any such amendment
or waiver would (A) reduce the principal of or rate of interest on or
fees in respect of any Loans in which the participant is participating
or increase any Commitments with respect thereto, (B) postpone the
date fixed for any payment of principal (including the extension of
the final maturity of any Loan or the date of any mandatory
prepayment), interest or fees in which the participant is
participating, or (C) release all or substantially all of the
collateral or guaranties (except as expressly provided in the Credit
Documents) supporting any of the Loans or Commitments in which the
participant is participating, (iii) sub-participations by the
participant (except to an Affiliate, parent company or Affiliate of a
parent company of the participant) shall be prohibited and (iv) any
such participations shall be in a minimum aggregate amount of
$5,000,000 of the Commitments and in integral multiples of $1,000,000
in excess thereof. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or
the other Credit Documents (the participant's rights against the
selling Lender in respect of such participation to be those set forth
in the participation agreement with such Lender creating such
participation) and all amounts payable by the Borrower hereunder shall
be determined as if such Lender had not sold such participation;
provided, however, that such participant shall be entitled to receive
additional amounts under Sections 3.9, 3.12, 3.13 and 3.14 to the same
extent that the Lender from which such participant acquired its
participation would be entitled to the benefit of such cost protection
provisions.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of an Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Borrower or any Credit Party and
the Agents or any Lender shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or under
any other Credit Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder. The
rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Agents or any Lender would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agents or the Lenders
to any other or further action in any circumstances without notice or demand.
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11.5 Payment of Expenses; Indemnification.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket
costs and expenses of (i) the Documentation Agent in connection with (A) the
negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Documentation
Agent and the fees and expenses of counsel for the Documentation Agent in
connection with collateral issues), and (B) any amendment, waiver or consent
relating hereto and thereto including, but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out, renegotiation or
restructure relating to the performance by the Credit Parties under this Credit
Agreement and (ii) the Agents and the Lenders in connection with (A)
enforcement of the Credit Documents and the documents and instruments referred
to therein, including, without limitation, in connection with any such
enforcement, the reasonable fees and disbursements of counsel for the Agents
and each of the Lenders, and (B) any bankruptcy or insolvency proceeding of a
Credit Party of any of its Subsidiaries and (b) indemnify each Agent, and each
Lender, its officers, directors, employees, representatives and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, any investigation, litigation or
other proceeding (whether or not any Agent, or Lender is a party thereto)
related to (i) the entering into and/or performance of any Credit Document or
the use of proceeds of any Loans (including other extensions of credit)
hereunder or the consummation of any other transactions contemplated in any
Credit Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding (but excluding any such losses, liabilities,
claims, damages or expenses to the extent incurred by reason of gross
negligence or willful misconduct on the part of the Person to be indemnified),
(ii) any Environmental Claim and (iii) any claims for Non-Excluded Taxes.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is
in writing and signed by the Required Lenders and the then Credit Parties;
provided that no such amendment, change, waiver, discharge or termination shall
without the consent of each Lender:
(a) extend the Revolving Loan Maturity Date or postpone or
extend the time for any payment or prepayment of principal;
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(b) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or fees hereunder;
(c) reduce or waive the principal amount of any Loan;
(d) increase or extend the Commitment of a Lender or the
total Commitments over the amount thereof in effect (it being
understood and agreed that a waiver of any Default or Event of Default
or a waiver of any mandatory reduction in the Commitments shall not
constitute a change in the terms of any Commitment of any Lender);
(e) release all or substantially all of the Collateral
securing the Credit Party Obligations hereunder (provided that the
Collateral Agent may, without consent from any other Lender, release
any Collateral that is sold or transferred by a Credit Party in
conformance with Section 8.5);
(f) release the Borrower from its obligations or release all
or substantially all of the other Credit Parties from their respective
obligations under the Credit Documents;
(g) amend, modify or waive any provision of this Section or
Section 3.4(a), 3.4(b)(i), 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13,
3.14, 9.1(a), 9.1(l), 11.2, 11.3 or 11.5;
(h) reduce any percentage specified in, or otherwise modify,
the definition of Required Lenders; or
(i) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under (or in respect of) the Credit
Documents.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote
as such Lender sees fit on any reorganization plan that affects the Loans or
the Letters of Credit, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or
insolvency proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary
in making proof of this Credit Agreement to produce or account for more than
one such counterpart. Delivery of executed counterparts by telecopy
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shall be as effective as an original and shall constitute a representation that
an original will be delivered.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Defaulting Lender.
Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders; provided,
however, that all other benefits and obligations under the Credit Documents
shall apply to such Defaulting Lender.
11.10 Survival of Indemnification and Representations and
Warranties.
All indemnities set forth herein and all representations and
warranties made herein shall survive the execution and delivery of this Credit
Agreement, the making of the Loans, the issuance of the Letters of Credit and
the repayment of the Loans, LOC Obligations and other obligations and the
termination of the Commitments hereunder.
11.11 Governing Law; Jurisdiction.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL
BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. Any legal action or proceeding with
respect to this Agreement or any other Credit Document may be brought
in the courts of the State of Michigan or of the United States for the
Eastern District of Michigan, and, by execution and delivery of this
Credit Agreement, each Credit Party hereby irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
the jurisdiction of such courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the
address for notices pursuant to Section 11.1, such service to become
effective 15 days after such mailing. Nothing herein shall affect the
right of a Lender to serve process in any other manner permitted by
law or to commence legal proceedings or to otherwise proceed against a
Credit Party in any other jurisdiction. Each Credit Party agrees
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that a final judgment in any action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law; provided that nothing in this
Section 11.11(a) is intended to impair a Credit Party's right under
applicable law to appeal or seek a stay of any judgment.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection
with this Agreement or any other Credit Document brought in the courts
referred to in subsection (a) hereof and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought
in an inconvenient forum.
11.12 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.13 Time.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight time, as the case may be, unless specified otherwise.
11.14 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.15 Further Assurances.
The Credit Parties agree, upon the request of the Agents, to promptly
take such actions, as reasonably requested, as is necessary to carry out the
intent of this Credit Agreement and the other Credit Documents, including, but
not limited to, such actions as are necessary to ensure that the Lenders have a
perfected security interest in the Collateral subject to no Liens other than
Permitted Liens.
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11.16 Confidentiality.
Each Lender agrees that it will use its reasonable best efforts to
keep confidential and to cause any representative designated under Section 7.12
to keep confidential any non-public information from time to time supplied to
it under any Credit Document; provided, however, that nothing herein shall
prevent the disclosure of any such information to (a) the extent a Lender in
good faith believes such disclosure is required by Requirement of Law, (b)
counsel for a Lender or to its accountants, (c) bank examiners or auditors or
comparable Persons, (d) any affiliate of a Lender, (e) any other Lender, or any
assignee, transferee or participant, or any potential assignee, transferee or
participant, of all or any portion of any Lender's rights under this Agreement
who is notified of the confidential nature of the information or (f) any other
Person in connection with any litigation to which any one or more of the
Lenders is a party; and provided further that no Lender shall have any
obligation under this Section 11.16 to the extent any such information becomes
available on a non-confidential basis from a source other than a Credit Party
or that any information becomes publicly available other than by a breach of
this Section 11.16.
11.17 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.18 Binding Effect.
This Credit Agreement shall become effective at such time when all of
the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have been executed by the Borrower, the Guarantors and the
Agents, and the Agents shall have received copies hereof (telefaxed or
otherwise) which, when taken together, bear the signatures of each Lender, and
thereafter this Credit Agreement shall be binding upon and inure to the benefit
of the Borrower, the Guarantors, the Agents and each Lender and their
respective successors and assigns.
11.19 Release of Collateral.
Subsequent to the date that the Overadvance is no longer available
(whether as a result of the Overadvance being requested and the 90 day period
thereafter having occurred or the time period available to use the Overadvance
has expired), the Lenders agree, upon the request and at the expense of the
Borrower, and so long as (a) the sum of the aggregate amount of Revolving Loans
outstanding plus LOC Obligations outstanding exceeds the Borrowing Base Assets
and (b) no Default or Event of Default exists and is continuing, to take such
action as is necessary to release any real property Collateral or Collateral
consisting of equipment. The Lenders hereby
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authorize the Collateral Agent to execute and deliver such documentation or to
take such other action as is necessary to give effect to this Section 11.19.
11.20 Consent to M.O.U.
Notwithstanding anything to the contrary contained in this Agreement,
each of the Credit Parties may execute, deliver, and perform its obligations
under the M.O.U. including, without limitation, the execution, delivery, and
performance of the definitive documents contemplated thereby; provided that
such definitive documents will be submitted to each Lender prior to the
execution of any such document (or, if such prior submission is not
practicable, contemporaneously with the execution of such document) for
confirmation by such Lender that such definitive document conforms with the
M.O.U., such confirmation not to be unreasonably withheld.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER:
RIDDELL SPORTS INC.,
a Delaware corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Executive Vice President
--------------------------
GUARANTORS:
RIDDELL, INC.,
a Illinois corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Vice President
--------------------------
EQUILINK LICENSING CORPORATION,
a Delaware corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Senior Vice President
--------------------------
RHC LICENSING CORPORATION,
a Delaware corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Senior Vice President
--------------------------
RIDMARK CORPORATION,
a Delaware corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Senior Vice President
--------------------------
<PAGE>
ALL AMERICAN SPORTS CORPORATION,
a Delaware corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Senior Vice President
--------------------------
VARSITY SPIRIT CORPORATION,
a Tennessee corporation
By: /s/ John M. Nichols
-----------------------------
Name: John M. Nichols
---------------------------
Title: Senior Vice President
--------------------------
CHEER ACQUISITION CORP.
a Tennessee corporation
By: /s/ David Groelinger
-----------------------------
Name: David Groelinger
---------------------------
Title: Vice President
--------------------------
VARSITY SPIRIT FASHIONS & SUPPLIES, INC.
a Minnesota corporation
By: /s/ John M. Nichols
-----------------------------
Name: John M. Nichols
---------------------------
Title: Senior Vice President
--------------------------
INTERNATIONAL LOGOS, INC.
a Tennessee corporation
By: /s/ John M. Nichols
-----------------------------
Name: John M. Nichols
---------------------------
Title: Senior Vice President
--------------------------
<PAGE>
VARSITY/INTROPA TOURS, INC.
a Tennessee corporation
By: /s/ John M. Nichols
-----------------------------
Name: John M. Nichols
---------------------------
Title: Senior Vice President
--------------------------
VARSITY USA, INC.
a Tennessee corporation
By: /s/ John M. Nichols
-----------------------------
Name: John M. Nichols
---------------------------
Title: Senior Vice President
--------------------------
<PAGE>
LENDERS:
NBD BANK
individually in its capacity as a
Lender and in its capacity as Administrative
Agent and Collateral Agent
By: /s/ Jon P. Dady
-----------------------------
Name: Jon P. Dady
---------------------------
Title: First Vice President
--------------------------
NATIONSBANK, N.A.,
individually in its capacity as a Lender
and in its capacity as Documentation Agent
By: /s/ Kimberly R. Dupuy
-----------------------------
Name: Kimberly R. Dupuy
---------------------------
Title: Vice President
--------------------------
