<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
July 28, 1998
___________________________________________________________
Date of Report (Date of earliest event reported)
Salton/Maxim Housewares, Inc.
____________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 0-19557 36-3777824
- ---------------------------- ------------ -------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
550 Business Center Drive, Mount Prospect, Illinois 60056
_____________________________________________________________
(Address of principal executive offices) (Zip Code)
(847) 803-4600
________________________________
(Registrant's telephone number)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On July 28, 1998, Salton/Maxim Housewares, Inc. ("Salton") repurchased the
6,535,072 shares of Salton common stock owned by Windmere-Durable Holdings, Inc.
("Windmere") pursuant to the previously announced Stock Agreement dated as of
May 6, 1998 (the "Windmere Stock Agreement") by and among Salton, Windmere and
the Salton Executive Related Parties (as defined therein). The repurchase price
was $12 per share in cash plus a $15 million subordinated promissory note (the
"Note"). The Note, which has a term of six and one-half years and bears
interest at 4% per annum payable annually, is subject to offsets of 5% of the
total purchase price paid by Salton for product purchases from Windmere and its
affiliates during the term of the Note. The principal amount of the Note is
also subject to reduction in the event Salton's distribution and marketing
agreement with Kmart Corporation is terminated for any reason.
In connection with the repurchase of Windmere's 50% interest in Salton: (i)
Windmere repaid in full its promissory note in the principal amount of
$10,847,620, which note was issued to Salton in July, 1996; (ii) Salton
repurchased for approximately $3.3 million Windmere's option to purchase up to
458,500 shares of Salton, which option was granted to Windmere in July, 1996;
and (iii) Windmere and Salton agreed to continue various commercial and other
arrangements, including an agreement relating to Salton's distribution and
marketing agreement with Kmart (the "Kmart Fee Agreement"), subject to certain
modifications.
Effective upon the closing of the repurchase of Windmere's 50% interest in
Salton, each of the persons who had been designated by Windmere to serve on
Salton's Board of Directors, Messrs. David Friedson, Harry D. Schulman, Laurence
S. Chud, M.D. and James Connolly, resigned from Salton's Board of Directors.
On July 28, 1998, Salton entered into a Credit Agreement dated July 27,
1998 (the "Lehman Credit Agreement") among Salton, the several lenders from time
to time parties thereto, Lehman Brothers Inc., as arranger, Lehman Commercial
Paper Inc., as syndication agent, and Lehman Commercial Paper Inc., as
administrative agent. Salton used a portion of the funds received from the
Lehman Credit Agreement to repurchase Windmere's 50% interest in Salton and to
repay all of Salton's outstanding indebtedness to Foothill Capital Corporation.
On July 28, 1998, Salton also issued $40 million of convertible preferred
stock to affiliates of Centre Partners Management LLC ("Centre Partners") in
connection with the previously announced Stock Purchase Agreement dated July 15,
1998 (the "Preferred Stock Agreement") by and among Salton and Centre Capital
Investors II, L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre Capital
Offshore Investors II, L.P., The State Board of Administration of Florida,
Centre Parallel Management Partners, L.P. and Centre Partners Coinvestment, L.P.
The convertible preferred stock is non-dividend bearing and is convertible into
2,352,941 shares of Salton (reflecting a $17 per share conversion price).
1
<PAGE> 3
In connection with the issuance of the convertible preferred stock, (i)
Salton filed a Certificate of Designation (the "Certificate of Designation")
setting forth the powers, preferences, rights, qualifications, limitations and
restrictions of such preferred stock with the State of Delaware, and (ii) Salton
and affiliates of Centre Partners entered into a Registration Rights Agreement
dated July 15, 1998 (the "Registration Rights Agreement") by and among Salton
and Centre Capital Investors II, L.P., Centre Capital Tax-Exempt Investors II,
L.P., Centre Capital Offshore Investors II, L.P., The State Board of
Administration of Florida, Centre Parallel Management Partners, L.P. and Centre
Partners Coinvestment, L.P.
In connection with the issuance of the convertible preferred stock to the
affiliates of Centre Partners, each of Mr. Bruce G. Pollack and Robert A.
Bergmann, which were designated by Centre Partners pursuant to the Preferred
Stock Agreement, were appointed as directors of Salton to serve in Class I and
Class II, respectively.
The foregoing description of the Windmere Stock Agreement, the Note, the
Kmart Fee Agreement, the Lehman Credit Agreement, the Preferred Stock Agreement,
the Certificate of Designation and the Registration Rights Agreement, does not
purport to be complete and is qualified in its entirety by reference to each
such document, a copy of which is attached hereto as Exhibit 10.1, 10.2, 10.3,
10.4, 10.5, 10.6 and 10.7 hereto, and is hereby incorporated herein by
reference. A copy of the Registrant's press release, dated July 28, 1998,
relating to the above-described transactions is attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Exhibit No. Description
- ----------- -----------
10.1 Stock Agreement, dated as of May 6, 1998, by and between
Salton/Maxim Housewares, Inc., Windmere-Durable Holdings, Inc.
and the Salton Executive Related Parties (as defined therein)
(incorporated by reference to Exhibit 2.1 of Salton's Current
Report on Form 8-K dated May 6, 1998).
10.2 Note, dated July 27, 1998, issued by the Salton/Maxim
Housewares, Inc. to Windmere-Durable Holdings, Inc.
10.3 Agreement dated July 27, 1998 between Salton/Maxim
Housewares, Inc. and Windmere-Durable Holdings, Inc.
10.4 Credit Agreement dated July 27, 1998 among Salton/Maxim
Housewares, Inc., the several lenders from time to time parties
thereto, Lehman Brothers Inc., as arranger, Lehman Commercial
Paper Inc., as syndication agent, and Lehman Commercial Paper
Inc., as administrative agent.
2
<PAGE> 4
10.5 Stock Purchase Agreement dated July 15, 1998 by and among
Salton/Maxim Housewares, Inc. and Centre Capital Investors II,
L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre
Capital Offshore Investors II, L.P., The State Board of
Administration of Florida, Centre Parallel Management Partners,
L.P. and Centre Partners Coinvestment, L.P. (incorporated by
reference to Exhibit 10.1 of Salton's Current Report on Form 8-K
dated July 15, 1998).
10.6 Certificate of Designation for the Series A Convertible
Preferred Stock of Salton/Maxim Housewares, Inc.
10.7 Registration Rights Agreement dated July 15, 1998 by and
among Salton/Maxim Housewares, Inc. and Centre Capital Investors
II, L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre
Capital Offshore Investors II, L.P., The State Board of
Administration of Florida, Centre Parallel Management Partners,
L.P. and Centre Partners Coinvestment, L.P.
99.1 Press Release of Salton/Maxim Housewares, Inc., issued July
28, 1998.
3
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SALTON/MAXIM HOUSEWARES, INC.
/s/ WILLIAM B. RUE
-------------------------
William B. Rue
Dated: July 28, 1998 Senior Vice President and
Chief Operating Officer
4
<PAGE> 6
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Stock Agreement, dated as of May 6, 1998, by and between
Salton/Maxim Housewares, Inc., Windmere-Durable Holdings, Inc.
and the Salton Executive Related Parties (as defined therein)
(incorporated by reference to Exhibit 2.1 of Salton's Current
Report on Form 8-K dated May 6, 1998).
10.2 Note, dated July 27, 1998, issued by the Salton/Maxim
Housewares, Inc. to Windmere-Durable Holdings, Inc.
10.3 Agreement dated July 27, 1998 between Salton/Maxim
Housewares, Inc. and Windmere-Durable Holdings, Inc.
10.4 Credit Agreement dated July 27, 1998 among Salton/Maxim
Housewares, Inc., the several lenders from time to time parties
thereto, Lehman Brothers Inc., as arranger, Lehman Commercial
Paper Inc., as syndication agent, and Lehman Commercial Paper
Inc., as administrative agent.
10.5 Stock Purchase Agreement dated July 15, 1998 by and among
Salton/Maxim Housewares, Inc. and Centre Capital Investors II,
L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre
Capital Offshore Investors II, L.P., The State Board of
Administration of Florida, Centre Parallel Management Partners,
L.P. and Centre Partners Coinvestment, L.P. (incorporated by
reference to Exhibit 10.1 of Salton's Current Report on Form 8-K
dated July 15, 1998).
10.6 Certificate of Designation for the Series A Convertible
Preferred Stock of Salton/Maxim Housewares, Inc.
10.7 Registration Rights Agreement dated July 15, 1998 by and
among Salton/Maxim Housewares, Inc. and Centre Capital Investors
II, L.P., Centre Capital Tax-Exempt Investors II, L.P., Centre
Capital Offshore Investors II, L.P., The State Board of
Administration of Florida, Centre Parallel Management Partners,
L.P. and Centre Partners Coinvestment, L.P.
99.1 Press Release of Salton/Maxim Housewares, Inc., issued July
28, 1998.
5
<PAGE> 1
EXHIBIT 10.2
PURCHASE MONEY NOTE DATED AS OF
JULY 27, 1998
1. Principal, Interest, Maturity. As partial payment for the purchase of
shares of stock of Salton/Maxim Housewares, Inc., a Delaware corporation
("Salton"), owned by Windmere Durable Holdings, Inc., a Florida corporation
("Windmere"), pursuant to a Stock Agreement dated as of May 6, 1998 among
Salton, Windmere and third parties, Salton hereby promises to pay to the order
of Windmere the principal amount of Fifteen Million Dollars and no cents
($15,000,000), with simple interest at the annual rate of four percent (4%) from
the date hereof, to be paid annually on the fifteenth day of June, commencing
June 15, 1999. Any unpaid principal balance plus accrued and unpaid interest
shall be due and payable on the last day of the seventy eighth (78th) full
calendar month next following the date hereof. If: (i) accrued and unpaid
interest is not paid in full on any interest payment date ("Interest Default")
or (ii) the principal balance is not paid upon the due date, whether at the
maturity of the Note or upon acceleration as set forth in Section 3 hereof
("Principal Default"), then, in the case of an Interest Default, simple interest
on the unpaid balance of this Note shall accrue on and after the Interest
Default at the rate of eight percent (8%) per annum until the Interest Default
is cured or is waived in writing by the holder of the Note and, in the case of a
Payment Default, simple interest on the unpaid balance of this Note shall also
accrue on and after the Payment Default on the unpaid principal balance at the
rate of eight percent (8%) per annum until payment in full is made of all
accrued and unpaid interest and the unpaid principal balance. In addition, in
the case of any Interest Default or Payment Default, Salton agrees to pay all
costs of collection, including legal fees and out of pocket expenses and court
costs.
2. Affiliate Definition; Credit. As used in this Note, the term
"Affiliate" of Salton or "Affiliate" of Windmere means any person or entity that
is controlled by, under the control of or under common control with a person or
entity within the meaning of Rule 405 adopted by the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. Commencing as of
the date hereof, to the extent that Salton or any Affiliate of Salton purchases
products from Windmere, its manufacturing Affiliate with offices in Hong Kong,
Durable Electrical Metal Factory, Ltd., or any other Affiliate of Windmere, an
amount equal to five percent (5%) of the total purchase price paid by Salton
shall constitute a credit, first, against accrued and unpaid interest owing on
this Note and, next, against the unpaid principal balance of this Note;
provided, however, that such credits shall not be considered payments,
distributions or sets-offs under Section 3 of this Note; and further provided,
that nothing contained herein shall obligate Salton or any Salton Affiliate to
buy any products from Windmere or any Windmere Affiliate, nor obligate Windmere
or any Windmere Affiliate to sell any products to Salton or any Salton
Affiliate.
3. Subordination. The principal balance, accrued and unpaid interest and
all other amounts owing under this Note are expressly made subordinate and
junior, as hereinafter set forth in this Section 3, to the prior payment in full
of all Senior Debt (as that term is hereinafter defined).
<PAGE> 2
3.1. Definition of Senior Debt. As used herein "Senior Debt" shall mean
all indebtedness whenever incurred by Salton for borrowed money, whether
secured or unsecured, with the exception of indebtedness owed to any Affiliate
of Salton, and trade debt. As used in this Section 3.1, the term "Affiliate"
shall not include any investor (other than a Salton Executive Related Party)
who acquires an equity interest in Salton at the closing of the Salton Option
or thereafter provided that such investor's interest represents less than fifty
percent (50%) of the voting interests in Salton or any parent company of
Salton.
3.2. Acceleration. If: (i) Senior Debt in an aggregate amount, including
principal, accrued interest and other amounts owing on such Senior Debt, in
excess of one million dollars matures, or is otherwise due and payable
(whether by acceleration or otherwise) and remains undischarged for a period in
excess of one hundred and twenty (120) days or (ii) Salton files a petition, as
a debtor, for relief under the United States Bankruptcy Code or an action
seeking to place Salton in involuntary bankruptcy under such Code is filed and
Salton does not oppose such action or such action is not discharged within
sixty (60) days next following the filing of such action, then, Windmere shall
have the right, on not less than five (5) days notice to Salton, to accelerate
the maturity of this Note, whereupon the remaining principal balance plus
accrued and unpaid interest shall become due immediately, subject to the terms
of this Section 3. Except as specifically set forth in this Section 3.2,
Windmere shall not have the right to accelerate this Note.
3.3 Amendment of Senior Debt. The Senior Debt shall continue to be Senior
Debt and entitled to the benefits of these subordination provisions
irrespective of any amendment, modification or waiver of any term of the Senior
Debt, any extension or renewal of the Senior Debt, or the granting or release
of any collateral or security securing the repayment of the Senior Debt.
3.4 Default in Respect of Senior Debt.
(a) Payment Default. In the event that Salton shall default in the
payment of any principal of, or interest on, any Senior Debt when the
same becomes due and payable, whether at maturity, at a date fixed for
prepayment, by declaration of acceleration or otherwise, then,
(i) unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment
(in cash, property or securities or by set-off or otherwise) shall be
made or agreed to be made on account of this Note or as a sinking fund
for this Note, or in respect of any redemption, retirement, purchase,
prepayment or other acquisition of this Note, and
(ii) no holder of this Note will take action to accelerate
this Note except as set forth above in Section 3.2, or to commence,
or join with any other creditor in commencing, any bankruptcy,
reorganization or insolvency proceeding with respect to Salton, or
will initiate and prosecute any other action or proceeding
-2-
<PAGE> 3
(whether at law or in equity) against Salton to recover all or any
part of this Note (unless the agent (or, if there shall be no agent
for the holders of Senior Debt at such time, the holders of the Senior
Debt) shall have agreed in writing in advance to any such action or
proceeding or prosecution, and shall have joined in, such action or
proceeding or prosecution).
(b) Other Defaults. Upon the occurrence of any other "default" (as
defined in any agreement evidencing the Senior Debt) then, unless and
until such default shall have been cured or waived in writing or shall
have ceased to exist,
(i) no direct or indirect payment (in cash, property or
securities or by set-off or otherwise) shall be made or agreed to
be made on account of this Note or as a sinking fund for this Note, or
in respect of any redemption, retirement, purchase, prepayment or
other acquisition of this Note during the period of 180 days after the
occurrence of such default, and
(ii) no holder of this Note will take action to accelerate
this Note except as set forth in Section 3.2 or, for a period of
180 days after the occurrence of such default, commence, or join with
any other creditors in commencing, any bankruptcy, reorganization or
insolvency proceedings with respect to Salton, or will initiate and
prosecute any other action or proceeding (whether at law or in equity)
against Salton to recover all or any part of this Note (unless the
agent (or, if there shall be no agent for the holders of Senior Debt
at such time, the holders of the Senior Debt) shall have agreed in
writing in advance to, and shall have joined, in such proceeding).
3.5 Insolvency. In the event of
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
which relates to Salton or its property,
(b) any proceeding for the liquidation, dissolution or other
winding-up of Salton, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(d) any assignment by Salton for the benefit of creditors, or
(d) any other marshalling of the assets of Salton,
then and in any such event:
(i) all Senior Debt shall first be paid in full, in cash or
cash equivalents, before any payment or distribution, whether in
cash, securities or other property, shall be made to any holder of
this Note on account of this Note;
-3-
<PAGE> 4
(ii) any payment or distribution, whether in cash, securities
or other property (other than securities of Salton or any other
corporation provided for by a plan or reorganization or readjustment
the payment of which is subordinated, at least to the extent of this
Note as provided in this Section 3, to the payment of all Senior Debt
at the time outstanding and to any securities issued to the holders of
Senior Debt in respect of the Senior Debt under any such plan or
reorganization or readjustment), that would otherwise (but for this
Section 3) be payable or deliverable in respect of this Note, shall be
paid or delivered directly to the holders of Senior Debt in accordance
with the priorities then existing among such holders of Senior Debt
until all Senior Debt shall have been paid in full, in cash or cash
equivalents; and
(iii) If any holder of this Note fails to file a claim or
proof of debt in respect of such this Note in such proceedings at least
five (5) business days prior to the latest date permitted by rule of
law or court order for such filing, then the holders of Senior Debt
shall be authorized (but not obligated) to file such claim or proof on
behalf of such holder of this Note. Each holder of the this Note
agrees that, while it shall retain the right to vote its claim and
otherwise act in any bankruptcy, insolvency or similar proceeding
related to Salton, such holder will not take any act or vote in any way
so as to contest the enforceability of the subordination provisions set
forth herein.
3.6 Turnover of Payments. In the event that
(a) any payment or distribution shall be paid to or collected or
received by any holder of this Note in contravention of any of the terms of
this Section 3 and prior to the payment in full, in cash or cash
equivalents, of the Senior Debt at the time outstanding, and
(b) any holder of such Senior Debt shall have notified the holder
of this Note, within one hundred eighty (180) days of any such payment or
distribution, of the facts by reason of which such collection or receipt
so contravenes this Section 3,
then and in any such event such holder of this Note will deliver such payment
or distribution, to the extent necessary to pay all such Senior Debt in full,
in cash or cash equivalents to the holders of such Senior Debt and, until so
delivered the same shall be held in trust by such holder of this Note as the
property of the holders of such Senior Debt. If after any amount is delivered
to the holders of Senior Debt pursuant to this Section 3.6 and (i) the holder
of this Note shall be required by an order or judgment of a court of competent
jurisdiction to return a payment (the "Avoided Payment") received by them and
so paid over (in whole or in part) to the holders of Senior Debt, or (ii) the
outstanding Senior Debt shall thereafter be paid in full, in cash or cash
equivalents, without giving effect to such delivery made pursuant to this
Section 3.6, then, in either case, the holders of Senior Debt shall return to
such holder of this Note any amount equal to the amount delivered to such
holders of Senior Debt pursuant to this Section 3.6, so
-4-
<PAGE> 5
long as (in the case of the immediately preceding clause (ii) only) after the
return of such amount the Senior Debt shall remain paid in full, in cash or cash
equivalents. For purposes of clause (i) of the immediately preceding sentence,
if less than all of the Avoided Payment was paid over to the holders of Senior
Debt and the holder of this Note is able to satisfy its obligations under such
order or judgment in whole or in part from the portion of the Avoided Payment
not so paid over to the holders of the Senior Debt, the holders of Senior Debt
shall not be required to return any portion of the Avoided Payment in excess of
the amount actually required by the holder(s) of this Note to satisfy its
obligations.
3.7 Obligations Not Impaired. No right of any present or future holder of
any Senior Debt to enforce subordination as herein provided shall at any time
in any way be prejudiced or impaired by (and such right shall remain in full
force and effect notwithstanding):
(a) any act or failure to act on the part of Salton
(including by way of an amendment to the provisions of this Section 3);
(b) any extension or indulgence in respect of any payment or
prepayment of the Senior Debt or any part thereof or in respect of
any other amount payable to any holder of Senior Debt;
(c) any amendment, modification, restatement, or waiver of, or
addition or supplement to, or deletion from, or compromise, release,
consent or other action in respect of, any of the terms of any Senior
Debt or any other agreement which may be relating to any Senior Debt;
(d) any exercise or non-exercise by any holder of Senior Debt
of any right, power, privilege or remedy under or in respect of any
Senior Debt or this Note, or any waiver of any such right, power,
privilege or remedy or any default in respect of any Senior Debt or
this Note, or any receipt by any holder of Senior Debt of any
collateral security, or any failure of any holder of Senior Debt to
perfect a security interest in any collateral, or any release by any
holder of Senior Debt of any security for the payment of such Senior
Debt;
(e) any merger or consolidation of Salton or any of its
subsidiaries into or with any of its subsidiaries or into or with any
entity, or any sale, lease or transfer of any or all of the assets of
Salton or any of its subsidiaries to any other entity or person; or
(f) the absence of any notice to, or knowledge by, any holder
of this Note of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (a) through (e).
Nothing contained in this Section 3 shall impair, as between Salton and any
holder of this Note, the obligation of Salton to pay to such holder the
principal thereof and interest, on the this Note,
-5-
<PAGE> 6
as and when the same shall become due and payable in accordance with the terms
thereof, or prevent any holder of any this Note from exercising all rights,
powers and remedies set forth herein or allowed by applicable law, all subject
to the rights of the holders of the Senior Debt to receive cash, securities or
other property otherwise payable or deliverable to the holder of this Note as
provided in this Section 3.
3.8 Payment of Senior Debt; Subrogation. Upon the payment in full, in
cash or cash equivalents, of all Senior Debt, the holder of this Note shall be
subrogated to all rights of any holder of Senior Debt to receive any further
payments or distributions applicable to the Senior Debt until the this Note
shall have been paid in full, and such payments or distributions received by
the holder of this Note by reason of such subrogation, of cash, securities or
other property that otherwise would be paid or distributed to the holders of
Senior Debt, shall, as between Salton and its creditors other than the holders
of Senior Debt, on the one hand, and the holder of this Note, on the other
hand, be deemed to be a payment by Salton on account of Senior Debt, and not on
account of this Note.
4. Cancellation of Note. If the Distribution and Marketing Agreement
between Salton and K-Mart Corporation dated January 27, 1997, as it may be
amended or renewed, is cancelled by K-Mart prior to June 30, 2004, the
principal balance of this note shall be reduced as of the date of such
cancellation in accordance with the amortization schedule attached hereto as
Schedule I, and, upon such reduction, accrued interest, interest already paid,
and interest accruing after such reduction prior to the maturity of this note
shall be recalculated on the reduced principal balance. To the extent that, on
account of such reduction, interest has been overpaid, such overpayment shall
be offset, first, against the next accruing amounts of interest not yet paid,
and then against the reduced principal balance, but Windmere shall not be
obligated otherwise to return accrued interest or principal already paid.
5. Applicable Law. This Note shall be governed by and interpreted in
accordance with the laws of Delaware without regard to the conflict of laws and
principles thereof.
6. Notices. Any notices under this Note shall be given as required by the
Stock Agreement.
Salton/Maxim Housewares, Inc.,
a Delaware corporation
By:
---------------------------------------
Its:
--------------------------------------
-6-
<PAGE> 7
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Balance in the
Cancelation Event of
No. Prior To Cancelation
- -------------------------------------------------------
<S> <C> <C>
1 11/1/98 168,708.35
2 12/1/98 337,979.05
3 1/1/99 507,814.00
- -------------------------------
4 2/1/99 678,216.06
5 3/1/99 849,184.12
6 4/1/99 1,020,723.08
- -------------------------------
7 6/1/99 1,192,833.84
8 6/1/99 1,365,618.30
9 7/1/99 1,538,778.37
- -------------------------------
10 8/1/99 1,712,616.98
11 9/1/99 1,887,033.05
12 10/1/99 2,062,031.50
- -------------------------------
13 11/1/99 2,237,613.29
14 12/1/99 2,413,780.35
15 1/1/00 2,590,534.63
- -------------------------------
16 2/1/00 2,767,878.09
17 3/1/00 2,946,812.70
18 4/1/00 3,124,340.42
- -------------------------------
19 5/1/00 3,303,463.23
20 6/1/00 3,483,183.12
21 7/1/00 3,863,502.08
- -------------------------------
22 8/1/00 3,844,422.10
23 9/1/00 4,025,945.19
24 10/1/00 4,208,073.35
- -------------------------------
25 11/1/00 4,390,808.61
26 12/1/00 4,574,162.98
27 1/1/01 4,758,108.51
- -------------------------------
28 2/1/01 4,942,677.22
29 3/1/01 5,127,861.15
30 4/1/01 5,313,662.37
- -------------------------------
31 5/1/01 5,500,082.93
32 6/1/01 5,687,124.86
33 7/1/01 5,874,790.31
- -------------------------------
34 8/1/01 6,063,081.29
35 9/1/01 6,251,999.91
36 10/1/01 6,441,548.26
- -------------------------------
37 11/1/01 6,631,728.43
38 12/1/01 6,822,542.54
39 1/1/02 7,013,992.69
- -------------------------------
40 2/1/02 7,206,081.02
41 3/1/02 7,398,809.63
42 4/1/02 7,692,180.68
- -------------------------------
43 5/1/02 7,786,196.29
44 6/1/02 7,980,858.63
45 7/1/02 8,176,189.84
- -------------------------------
46 8/1/02 8,372,132.08
47 9/1/02 8,568,747.54
48 10/1/02 8,766,018.37
- -------------------------------
49 11/1/02 8,963,946.78
50 12/1/02 9,162,534.95
51 1/1/03 9,361,785.08
- -------------------------------
52 2/1/03 9,661,699.38
53 3/1/03 9,762,280.06
54 4/1/03 9,963,529.34
- -------------------------------
55 5/1/03 10,165,448.46
56 6/1/03 10,368,042.62
57 7/1/03 10,571,311.11
- -------------------------------
58 8/1/03 10,776,257.16
59 9/1/03 10,979,883.03
60 10/1/03 11,165,190.99
- -------------------------------
61 11/1/03 11,391,163.31
62 12/1/03 11,597,862.27
63 1/1/04 11,805,230.15
- -------------------------------
64 2/1/04 12,013,289.27
65 3/1/04 12,222,041.91
66 4/1/04 12,431,490.40
- -------------------------------
67 5/1/04 12,641,637.05
68 6/1/04 12,852,484.18
69 7/1/04 13,064,034.14
- -------------------------------
70 8/1/04 15,000,000.00
71 9/1/04 15,000,000.00
72 10/1/04 15,000,000.00
- -------------------------------
73 11/1/04 15,000,000.00
- -------------------------------
74 12/1/04 15,000,000.00
- -------------------------------
75 1/1/05 15,000,000.00
- -------------------------------
76 2/1/05 15,000,000.00
- -------------------------------
77 3/1/05 15,000,000.00
- -------------------------------
78 4/1/05 15,000,000.00
- -------------------------------
- -------------------------------
Assumes note is issued 10/1/1998.
- ------------------------------- If the note is issued before or after such
date then the schedule of reductions due
- ------------------------------- to Kmart cancelation will have to be
adjusted to reflect a different number of
- ------------------------------- monthly periods prior to July 1, 2004.
- -------------------------------
</TABLE>
-7-
<PAGE> 1
EXHIBIT 10.3
Letter Agreement dated April 30, 1997
between
Windmere Corporation ("Windmere")
and
Salton/Maxim Housewares, Inc. ("Salton")
as amended and restated July 27, 1998
WHEREAS, Windmere, with its main office in Miami Lakes, Florida, and Salton,
with its main office in Mt. Prospect, Illinois, have worked together to obtain
the benefits of significant sales of products under the White-Westinghouse
brand to K-Mart Corporation ("K-Mart"); and
WHEREAS, the distribution profits on the sales to K-Mart of the
White-Westinghouse brand of appliances will all be received and recorded on the
books of Salton (the "White-Westinghouse Profits"); and
WHEREAS, the parties wish to provide explicitly for the calculation of the
White-Westinghouse Profits, recognizing that Salton is presently warehousing
White-Westinghouse product in the United States to facilitate their sale;
NOW, THEREFORE, in consideration of Windmere's marketing cooperation efforts,
this Letter Agreement documents the obligation of Salton to pay a fee as
described herein to Windmere as compensation for its efforts on Salton's behalf
in obtaining said White-Westinghouse Profits.
1.01 Fees.
(a) Salton shall pay Windmere a fee equal to fifty percent (50%) of
said White-Westinghouse Profits (as such term is hereinafter defined) earned by
Salton on the sale of any White-Westinghouse Product to K-Mart. The fee shall
be paid, by wire transfer to Windmere's bank account, not later than the
forty-fifth (45th) day after the end of each calendar quarter on the
transactions occurring within said quarter.
(b) Not later than the 25th day of each calendar month, Salton
shall provide to Windmere a report of Sales (as such term is defined below)
during the prior month, together with a calculation of said White-Westinghouse
Profits, all in such detail as may reasonably be requested by Windmere (each a
"Salton Report").
(c) White-Westinghouse Profits earned by Salton on the sale of
White-Westinghouse Products shall be determined by subtracting from Sales (x)
the Cost of Sales on First Party Sales (as such terms are defined below) of the
related products and (y) the Direct Expenses on First Party Sales and Third
Party Sales (as such terms are defined below) relating thereto.
(i) For the purposes of this Agreement, "Sales" shall mean the
amount invoiced by Salton to K-Mart for the White-Westinghouse Products net of
accepted returns and
<PAGE> 2
excluding all freight charges ("First Party Sales"); provided, however, in those
cases in which K-Mart elects, pursuant to Section 7.1.2 of the K-Mart Agreement,
to purchase K-Mart Products from "Third Party Manufacturers" on behalf of
Salton, Sales shall be deemed to be equal to the difference between the Salton
Payment and the TPM Payment (as each of such terms are defined in Section 7.1.3
of the K-Mart Agreement).
(ii) For the purposes of this Agreement, Cost of Sales shall
mean the FOB point of shipment invoice amount from the applicable vendor, plus,
to the extent applicable, freight charges and duties.
(iii) For the purposes of this Agreement: (A) Direct Expenses
on First Party Sales shall be the total of: (x) three and one half percent
(3.5%) of Sales plus (y) the sum of: (1) royalties owing on such Sales plus the
minimum royalty owing, if any, regardless of Sales and (2) Detroit office
selling expenses, provided, however, that if 75% or more of Salton's First Party
Sales are FOB Hong Kong, said three-and-one half percent (3.5%) figure shall be
reduced to two percent (2%); and (B) Direct Expenses on Third Party Sales shall
consist only of royalties owing on such sales.
1.02 Right of Audit. Windmere shall have the right, upon reasonable notice
and at reasonable times, within six (6) months following its receipt of any
Salton Report to have a review of the books and records of Salton with respect
to the payments to be made for the period covered by such Salton Report, to
confirm the accuracy of the Salton Report, provided, however, that such right of
review shall not be exercisable more than two times per calendar year and
provided further that if such review reveals an underpayment of more than 3.0%
of the amount to which Windmere is entitled hereunder, then Windmere may have
such review as often as it may reasonably deem necessary. Costs and expenses of
such examinations shall be paid solely by Windmere; provided, however, that if
an examination reveals an underpayment to Windmere of more than 3.0% of the
amount to which Windmere is entitled hereunder, then the reasonable costs and
expenses of such examination shall be paid by Salton upon receiving an invoice
therefor, with supporting documentation attached. It is specifically agreed
that Windmere may conduct such an examination only through a firm of nationally
recognized independent accountants not regularly retained by Salton or Windmere
or their respective affiliates and mutually agreed on by Windmere and Salton. If
Salton and Windmere cannot agree upon a firm of nationally recognized
independent accountants, the firm shall be Price Waterhouse & Co., or any
successor to Price Waterhouse & Co. If Price Waterhouse & Co. shall be acquired
by, merge into or otherwise cease to be independent of a firm that is regularly
retained by Salton or Windmere, then, unless Windmere and Salton mutually agree
upon a successor independent firm, at the written request of either Windmere or
Salton made to the other, another national recognized firm that is not regularly
retained by Salton or Windmere shall be selected by the head of the Miami,
Florida office of the American Arbitration Association. Such independent
accountants shall: (i) confirm the First Party Sales and Third Party Sales and
the Cost of Sales and (ii) shall have access to the books and records of Salton,
but shall be obligated to keep confidential from Windmere and its affiliates and
all third parties, the names of Salton's
2
<PAGE> 3
manufacturing sources, the terms of purchase, unit prices and all other details
available to such independent accountants concerning the Cost of Sales. The
determination of such independent accounting firm shall be binding on both
Windmere and Salton.
1.03 Non-Compete. Neither Windmere nor any Affiliate of Windmere, including
but not limited to Durable Electrical Metal Factory, Ltd., and any partnership
or joint venture to which Windmere is a party shall compete with Salton in
selling White-Westinghouse Trademarked Products to K-Mart covered by the
Salton/K-Mart Agreement. Any such competition shall be a breach of the
Salton/Windmere K-Mart Letter Agreement which shall entitle Salton to terminate
the Salton/Windmere K-Mart Letter Agreement by notice to Windmere.
1.04 Term. The provisions of this Agreement with regard to sales to K-Mart
shall not be cancelable during the term of that existing contract between Salton
and K-Mart, including any extensions or modifications thereof. The term of the
provisions of this Agreement with regard to sales to K-Mart shall coincide with
the contract term as specified in said contract between Salton and K-Mart.
1.05 Jurisdiction. This Agreement shall be interpreted under the laws of the
State of Delaware, without regard to its conflict of laws provisions.
Windmere Corporation Salton/Maxim Housewares, Inc.
By:______________________ By:______________________________
3
<PAGE> 1
EXHIBIT 10.4
================================================================================
$215,000,000
CREDIT AGREEMENT
AMONG
SALTON/MAXIM HOUSEWARES, INC.
AS BORROWER,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
LEHMAN BROTHERS INC.,
AS ARRANGER
LEHMAN COMMERCIAL PAPER INC.,
AS SYNDICATION AGENT
AND
LEHMAN COMMERCIAL PAPER INC.,
AS ADMINISTRATIVE AGENT
DATED AS OF JULY 27, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. DEFINITIONS...................................................... 1
1.1 Defined Terms.................................................... 1
1.2 Other Definitional Provisions.................................... 23
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.................................. 24
2.1 Term Loan Commitments............................................ 24
2.2 Procedure for Term Loan Borrowing................................ 24
2.3 Repayment of Term Loans.......................................... 24
2.4 Revolving Credit Commitments..................................... 25
2.5 Procedure for Revolving Credit Borrowing......................... 25
2.6 Repayment of Loans; Evidence of Debt............................. 26
2.7 Commitment Fees, etc............................................. 27
2.8 Termination or Reduction of Commitments.......................... 27
2.9 Optional Prepayments............................................. 27
2.10 Mandatory Prepayments and Commitment Reductions.................. 28
2.11 Conversion and Continuation Options.............................. 29
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches........ 30
2.13 Interest Rates and Payment Dates................................. 30
2.14 Computation of Interest and Fees................................. 30
2.15 Inability to Determine Interest Rate............................. 31
2.16 Pro Rata Treatment and Payments.................................. 31
2.17 Requirements of Law.............................................. 33
2.18 Taxes............................................................ 34
2.19 Indemnity........................................................ 35
2.20 Illegality....................................................... 36
2.21 Change of Lending Office......................................... 36
SECTION 3. LETTERS OF CREDIT................................................ 36
3.1 L/C Commitment................................................... 36
3.2 Procedure for Issuance of Letter of Credit....................... 37
3.3 Fees and Other Charges........................................... 37
3.4 L/C Participations............................................... 38
3.5 Reimbursement Obligation of the Borrower......................... 38
3.6 Obligations Absolute............................................. 40
3.7 Letter of Credit Payments........................................ 40
3.8 Applications..................................................... 40
SECTION 4. REPRESENTATIONS AND WARRANTIES................................... 41
4.1 Financial Condition.............................................. 41
4.2 No Change........................................................ 41
4.3 Corporate Existence; Compliance with Law......................... 42
4.4 Corporate Power; Authorization; Enforceable Obligations.......... 42
4.5 No Legal Bar..................................................... 42
4.6 No Material Litigation........................................... 42
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.7 No Default................................................................... 43
4.8 Ownership of Property; Liens................................................. 43
4.9 Intellectual Property........................................................ 43
4.10 Taxes........................................................................ 43
4.11 Federal Regulations.......................................................... 43
4.12 Labor Matters................................................................ 43
4.13 ERISA........................................................................ 44
4.14 Investment Company Act; Other Regulations.................................... 44
4.15 Subsidiaries................................................................. 44
4.16 Use of Proceeds.............................................................. 44
4.17 Environmental Matters........................................................ 44
4.18 Accuracy of Information, etc................................................. 45
4.19 Security Documents........................................................... 46
4.20 Solvency..................................................................... 46
4.21 Senior Indebtedness.......................................................... 46
4.22 Year 2000 Matters............................................................ 46
SECTION 5. CONDITIONS PRECEDENT......................................................... 47
5.1 Conditions to Initial Extension of Credit.................................... 47
5.2 Conditions to Each Extension of Credit....................................... 49
SECTION 6. AFFIRMATIVE COVENANTS........................................................ 50
6.1 Financial Statements......................................................... 50
6.2 Certificates; Other Information.............................................. 51
6.3 Payment of Obligations....................................................... 52
6.4 Conduct of Business and Maintenance of Existence, etc........................ 52
6.5 Maintenance of Property; Insurance........................................... 52
6.6 Inspection of Property; Books and Records; Discussions....................... 52
6.7 Notices...................................................................... 53
6.8 Environmental Laws........................................................... 53
6.9 Interest Rate Protection/Issuance of Senior Subordinated Notes............... 54
6.10 Additional Collateral, etc................................................... 54
6.11 Further Assurances........................................................... 55
6.12 Year 2000 Matters............................................................ 56
SECTION 7. NEGATIVE COVENANTS........................................................... 56
7.1 Financial Condition Covenants................................................ 56
7.2 Limitation on Indebtedness................................................... 56
7.3 Limitation on Liens.......................................................... 57
7.4 Limitation on Fundamental Changes............................................ 58
7.5 Limitation on Disposition of Property........................................ 58
7.6 Limitation on Restricted Payments............................................ 59
7.7 Limitation on Capital Expenditures........................................... 59
7.8 Limitation on Investments.................................................... 59
7.9 Limitation on Optional Payments and Modifications of Debt Instruments, etc... 60
7.10 Limitation on Transactions with Affiliates................................... 60
7.11 Limitation on Sales and Leasebacks........................................... 61
7.12 Limitation on Changes in Fiscal Periods...................................... 61
7.13 Limitation on Negative Pledge Clauses........................................ 61
7.14 Limitation on Restrictions on Subsidiary Distributions....................... 61
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
7.15 Limitation on Lines of Business................................. 61
SECTION 8. EVENTS OF DEFAULT............................................... 61
SECTION 9. THE AGENTS...................................................... 65
9.1 Appointment..................................................... 65
9.2 Delegation of Duties............................................ 65
9.3 Exculpatory Provisions.......................................... 65
9.4 Reliance by Administrative Agent................................ 66
9.5 Notice of Default............................................... 66
9.6 Non-Reliance on Agents and Other Lenders........................ 66
9.7 Indemnification................................................. 67
9.8 Agent in Its Individual Capacity................................ 67
9.9 Successor Administrative Agent.................................. 67
9.10 Authorization to Release Liens.................................. 68
9.11 The Arranger.................................................... 68
SECTION 10. MISCELLANEOUS................................................... 68
10.1 Amendments and Waivers.......................................... 68
10.2 Notices......................................................... 69
10.3 No Waiver; Cumulative Remedies.................................. 70
10.4 Survival of Representations and Warranties...................... 70
10.5 Payment of Expenses............................................. 70
10.6 Successors and Assigns; Participations and Assignments.......... 71
10.7 Adjustments; Set-off............................................ 74
10.8 Counterparts.................................................... 74
10.9 Severability.................................................... 74
10.10 Integration..................................................... 74
10.11 GOVERNING LAW................................................... 75
10.12 Submission To Jurisdiction; Waivers............................. 75
10.13 Acknowledgements................................................ 75
10.14 Confidentiality................................................. 76
10.15 Accounting Charges.............................................. 76
10.16 Restricted Subsidiaries......................................... 76
10.17 WAIVERS OF JURY TRIAL........................................... 76
</TABLE>
-iii-
<PAGE> 5
ANNEXES:
A Pricing Grid
SCHEDULES:
1.1A Commitments
1.1B Mortgaged Property
3.1(d) Existing Letters of Credit
4.1(b) Material Guarantees
4.4 Consents, Authorizations, Filings and Notices
4.6 Certain Litigation
4.9 Intellectual Property
4.10 Taxes
4.15 Subsidiaries
4.19(a) UCC Filing Jurisdictions
7.1(a) Applicable Coverage Ratio
7.1(b) Applicable Interest Coverage Ratio
7.1(c) Applicable Fixed Charge Coverage Ratio
7.2(d) Existing Indebtedness
7.3(f) Existing Liens
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D Form of Exemption Certificate
E Form of Assignment and Acceptance
F Form of Legal Opinion of Sonnenschein Nath & Rosenthal
G-1 Form of Term Note
G-2 Form of Revolving Credit Note
-iv-
<PAGE> 6
CREDIT AGREEMENT, dated as of July 27, 1998, among SALTON/MAXIM
HOUSEWARES, INC., a Delaware corporation (the "Borrower"), the several banks and
other financial institutions or entities from time to time parties to this
Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor and arranger (in
such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication
agent (in such capacity, the "Syndication Agent"), and LEHMAN COMMERCIAL PAPER
INC., as administrative agent (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Stock Agreement, dated as of May 6, 1998,
among the Borrower, Windmere-Durable Holdings, Inc. (the "Seller") and others
(the "Stock Repurchase Agreement"), the Borrower intends to purchase (the "Stock
Repurchase") from the Seller (i) the 6,535,072 shares of the Borrower's common
stock (the "Stock") owned by the Seller for consideration consisting of $12.00
in cash per share of Stock plus a $15,000,000 subordinated promissory note of
the Borrower (the "Seller Note") and (ii) options owned by the Seller to
purchase 458,500 shares of Stock at $7.17 per share for consideration of
$3,287,445 in cash;
WHEREAS, in order to provide financing for the Stock Repurchase and
related costs and expenses and to provide for working capital and general
corporate needs following the Stock Repurchase, the Borrower has requested that
the Lenders provide senior secured credit facilities in an aggregate amount of
$215,000,000; and
WHEREAS, the Lenders are willing to make such credit facilities
available upon and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"Adjustment Date": as defined in the Pricing Grid.
"Affiliate": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" of a Person
means the power, directly or indirectly, either to (a) vote 10% or more of
the securities having ordinary voting power for the election of directors
(or persons performing similar functions) of such Person or (b) direct or
cause the direction of the management and policies of such Person, whether
by contract or otherwise.
<PAGE> 7
2
"Agents": the collective reference to the Syndication Agent and the
Administrative Agent.
"Aggregate Exposure": with respect to any Lender at any time, an
amount equal to (a) until the Closing Date, the aggregate amount of such
Lender's Commitments at such time and (b) thereafter, the sum of (i) the
aggregate then unpaid principal amount of such Lender's Term Loans, (ii)
the amount of such Lender's Delayed Draw Term Loan Commitment then in
effect and (iii) the amount of such Lender's Revolving Credit Commitment
then in effect or, if the Revolving Credit Commitments have been
terminated, the amount of such Lender's Revolving Extensions of Credit then
outstanding.
"Aggregate Exposure Percentage": with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate
Exposure at such time to the Aggregate Exposure of all Lenders at such
time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Applicable Fixed Charge Ratio": for any period of four consecutive
fiscal quarters, the ratio determined for such period in accordance with
Schedule 7.1(c).
"Applicable Interest Coverage Ratio": for any period of four
consecutive fiscal quarters, the ratio determined for such period in
accordance with Schedule 7.1(b).
"Applicable Leverage Ratio": as at the last day of any fiscal quarter,
the ratio determined for such fiscal quarter in accordance with Schedule
7.1(a).
"Applicable Margin": for each Type of Loan, the rate per annum
determined pursuant to the Pricing Grid.
"Application": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"Asset Sale": any Disposition of Property or series of related
Dispositions of Property (excluding any such Disposition permitted by
clause (a), (b), (c), (d) or (e) of Section 7.5) which yields gross
proceeds to the Borrower or any of its Subsidiaries (valued at the initial
principal amount thereof in the case of non-cash proceeds consisting of
notes or other debt securities and valued at fair market value in the case
of other non-cash proceeds) in excess of $10,000.
"Assignee": as defined in Section 10.6(c).
"Assignor": as defined in Section 10.6(c).
"Available Delayed Draw Term Loan Commitment": as to any Delayed Draw
Term Loan Lender at any time, an amount equal to the excess, if any, of (a)
such
<PAGE> 8
3
Lender's Delayed Draw Term Loan Commitment then in effect over (b) such
Lender's Delayed Draw Term Loans then outstanding.
"Available Revolving Credit Commitment": as to any Revolving Credit
Lender at any time, an amount equal to the excess, if any, of (a) such
Lender's Revolving Credit Commitment then in effect over (b) such Lender's
Revolving Extensions of Credit then outstanding.
"Base Rate": for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by the Reference Lender as
its prime or base rate in effect at its principal office in New York City
(the Prime Rate not being intended to be the lowest rate of interest
charged by the Reference Lender in connection with extensions of credit to
debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which
is one and the denominator of which is one minus the C/D Reserve Percentage
and (b) the C/D Assessment Rate; and "Three-Month Secondary CD Rate" shall
mean, for any day, the secondary market rate for three-month certificates
of deposit reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the Board
through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Reference Lender from three New York City
negotiable certificate of deposit dealers of recognized standing selected
by it. Any change in the Base Rate due to a change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate, respectively.
"Base Rate Loans": Loans for which the rate of interest is based upon
the Base Rate.
"Benefitted Lender": as defined in Section 10.7.
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrowing Date": any Business Day specified by the Borrower as a date
on which the Borrower requests the relevant Lenders to make Loans
hereunder.
<PAGE> 9
4
"Business": as defined in Section 4.17.
"Business Day": (i) for all purposes other than as covered by
clause (ii) below, a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar
Loans, any day which is a Business Day described in clause (i) and which
is also a day for trading by and between banks in Dollar deposits in the
interbank eurodollar market.
"Capital Expenditures": for any period, with respect to any Person,
the aggregate of all expenditures by such Person and its Subsidiaries for
the acquisition or leasing (pursuant to a capital lease) of fixed or
capital assets or additions to equipment (including replacements,
capitalized repairs and improvements during such period) which should be
capitalized under GAAP on a consolidated balance sheet of such Person and
its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under
GAAP, and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at such
time determined in accordance with GAAP.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants, rights or options to purchase any
of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of
acquisition; (b) certificates of deposit, time deposits, eurodollar time
deposits or overnight bank deposits having maturities of six months or
less from the date of acquisition issued by any Lender or by any
commercial bank organized under the laws of the United States of America
or any state thereof having combined capital and surplus of not less than
$500,000,000; (c) commercial paper of an issuer rated at least A-2 by
Standard & Poor's Ratings Services ("S&P") or P-2 by Moody's Investors
Service, Inc. ("Moody's"), or carrying an equivalent rating by a
nationally recognized rating agency, if both of the two named rating
agencies cease publishing ratings of commercial paper issuers generally,
and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed
or insured by the United States government; (e) securities with
maturities of one year or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the United
States, by any
<PAGE> 10
5
political subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A
by Moody's; (f) securities with maturities of six months or less from the
date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of
this definition; or (g) shares of money market mutual or similar funds
which invest exclusively in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"C/D Assessment Rate": for any day as applied to any Base Rate
Loan, the annual assessment rate in effect on such day which is payable
by a member of the Bank Insurance Fund maintained by the Federal Deposit
Insurance Corporation (the "FDIC") classified as well-capitalized and
within supervisory subgroup "B" (or a comparable successor assessment
risk classification) within the meaning of 12 C.F.R. Section 327.4 (or
any successor provision) to the FDIC (or any successor) for the FDIC's
(or such successor's) insuring time deposits at offices of such
institution in the United States.
"C/D Reserve Percentage": for any day as applied to any Base Rate
Loan, that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board, for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board as in effect from time to time) in respect of new non-personal
time deposits in Dollars having a maturity of 30 days or more.
"Closing Date": the date on which the conditions precedent set
forth in Section 5.1 shall have been satisfied, which date shall occur on
or before July 31, 1998.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all Property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commitment": as to any Lender, the sum of the Tranche A Term Loan
Commitment, the Delayed Draw Term Loan Commitment and the Revolving
Credit Commitment of such Lender.
"Commitment Fee Rate": the rate per annum determined pursuant to
the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of
the Code.
<PAGE> 11
6
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Consolidated Current Assets": at any date, all amounts (other than
cash and Cash Equivalents) which would, in conformity with GAAP, be set
forth opposite the caption "total current assets" (or any like caption)
on a consolidated balance sheet of the Borrower and its Restricted
Subsidiaries at such date.
"Consolidated Current Liabilities": at any date, all amounts which
would, in conformity with GAAP, be set forth opposite the caption "total
current liabilities" (or any like caption) on a consolidated balance
sheet of the Borrower and its Restricted Subsidiaries at such date, but
excluding (a) the current portion of any Funded Debt of the Borrower and
its Restricted Subsidiaries and (b) without duplication of clause (a)
above, all Indebtedness consisting of Revolving Credit Loans to the
extent otherwise included therein.
"Consolidated EBITDA": for any period, Consolidated Net Income for
such period plus, without duplication and to the extent reflected as a
charge in the statement of such Consolidated Net Income for such period,
the sum of (a) income tax expense, (b) interest expense, amortization or
writeoff of debt discount and debt issuance costs and commissions,
discounts and other fees and charges associated with Indebtedness
(including the Loans), (c) depreciation and amortization expense, (d)
amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring
expenses or losses (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such
period, losses on sales of assets outside of the ordinary course of
business) and (f) any other non-cash charges, and minus, to the extent
included in the statement of such Consolidated Net Income for such
period, the sum of (a) interest income, (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net
Income for such period, gains on the sales of assets outside of the
ordinary course of business) and (c) any other non-cash income, all as
determined on a consolidated basis.
"Consolidated Fixed Charge Coverage Ratio": for any period, the
ratio of (a) Consolidated EBITDA for such period less the aggregate
amount actually paid by the Borrower and its Restricted Subsidiaries in
cash during such period on account of Capital Expenditures to (b)
Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges": for any period, the sum (without
duplication) of (a) Consolidated Interest Expense for such period, (b)
cash income taxes paid or to be paid by the Borrower or any of its
Restricted Subsidiaries on a consolidated basis in respect of such period
and (c) scheduled payments made during such period on account of
principal of Indebtedness of the Borrower or any of its Restricted
Subsidiaries (including scheduled principal payments in respect of the
Term Loans).
<PAGE> 12
7
"Consolidated Interest Coverage Ratio": for any period, the ratio
of (a) Consolidated EBITDA for such period to (b) Consolidated Interest
Expense for such period.
"Consolidated Interest Expense": for any period, total interest
expense (including that attributable to Capital Lease Obligations) of the
Borrower and its Restricted Subsidiaries for such period with respect to
all outstanding Indebtedness of the Borrower and its Restricted
Subsidiaries (including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under Hedge Agreements in
respect of interest rates to the extent such net costs are allocable to
such period in accordance with GAAP).
"Consolidated Leverage Ratio": as at the last day of any period of
four consecutive fiscal quarters, the ratio of (a) Consolidated Total
Debt on such day to (b) Consolidated EBITDA for such period; provided
that for purposes of calculating Consolidated EBITDA of the Borrower and
its Restricted Subsidiaries for any period, the Consolidated EBITDA of
any Person (other than a Person which becomes an Unrestricted Subsidiary
upon the acquisition thereof) acquired by the Borrower or its Restricted
Subsidiaries during such period shall be included on a pro forma basis
for such period (assuming the consummation of such acquisition and the
incurrence or assumption of any Indebtedness in connection therewith
occurred on the first day of such period) if the consolidated balance
sheet of such acquired Person and its consolidated Subsidiaries as at the
end of the period preceding the acquisition of such Person and the
related consolidated statements of income and stockholders' equity and of
cash flows for the period in respect of which Consolidated EBITDA is to
be calculated (i) have been previously provided to the Administrative
Agent and the Lenders and (ii) either (A) have been reported on without a
qualification arising out of the scope of the audit by independent
certified public accountants of nationally recognized standing or (B)
have been found acceptable by the Administrative Agent.
"Consolidated Net Income": for any period, the consolidated net
income (or loss) of the Borrower and its Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP; provided that
there shall be excluded (a) the income (or deficit) of any Person accrued
prior to the date it becomes a Restricted Subsidiary of the Borrower or
is merged into or consolidated with the Borrower or any of its Restricted
Subsidiaries, (b) the income (or deficit) of any Person (other than a
Restricted Subsidiary of the Borrower) in which the Borrower or any of
its Restricted Subsidiaries has an ownership interest, except to the
extent that any such income is actually received by the Borrower or such
Restricted Subsidiary in the form of dividends or similar distributions
and (c) the undistributed earnings of any Restricted Subsidiary of the
Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under
any Loan Document) or Requirement of Law applicable to such Restricted
Subsidiary.
"Consolidated Senior Debt": all Consolidated Total Debt other than
Subordinated Debt.
<PAGE> 13
8
"Consolidated Senior Debt Ratio": as of the last day of any period
of four consecutive fiscal quarters, the ratio of (a) Consolidated Senior
Debt on such day to (b) Consolidated EBITDA for such period.
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Funded Debt of the Borrower and its Restricted Subsidiaries
at such date, determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital": at any date, the excess of
Consolidated Current Assets on such date over Consolidated Current
Liabilities on such date.
"Continuing Directors": the directors of the Borrower on the
Closing Date, after giving effect to the Stock Repurchase and the other
transactions contemplated hereby, and each other director, if, in each
case, such other director's nomination for election to the board of
directors of the Borrower is recommended by at least 66-2/3% of the then
Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"Convertible Preferred Stock": the Borrower's Series A Convertible
Preferred Stock issued pursuant to the Preferred Stock Purchase
Agreement.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Delayed Draw Term Loan": as defined in Section 2.1.
"Delayed Draw Term Loan Commitment": as to any Delayed Draw Term
Loan Lender, the obligation of such Lender, if any, to make a Delayed
Draw Term Loan to the Borrower hereunder in a principal amount not to
exceed the amount set forth under the heading "Delayed Draw Term Loan
Commitment" opposite such Lender's name on Schedule 1.1A. The original
aggregate amount of the Delayed Draw Term Loan Commitments is
$75,000,000.
"Delayed Draw Term Loan Commitment Period": the period commencing
on the Closing Date and ending on the Delayed Draw Term Loan Commitment
Termination Date.
"Delayed Draw Term Loan Commitment Termination Date: the date which
is 364 days after the Closing Date.
"Delayed Draw Term Loan Lender": each Lender which has a Delayed
Draw Term Loan Commitment or which is the holder of a Delayed Draw Term
Loan.
"Delayed Draw Term Loan Percentage": as to any Lender at any time,
the percentage which such Lender's Delayed Draw Term Loan Commitment then
<PAGE> 14
9
constitutes of the aggregate Delayed Draw Term Loan Commitments (or, at
any time after the Closing Date, the percentage which the aggregate
principal amount of such Lender's Delayed Draw Term Loans then outstanding
constitutes of the aggregate principal amount of the Delayed Draw Term
Loans then outstanding).
"Disposition": with respect to any Property, any sale, lease, sale
and leaseback, assignment, conveyance, transfer or other disposition
thereof; the terms "Dispose" and "Disposed of" shall have correlative
meanings.
"Dollars" and "$": dollars in lawful currency of the United States
of America.
"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States of America.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of human health
or the environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal
and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined on the basis of the rate for deposits in Dollars for a period
equal to such Interest Period commencing on the first day of such
Interest Period appearing on Page 3750 of the Dow Jones Markets screen as
of 11:00 A.M., London time, two Business Days prior to the beginning of
such Interest Period. In the event that such rate does not appear on
Page 3750 of the Dow Jones Markets screen (or otherwise on such screen),
the "Eurodollar Base Rate" for purposes of this definition shall be
determined by reference to such other comparable publicly available
service for displaying eurodollar rates as may be selected by the
Administrative Agent.
"Eurodollar Loans": Loans for which the rate of interest is based
upon the Eurodollar Rate.
<PAGE> 15
10
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Eurodollar Tranche": the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on
the same date and end on the same later date (whether or not such Loans
shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Borrower, the
excess, if any, of (a) the sum, without duplication, of (i) Consolidated
Net Income for such fiscal year, (ii) an amount equal to the amount of
all non-cash charges (including depreciation and amortization) deducted
in arriving at such Consolidated Net Income, (iii) decreases in
Consolidated Working Capital for such fiscal year, (iv) an amount equal
to the aggregate net non-cash loss on the Disposition of Property by the
Borrower and its Restricted Subsidiaries during such fiscal year (other
than sales of inventory in the ordinary course of business), to the
extent deducted in arriving at such Consolidated Net Income and (v) the
net increase during such fiscal year (if any) in deferred tax accounts of
the Borrower less (b) the sum, without duplication, of (i) an amount
equal to the amount of all non-cash credits included in arriving at such
Consolidated Net Income, (ii) the aggregate amount actually paid by the
Borrower and its Restricted Subsidiaries in cash during such fiscal year
on account of Capital Expenditures (excluding the principal amount of
Indebtedness incurred in connection with such expenditures and any such
expenditures financed with the proceeds of any Reinvestment Deferred
Amount), (iii) the aggregate amount of all prepayments of Revolving
Credit Loans during such fiscal year to the extent accompanying permanent
optional reductions of the Revolving Credit Commitments and all optional
prepayments of the Term Loans and other Funded Debt during such fiscal
year, (iv) the aggregate amount of all regularly scheduled principal
payments of Funded Debt (including, without limitation, the Term Loans)
of the Borrower and its Restricted Subsidiaries made during such fiscal
year (other than in respect of any revolving credit facility to the
extent there is not an equivalent permanent reduction in commitments
thereunder), (v) increases in Consolidated Working Capital for such
fiscal year, (vi) an amount equal to the aggregate net non-cash gain on
the Disposition of Property by the Borrower and its Restricted
Subsidiaries during such fiscal year (other than sales of inventory in
the ordinary course of business), to the extent included in arriving at
such Consolidated Net Income, and (vii) the net decrease during such
fiscal year (if any) in deferred tax accounts of the Borrower.
"Excess Cash Flow Application Date": as defined in Section 2.10(c).
<PAGE> 16
11
"Excluded Foreign Subsidiaries": any Foreign Subsidiary in respect
of which either (i) the pledge of all of the Capital Stock of such
Subsidiary as Collateral or (ii) the guaranteeing by such Subsidiary of
the Obligations, would, in the good faith judgment of the Borrower,
result in adverse tax consequences to the Borrower.
"Existing Credit Facility": Amended and Restated Loan and Security
Agreement, dated as of June 30, 1997, by and between Salton/Maxim
Housewares, Inc. and Foothill Capital Corporation.
"Facility": each of (a) the Tranche A Term Loan Commitments and the
Tranche A Term Loans made thereunder (the "Tranche A Term Loan
Facility"), (b) the Delayed Draw Term Loan Commitments and the Delayed
Draw Term Loans made thereunder (the "Delayed Draw Term Loan Facility")
and (c) the Revolving Credit Commitments and the extensions of credit
made thereunder (the "Revolving Credit Facility").
"Federal Funds Effective Rate"; for any day, the weighted average of
the rates on overnight federal funds transactions with members of the
Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received
by the Reference Lender from three federal funds brokers of recognized
standing selected by it.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"FQ1", "FQ2 ", "FQ3", and "FQ4": when used with a numerical year
designation, means the first, second, third or fourth fiscal quarters,
respectively, of such fiscal year of the Borrower. (e.g., FQ1 1999 means
the first fiscal quarter of the Borrower's 1999 fiscal year, which ends
June 26, 1999).
"Funded Debt": as to any Person, all Indebtedness of such Person
that matures more than one year from the date of its creation or matures
within one year from such date but is renewable or extendible, at the
option of such Person, to a date more than one year from such date or
arises under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year
from such date, including, without limitation, all current maturities and
current sinking fund payments in respect of such Indebtedness whether or
not required to be paid within one year from the date of its creation
and, in the case of the Borrower, Indebtedness in respect of the Loans.
"Funding Office": the office specified from time to time by the
Administrative Agent as its funding office by notice to the Borrower and
the Lenders.
"GAAP": generally accepted accounting principles in the United
States of America as in effect from time to time, except that for
purposes of Section 7.1, GAAP shall be determined on the basis of such
principles in effect on the date hereof
<PAGE> 17
12
and consistent with those used in the preparation of the most recent
audited financial statements delivered pursuant to Section 4.1(b).
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another
Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued
a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "primary obligations") of any other third Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any Property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of
the primary obligor, (iii) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may
be liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum
reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Hedge Agreements": all interest rate swaps, caps or collar
agreements or similar arrangements entered into by the Borrower providing
for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations
of such Person
<PAGE> 18
13
for the deferred purchase price of Property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such Property), (e) all
Capital Lease Obligations of such Person, (f) all obligations of such
Person, contingent or otherwise, as an account party under acceptance,
letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock of such Person, (h) all Guarantee
Obligations of such Person in respect of obligations of the kind referred
to in clauses (a) through (g) above; (i) all obligations of the kind
referred to in clauses (a) through (h) above secured by (or for which the
holder of such obligation has an existing right, contingent or otherwise,
to be secured by) any Lien on Property (including, without limitation,
accounts and contract rights) owned by such Person, whether or not such
Person has assumed or become liable for the payment of such obligation,
(j) for the purposes of Section 8(e) only, all obligations of such Person
in respect of Hedge Agreements and (k) the liquidation value of any
mandatorily redeemable preferred Capital Stock of such Person or its
Subsidiaries held by any Person other than such Person and its Wholly
Owned Subsidiaries.
"Indemnified Liabilities": as defined in Section 10.5.
"Indemnitee": as defined in Section 10.5.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, patents,
patent licenses, trademarks, trademark licenses, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement
or other impairment thereof, including the right to receive all proceeds
and damages therefrom.
"Interest Payment Date": (a) as to any Base Rate Loan, the last day
of each March, June, September and December to occur while such Loan is
outstanding and the final maturity date of such Loan, (b) as to any
Eurodollar Loan having an Interest Period of three months or less, the
last day of such Interest Period, (c) as to any Eurodollar Loan having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period
and the last day of such Interest Period and (d) as to any Loan (other
than any Revolving Credit Loan that is a Base Rate Loan), the date of any
repayment or prepayment made in respect thereof.
<PAGE> 19
14
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may
be, with respect to such Eurodollar Loan and ending one, two, three or
six months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with respect
thereto; and (b) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Administrative Agent not less than
three Business Days prior to the last day of the then current Interest
Period with respect thereto; provided that, all of the foregoing
provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in
which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Scheduled Revolving Credit Termination Date or beyond the date final
payment is due on the Tranche A Term Loans or the Delayed Draw Term
Loans, as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(iii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Investments": as defined in Section 7.8.
"Issuing Lender": Lasalle National Bank and any Revolving Credit
Lender selected by the Borrower with the consent of such Revolving Credit
Lender, in its capacity as issuer of any Letter of Credit.
"L/C Commitment": $10,000,000.
"L/C Fee Payment Date": the last day of each March, June, September
and December and the last day of the Revolving Credit Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of drawings under Letters
of Credit which have not then been reimbursed pursuant to Section 3.5.
<PAGE> 20
15
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
"Letters of Credit": as defined in Section 3.1(a).
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention
agreement and any capital lease having substantially the same economic
effect as any of the foregoing).
"Loan": any loan made by any Lender pursuant to this Agreement.
"Loan Documents": this Agreement, the Security Documents, the
Syndication Letter Agreement and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
"Majority Delayed Term Loan Lenders": the Majority Facility Lenders
in respect of the Delayed Draw Term Loan Facility.
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 50% of the aggregate unpaid principal amount of the
Term Loans or the Total Revolving Extensions of Credit, as the case may
be, outstanding under such Facility (or, in the case of the Revolving
Credit Facility, prior to any termination of the Revolving Credit
Commitments, the holders of more than 50% of the Total Revolving Credit
Commitments).
"Majority Revolving Credit Facility Lenders": the Majority Facility
Lenders in respect of the Revolving Credit Facility.
"Margin Stock": as defined in Regulation U.
"Margin Stock Restriction": any restriction, contained in any
agreement or other arrangement between the Borrower and/or any of its
Restricted Subsidiaries, on the one hand, and any Agent or Lender or any
affiliate thereof, on the other hand, on the right or ability of the
Borrower or any Restricted Subsidiary to sell, pledge or otherwise
Dispose of any Restricted Margin Stock.
"Material Adverse Effect": a material adverse effect on (a) the
Stock Repurchase, (b) the business, assets, property or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a
whole or (c) the validity or enforceability of this Agreement or any of
the other Loan Documents or the rights or remedies of the Agents or the
Lenders hereunder or thereunder.
<PAGE> 21
16
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances, materials or wastes, defined or
regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde
insulation.
"Mortgages": each of the mortgages and deeds of trust, if any, made
by any Loan Party in favor of, or for the benefit of, the Administrative
Agent for the benefit of the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash
Equivalents (including any such proceeds received by way of deferred
payment of principal pursuant to a note or installment receivable or
purchase price adjustment receivable or otherwise, but only as and when
received) of such Asset Sale or Recovery Event, net of attorneys' fees,
accountants' fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly
permitted hereunder on any asset which is the subject of such Asset Sale
or Recovery Event (other than any Lien pursuant to a Security Document)
and other customary fees and expenses actually incurred in connection
therewith and net of taxes paid or reasonably estimated to be payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with
any issuance or sale of equity securities or debt securities or
instruments or the incurrence of loans, the cash proceeds received from
such issuance or incurrence, net of attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
"Non-Excluded Taxes": as defined in Section 2.18(a).
"Non-U.S. Lender": as defined in Section 2.18(d).
"Notes": the collective reference to any promissory note evidencing
Loans.
"Obligations": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender (or, in the case of
Hedge Agreements, any affiliate of any Lender), whether direct or
indirect, absolute or contingent, due or to become due, or now existing
or hereafter incurred, which may arise under, out of, or in connection
with, this Agreement, any other Loan Document, the Letters of Credit, any
Hedge Agreement entered into with any Lender or any affiliate of any
Lender or
<PAGE> 22
17
any other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise.
"Other Taxes": any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.
"Participant": as defined in Section 10.6(b).
"Payment Office": the office specified from time to time by the
Administrative Agent as its payment office by notice to the Borrower and
the Lenders.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Permitted Acquisition": any acquisition by the Borrower or any of
its Subsidiaries of all of the Capital Stock of, or all or substantially
all of the assets constituting a business unit of, any other Person so
long as, with respect to any such acquisition, the following conditions
are satisfied:
(i) no Default or Event of Default shall have occurred and be
continuing or would result from such acquisition;
(ii) after giving effect to such acquisition, the Borrower
shall be in pro forma compliance with the financial covenants set
forth in Section 7.1;
(iii) the acquisition shall conform with the Borrower's stated
management strategy as in effect on the Closing Date, and the target
of such acquisition shall be in the same or a similar line of
business as the Borrower and its Subsidiaries;
(iv) the aggregate consideration for such acquisition shall not
exceed $20,000,000;
(v) the target of such acquisition either (a) shall have had
positive consolidated net income before interest, taxes, depreciation
and amortization, determined in accordance with GAAP ("EBITDA") for
the four consecutive fiscal quarters of such target most recently
ended prior to the date of such acquisition, or (b) shall have had
positive pro forma EBITDA for such period (giving effect to such cost
savings as can be documented in accordance with Regulation S-X under
the Securities Act of 1933, as amended); and
<PAGE> 23
18
(vi) the Borrower shall have performed reasonable and customary
due diligence with respect to such acquisition and the target
thereof, including with respect to environmental matters.
"Permitted Investors": Centre Capital Investors II, L.P., Centre
Capital Tax-Exempt Investors II, L.P., Centre Capital Offshore Investors
II, L.P., The State Board of Administration of Florida, Centre Parallel
Management Partners, L.P., and Centre Partners Coinvestment, L.P.
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Preferred Stock Purchase Agreement": the Stock Purchase Agreement,
dated July 27, 1998, by and among the Borrower and the Purchasers named
therein, consisting of Center Capital Investors II, L.P., certain of its
affiliates and certain investment vehicles or investors managed or
advised by such affiliates.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Pro Forma Balance Sheet": as defined in Section 4.1(a).
"Projections": as defined in Section 6.2(c).
"Properties": as defined in Section 4.17.
"Property": any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or
intangible, including, without limitation, Capital Stock.
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Borrower or any of its Subsidiaries.
"Reference Lender": Citibank, N.A.
"Refinancing Date": the date on which the Senior Subordinated Notes
are issued and proceeds therefrom are applied in the manner specified in
Section 2.10.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
<PAGE> 24
19
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deferred Amount": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Borrower or any of
its Subsidiaries in connection therewith which are not applied to prepay
the Term Loans or reduce the Revolving Credit Commitments pursuant to
Section 2.10 as a result of the delivery of a Reinvestment Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect
of which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
Officer stating that no Event of Default has occurred and is continuing
and that the Borrower (directly or indirectly through a Restricted
Subsidiary) intends and expects to use all or a specified portion of the
Net Cash Proceeds of an Asset Sale or Recovery Event to acquire assets
useful in its business.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire
assets useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
Event, the earlier of (a) the date occurring six months after such
Reinvestment Event and (b) the date on which the Borrower shall have
determined not to, or shall have otherwise ceased to, acquire assets
useful in the Borrower's business with all or any portion of the relevant
Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or
.35 of PBGC Reg. Section 4043.
"Required Lenders": at any time, the holders of more than 50% of
(a) until the Closing Date, the Commitments and (b) thereafter, the sum
of (i) the aggregate unpaid principal amount of the Term Loans then
outstanding and (ii) the Total Revolving Credit Commitments then in
effect or, if the Revolving Credit Commitments have been terminated, the
Total Revolving Extensions of Credit then outstanding.
"Required Prepayment Lenders": the Majority Facility Lenders in
respect of each Facility.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents
of such Person, and any
<PAGE> 25
20
law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Responsible Officer": the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect
to financial matters, the chief financial officer of the Borrower.
"Restricted Margin Stock": all Margin Stock owned by the Borrower
and its Restricted Subsidiaries to the extent that the market value
thereof constitutes more than 25% of the value of the assets of the
Borrower and its Subsidiaries which constitute Collateral and/or which
are subject to the restrictions of Sections 7.3, 7.4 or 7.5.
"Restricted Payments": as defined in Section 7.6.
"Restricted Subsidiary": each Subsidiary of the Borrower other than
an Unrestricted Subsidiary.
"Revolving Credit Commitment": as to any Lender, the obligation of
such Lender, if any, to make Revolving Credit Loans, in an aggregate
principal and/or face amount not to exceed the amount set forth under the
heading "Revolving Credit Commitment" opposite such Lender's name on
Schedule 1.1A, as the same may be changed from time to time pursuant to
the terms hereof. The original amount of the Total Revolving Credit
Commitments is $50,000,000.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to the Revolving Credit Termination Date.
"Revolving Credit Lender": each Lender which has a Revolving Credit
Commitment or which is the holder of Revolving Credit Loans.
"Revolving Credit Loans": as defined in Section 2.4.
"Revolving Credit Percentage": as to any Revolving Credit Lender at
any time, the percentage which such Lender's Revolving Credit Commitment
then constitutes of the Total Revolving Credit Commitments (or, at any
time after the Revolving Credit Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Revolving Credit Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Credit Loans then
outstanding).
"Revolving Credit Termination Date": the earlier of (a) the
Scheduled Revolving Credit Termination Date and (b) the date on which the
Term Loans shall be paid in full.
"Revolving Extensions of Credit": as to any Revolving Credit Lender
at any time, an amount equal to the sum of (a) the aggregate principal
amount of all
<PAGE> 26
21
Revolving Credit Loans made by such Lender then outstanding and (b) such
Lender's Revolving Credit Percentage of the L/C Obligations then
outstanding.
"Salton Hong Kong": Salton Hong Kong Ltd., a Hong Kong company.
"Scheduled Revolving Credit Termination Date": July 27, 2003.
"Security Documents": the collective reference to the Guarantee and
Collateral Agreement, any Mortgages and all other security documents
hereafter delivered to the Administrative Agent granting a Lien on any
Property of any Person to secure the obligations and liabilities of any
Loan Party under any Loan Document.
"Seller": as defined in the recitals to this Agreement.
"Seller Note": as defined in the recitals to this Agreement.
"Senior Subordinated Note Indenture": the Indenture pursuant to
which the Senior Subordinated Notes will be issued.
"Senior Subordinated Notes": up to $125,000,000 aggregate principal
amount of senior, unsecured subordinated notes of the Borrower (in
respect of which Lehman Brothers Inc. will be sole underwriter, placement
agent or initial purchaser) to be issued after the Closing Date, having
subordination and other terms (including maturity date) reasonably
satisfactory to the Borrower and the Syndication Agent.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable
value" of the assets of such Person will, as of such date, exceed the
amount of all "liabilities of such Person, contingent or otherwise", as
of such date, as such quoted terms are determined in accordance with
applicable federal and state laws governing determinations of the
insolvency of debtors, (b) the present fair saleable value of the assets
of such Person will, as of such date, be greater than the amount that
will be required to pay the liability of such Person on its debts as such
debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they
mature. For purposes of this definition, (i) "debt" means liability on a
"claim", and (ii) "claim" means any (x) right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured or (y) right to an equitable remedy for breach of
performance if such breach gives rise to a right to payment, whether or
not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured or unmatured, disputed, undisputed, secured or
unsecured.
"Specified Change of Control": a "Change of Control", or any
similar definition, as such term shall be defined in the Senior
Subordinated Note Indenture.
<PAGE> 27
22
"Stock Repurchase": as defined in the recitals to this Agreement.
"Stock Repurchase Agreement": as defined in the recitals to this
Agreement.
"Subordinated Debt": the Seller Note and the Senior Subordinated
Notes.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or
such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation, partnership or other entity are at
the time owned, or the management of which is otherwise controlled,
directly or indirectly through one or more intermediaries, or both, by
such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than
any Excluded Foreign Subsidiary.
"Syndication Date": the date on which the Syndication Agent
completes the syndication of the Facilities and the entities selected in
such syndication process become parties to this Agreement.
"Syndication Letter Agreement": the letter agreement, dated as of
the Closing Date, between the Borrower and the Syndication Agent relating
to the syndication of the Facilities.
"Term Loan Lenders": the collective reference to the Tranche A Term
Loan Lenders and the Delayed Draw Term Loan Lenders.
"Term Loans": the collective reference to the Tranche A Term Loans
and Delayed Draw Term Loans.
"Total Revolving Credit Commitments": at any time, the aggregate
amount of the Revolving Credit Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Credit
Lenders outstanding at such time.
"Tranche A Term Loan": as defined in Section 2.1.
"Tranche A Term Loan Commitment": as to any Lender, the obligation
of such Lender, if any, to make a Tranche A Term Loan to the Borrower
hereunder in a principal amount not to exceed the amount set forth under
the heading "Tranche A Term Loan Commitment" opposite such Lender's name
on Schedule 1.1A. The original aggregate amount of the Tranche A Term
Loan Commitments is $90,000,000.
<PAGE> 28
23
"Tranche A Term Loan Lender": each Lender which has a Tranche A
Term Loan Commitment or is the holder a Tranche A Term Loan.
"Tranche A Term Loan Percentage": as to Tranche A Term Loan Lender
at any time, the percentage which such Lender's Tranche A Term Loan
Commitment then constitutes of the aggregate Tranche A Term Loan
Commitments (or, at any time after the Closing Date, the percentage which
the aggregate principal amount of such Lender's Tranche A Term Loans then
outstanding constitutes of the aggregate principal amount of the Tranche
A Term Loans then outstanding).
"Transferee": as defined in Section 10.15.
"Type": as to any Loan, its nature as a Base Rate Loan or a
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (current version), International Chamber of Commerce Publication
No. 500, as the same may be amended from time to time.
"Unrestricted Margin Stock": all Margin Stock owned by the Borrower
and its Restricted Subsidiaries other than Restricted Margin Stock.
"Unrestricted Subsidiary": any Subsidiary of the Borrower which is
designated as an Unrestricted Subsidiary pursuant to Section 10.16.
"Wholly Owned Subsidiary": as to any Person, any other Person all
of the Capital Stock of which (other than directors' qualifying shares
required by law) is owned by such Person directly and/or through other
Wholly Owned Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that
is a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE> 29
24
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Term Loan Commitments. Subject to the terms and conditions hereof,
(a) each Tranche A Term Loan Lender severally agrees to make a term loan (a
"Tranche A Term Loan") to the Borrower on the Closing Date in an amount not to
exceed the amount of the Tranche A Term Loan Commitment of such Lender and (b)
each Delayed Draw Term Loan Lender severally agrees to make term loans (each, a
"Delayed Draw Term Loan") to the Borrower on not more than 10 separate Borrowing
Dates during the Delayed Draw Term Loan Commitment Period in an aggregate amount
not to exceed the amount of the Delayed Draw Term Loan Commitment of such
Lender. The Term Loans may from time to time be Eurodollar Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance with Sections 2.2 and 2.11.
2.2 Procedure for Term Loan Borrowing. The Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 10:00 A.M., New York City time, (a) in the case of
Term Loans to be made on the Closing Date, one Business Day prior to the
anticipated Closing Date and (b) in the case of Delayed Draw Term Loans to be
made after the Closing Date, (i) three Business Days prior to the requested
Borrowing Date, in the case of Eurodollar Loans, or (ii) one Business Day prior
to the requested Borrowing Date, in the case of Base Rate Loans) requesting that
the Term Loan Lenders make the Term Loans and specifying (a) the amount and Type
of Term Loans to be borrowed, (b) the requested Borrowing Date and (c) in the
case of Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Period therefor. The Term Loans
made on the Closing Date shall initially be Base Rate Loans, and no Term Loan
may be converted into or continued as a Eurodollar Loan having an Interest
Period in excess of one month prior to the Syndication Date. Each borrowing
under the Delayed Draw Term Loan Commitments shall be in an amount equal to
$1,000,000 or a whole multiple thereof. Upon receipt of such notice the
Administrative Agent shall promptly notify each Tranche A Term Loan Lender
and/or Delayed Draw Term Loan Lender, as the case may be, thereof. Not later
than 12:00 Noon, New York City time, on the relevant Borrowing Date each Term
Loan Lender shall make available to the Administrative Agent at the Funding
Office an amount in immediately available funds equal to the Term Loan or Term
Loans to be made by such Lender. The Administrative Agent shall make available
to the Borrower the aggregate of the amounts made available to the
Administrative Agent by the Term Loan Lenders in immediately available funds.
2.3 Repayment of Term Loans. (a) The Tranche A Term Loan of each Tranche
A Lender shall mature in 20 consecutive quarterly installments, commencing on
September 30, 1998, each of which shall be in an amount equal to such Lender's
Tranche A Term Loan Percentage multiplied by the amount set forth below opposite
such installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
1-8 $1,250,000
9-16 6,250,000
17-20 7,500,000
</TABLE>
<PAGE> 30
25
(b) The Delayed Draw Term Loan of each Delayed Draw Lender shall mature
in 16 consecutive quarterly installments, commencing on September 30, 1999,
each of which shall be in an amount equal to such Lender's Delayed Draw Term
Loan Percentage multiplied by the amount set forth below opposite such
installment:
<TABLE>
<CAPTION>
Installment Principal Amount
----------- ----------------
<S> <C>
1-4 $2,500,000
5-12 5,000,000
13-16 6,250,000
</TABLE>
; provided that if less than $75,000,000 in aggregate principal amount of the
Delayed Draw Term Loans shall be borrowed, each of the installment amounts set
forth above shall be proportionally reduced.
2.4 Revolving Credit Commitments. (a) Subject to the terms and conditions
hereof, each Revolving Credit Lender severally agrees to make revolving credit
loans ("Revolving Credit Loans") to the Borrower from time to time during the
Revolving Credit Commitment Period in an aggregate principal amount at any one
time outstanding which, when added to such Lender's Revolving Credit Percentage
of the L/C Obligations then outstanding, does not exceed the amount of such
Lender's Revolving Credit Commitment. During the Revolving Credit Commitment
Period the Borrower may use the Revolving Credit Commitments by borrowing,
prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all
in accordance with the terms and conditions hereof. The Revolving Credit Loans
may from time to time be Eurodollar Loans or Base Rate Loans, as determined by
the Borrower and notified to the Administrative Agent in accordance with
Sections 2.5 and 2.11, provided that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving Credit
Termination Date.
(b) The Borrower shall repay all outstanding Revolving Credit Loans on
the Revolving Credit Termination Date.
2.5 Procedure for Revolving Credit Borrowing. The Borrower may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, provided that the Borrower shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested Borrowing Date, in the case of Base
Rate Loans), specifying (i) the amount and Type of Revolving Credit Loans to be
borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurodollar
Loans, the respective amounts of each such Type of Loan and the respective
lengths of the initial Interest Period therefor. Any Revolving Credit Loans
made on the Closing Date shall initially be Base Rate Loans, and no Revolving
Credit Loan may be made as, converted into or continued as a Eurodollar Loan
having an Interest Period in excess of one month prior to the Syndication Date.
Each borrowing under the Revolving Credit Commitments shall be in an amount
equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple
thereof (or, if the then aggregate Available Revolving Credit
<PAGE> 31
26
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $5,000,000 or a whole multiple of $1,000,000 in excess
thereof. Upon receipt of any such notice from the Borrower, the Administrative
Agent shall promptly notify each Revolving Credit Lender thereof. Each
Revolving Credit Lender will make the amount of its pro rata share of each
borrowing available to the Administrative Agent for the account of the Borrower
at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing
Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the
Borrower by the Administrative Agent in like funds as received by the
Administrative Agent.
2.6 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid principal amount of each Revolving Credit Loan of such
Revolving Credit Lender on the Revolving Credit Termination Date (or such
earlier date on which the Loans become due and payable pursuant to Section 8)
and (ii) the principal amount of each Term Loan of such Term Loan Lender in
installments according to the relevant amortization schedule set forth in
Section 2.3 (or on such earlier date on which the Loans become due and payable
pursuant to Section 8). The Borrower hereby further agrees to pay interest on
the unpaid principal amount of the Loans from time to time outstanding from the
date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in Section 2.13.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent, on behalf of the Borrower, shall maintain
the Register pursuant to Section 10.6(e), and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of each Loan made hereunder
and any Note evidencing such Loan, the Type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) both the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.6(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made
to such Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing any Term Loans or Revolving Credit
Loans, as the case may be, of such Lender, substantially in the forms of
Exhibit G-1 or G-2, respectively, with appropriate insertions as to date and
principal amount.
<PAGE> 32
27
2.7 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Delayed Draw Term Loan Lender a
commitment fee for the period from and including the Closing Date to the Delayed
Draw Term Loan Commitment Termination Date, computed at the Commitment Fee Rate
on the average daily amount of the Available Delayed Draw Term Loan Commitment
of such Lender during the period for which payment is made, payable quarterly in
arrears on the last day of each March, June, September and December and on the
Delayed Draw Term Loan Commitment Termination Date, commencing on the first of
such dates to occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent for the
account of each Revolving Credit Lender a commitment fee for the period from
and including the Closing Date to the last day of the Revolving Credit
Commitment Period, computed at the Commitment Fee Rate on the average daily
amount of the Available Revolving Credit Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Revolving Credit
Termination Date, commencing on the first of such dates to occur after the date
hereof.
(c) The Borrower agrees to pay to the Syndication Agent the fees in the
amounts and on the dates previously agreed to in writing by the Borrower and
the Syndication Agent.
(d) The Borrower agrees to pay to the Administrative Agent the fees in
the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent.
2.8 Termination or Reduction of Commitments. The Borrower shall have the
right, upon not less than three Business Days' notice to the Administrative
Agent, to terminate the Revolving Credit Commitments and/or the Delayed Draw
Term Loan Commitments or, from time to time, to reduce the amount of the
Revolving Credit Commitments and/or the Delayed Draw Term Loan Commitments;
provided that no such termination or reduction of Revolving Credit Commitments
shall be permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans made on the effective date thereof, the Total Revolving
Extensions of Credit would exceed the Total Revolving Credit Commitments. Any
such reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Revolving Credit Commitments or the
Delayed Draw Term Loan Commitments, as the case may be, then in effect.
2.9 Optional Prepayments. The Borrower may at any time and from time to
time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of Base Rate Loans, which notice shall specify the
date and amount of prepayment and whether the prepayment is of Eurodollar Loans
or Base Rate Loans; provided, that if a Eurodollar Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto, the Borrower
shall also pay any amounts owing pursuant to Section 2.19. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof. If
<PAGE> 33
28
any such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of
Revolving Credit Loans which are Base Rate Loans) accrued interest to such date
on the amount prepaid. Partial prepayments of Term Loans and Revolving Credit
Loans shall be in an aggregate principal amount of $1,000,000 or a whole
multiple thereof.
2.10 Mandatory Prepayments and Commitment Reductions. (a) Unless the
Required Prepayment Lenders shall otherwise agree, if any Indebtedness shall be
incurred by the Borrower or any of its Restricted Subsidiaries (excluding any
Indebtedness incurred in accordance with Section 7.2(a), (b), (c), (d), (e) and
(g) as in effect on the date of this Agreement), an amount equal to 100% of the
Net Cash Proceeds thereof shall be applied on the date of such incurrence toward
the prepayment of the Term Loans and the reduction of Commitments as set forth
in Section 2.10(d).
(b) Unless the Required Prepayment Lenders shall otherwise agree, if on
any date the Borrower or any of its Restricted Subsidiaries shall receive Net
Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied on such date toward the prepayment of the Term Loans and the reduction
of the Commitments as set forth in Section 2.10(d); provided, that,
notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset
Sales and Recovery Events that may be excluded from the foregoing requirement
pursuant to a Reinvestment Notice shall not exceed $2,000,000 in any fiscal
year of the Borrower and (ii) on each Reinvestment Prepayment Date, an amount
equal to the Reinvestment Prepayment Amount with respect to the relevant
Reinvestment Event shall be applied toward the prepayment of the Term Loans and
the reduction of the Commitments as set forth in Section 2.10(d).
(c) Unless the Required Prepayment Lenders shall otherwise agree, if, for
any fiscal year of the Borrower commencing with the fiscal year ending June 26,
1999, there shall be Excess Cash Flow, the Borrower shall, on the relevant
Excess Cash Flow Application Date, apply 50% of such Excess Cash Flow toward
the prepayment of the Term Loans and reduction of the Commitments as set forth
in Section 2.10(d). Each such prepayment shall be made on a date (an "Excess
Cash Flow Application Date") no later than five days after the earlier of (i)
the date on which the financial statements of the Borrower referred to in
Section 6.1(a), for the fiscal year with respect to which such prepayment is
made, are required to be delivered to the Lenders and (ii) the date such
financial statements are actually delivered.
(d) Amounts to be applied in connection with prepayments and Commitment
reductions made pursuant to this Section shall be applied (i) if such
prepayment is made during the Delayed Draw Term Loan Commitment Period, first,
to the prepayment of the Tranche A Term Loans, second, to the prepayment of any
outstanding Delayed Draw Term Loans, third, to reduce permanently the Delayed
Draw Term Loan Commitments and, fourth, to reduce permanently the Revolving
Credit Commitments, and (ii) if such prepayment is made after the termination
of the Delayed Draw Term Loan Commitments, first, to the prepayment of the Term
Loans, and, second, to reduce permanently the Revolving Credit Commitments;
provided, that (i) the Net Cash Proceeds of the Senior Subordinated Notes and
the Excess Cash Flow amounts described in Section 2.10(c) shall not
<PAGE> 34
29
reduce the Revolving Credit Commitments and (ii) with respect to any prepayment
made with the Net Cash Proceeds of the Senior Subordinate Notes, after applying
such Net Cash Proceeds to repay in full all outstanding Term Loans pursuant to
clauses first and second of clause (i) above, only that portion of the remaining
Net Cash Proceeds in excess of $10,000,000 shall be required to be applied in
accordance with clauses third and fourth of such clause (i). Any such reduction
of the Revolving Credit Commitments shall be accompanied by prepayment of the
Revolving Credit Loans to the extent, if any, that the Total Revolving
Extensions of Credit exceed the amount of the Total Revolving Credit Commitments
as so reduced, provided that if the aggregate principal amount of Revolving
Credit Loans then outstanding is less than the amount of such excess (because
L/C Obligations constitute a portion thereof), the Borrower shall, to the extent
of the balance of such excess, replace outstanding Letters of Credit and/or
deposit an amount in cash and/or Cash Equivalents in a cash collateral account
established with the Administrative Agent for the benefit of the Lenders on
terms and conditions satisfactory to the Administrative Agent. The application
of any prepayment pursuant to this Section shall be made first to Base Rate
Loans and second to Eurodollar Loans. Each prepayment of the Loans under this
Section (except in the case of Revolving Credit Loans that are Base Rate Loans)
shall be accompanied by accrued interest to the date of such prepayment on the
amount prepaid.
2.11 Conversion and Continuation Options. (a) The Borrower may elect from
time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Base Rate Loans to Eurodollar Loans by
giving the Administrative Agent at least three Business Days' prior irrevocable
notice of such election (which notice shall specify the length of the initial
Interest Period therefor), provided that no Base Rate Loan under a particular
Facility may be converted into a Eurodollar Loan (i) when any Event of Default
has occurred and is continuing and the Administrative Agent or the Majority
Facility Lenders in respect of such Facility have determined in its or their
sole discretion not to permit such conversions or (ii) after the date that is
one month prior to the final scheduled termination or maturity date of such
Facility. Upon receipt of any such notice the Administrative Agent shall
promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in Section 1.1,
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan under a particular Facility may be continued
as such (i) when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Majority Facility Lenders in respect of such
Facility have determined in its or their sole discretion not to permit such
continuations or (ii) after the date that is one month prior to the final
scheduled termination or maturity date of such Facility, and provided, further,
that if the Borrower shall fail to give any required notice as described above
in this paragraph or if such continuation is not permitted pursuant to the
preceding proviso such Loans shall be automatically converted to Base Rate
Loans on the last day of such then expiring Interest Period. Upon receipt of
any such notice the Administrative Agent shall promptly notify each relevant
Lender thereof.
<PAGE> 35
30
2.12 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, (a) after giving effect
thereto, the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and (b) no more than ten Eurodollar Tranches shall
be outstanding at any one time.
2.13 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal to
the Base Rate plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and
Reimbursement Obligations (whether or not overdue) shall bear interest at a
rate per annum which is equal to (x) in the case of the Loans, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate
applicable to Base Rate Loans under the Revolving Credit Facility plus 2%, and
(ii) if all or a portion of any interest payable on any Loan or Reimbursement
Obligation or any commitment fee or other amount payable hereunder shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the rate
then applicable to Base Rate Loans under the relevant Facility plus 2% (or, in
the case of any such other amounts that do not relate to a particular Facility,
the rate then applicable to Base Rate Loans under the Revolving Credit Facility
plus 2%), in each case, with respect to clauses (i) and (ii) above, from the
date of such non-payment until such amount is paid in full (as well after as
before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this Section shall
be payable from time to time on demand.
2.14 Computation of Interest and Fees. (a) Interest, fees and
commissions payable pursuant hereto shall be calculated on the basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans the rate of interest on which is calculated on the basis of the Prime
Rate, the interest thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on
a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of the effective date
and the amount of each such change in interest rate.
<PAGE> 36
31
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.13(a).
2.15 Inability to Determine Interest Rate. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Facility Lenders in respect of the relevant Facility that the
Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the relevant Lenders as soon as practicable thereafter. If
such notice is given (x) any Eurodollar Loans under the relevant Facility
requested to be made on the first day of such Interest Period shall be made as
Base Rate Loans, (y) any Loans under the relevant Facility that were to have
been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans
under the relevant Facility shall be converted, on the first day of such
Interest Period, to Base Rate Loans. Until such notice has been withdrawn by
the Administrative Agent, no further Eurodollar Loans under the relevant
Facility shall be made or continued as such, nor shall the Borrower have the
right to convert Loans under the relevant Facility to Eurodollar Loans.
2.16 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower
from the Lenders hereunder, each payment by the Borrower on account of any
commitment fee and any reduction of the Commitments of the Lenders shall be made
pro rata according to the respective Tranche A Term Loan Percentages, Delayed
Draw Term Loan Percentages or Revolving Credit Percentages, as the case may be,
of the relevant Lenders. Each payment (other than prepayments) in respect of
principal or interest in respect of the Loans, each payment in respect of fees
payable hereunder, and each payment in respect of Reimbursement Obligations,
shall be applied to the amounts of such obligations owing to the Lenders pro
rata according to the respective amounts then due and owing to the Lenders.
(b) Each payment (including each prepayment) by the Borrower on account
of principal of and interest on the Tranche A Term Loans or the Delayed Draw
Term Loans shall be made pro rata according to the respective outstanding
principal amounts of such Term Loans then due and owing to the Term Loan
Lenders. The amount of each principal prepayment of the Term Loans shall be
applied to reduce the then remaining installments of
<PAGE> 37
32
the Tranche A Term Loans and Delayed Draw Term Loans, as the case may be, pro
rata based upon the then remaining principal amount thereof. Amounts prepaid on
account of the Term Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on account
of principal of and interest on the Revolving Credit Loans shall be made pro
rata according to the respective outstanding principal amounts of the Revolving
Credit Loans then held by the Revolving Credit Lenders.
(d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for
the account of the Lenders, at the Payment Office, in Dollars and in
immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received. If
any payment hereunder (other than payments on the Eurodollar Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day unless the result
of such extension would be to extend such payment into another calendar month,
in which event such payment shall be made on the immediately preceding Business
Day. In the case of any extension of any payment of principal pursuant to the
preceding two sentences, interest thereon shall be payable at the then
applicable rate during such extension.
(e) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Administrative Agent by the required time on the Borrowing Date therefor,
such Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available
to the Administrative Agent. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this paragraph
shall be conclusive in the absence of manifest error. If such Lender's share
of such borrowing is not made available to the Administrative Agent by such
Lender within three Business Days of such Borrowing Date, the Administrative
Agent shall also be entitled to recover such amount with interest thereon at
the rate per annum applicable to Base Rate Loans under the relevant Facility,
within two Business Days of the Administrative Agent's demand, from the
Borrower.
(f) Unless the Administrative Agent shall have been notified in writing
by the Borrower prior to the date of any payment being made hereunder that the
Borrower will not make such payment to the Administrative Agent, the
Administrative Agent may assume that the Borrower is making such payment, and
the Administrative Agent may, but shall not be required to, in reliance upon
such assumption, make available to the Lenders their respective
<PAGE> 38
33
pro rata shares of a corresponding amount. If such payment is not made to the
Administrative Agent by the Borrower within three Business Days of such required
date, the Administrative Agent shall be entitled to recover, on demand, from
each Lender to which any amount which was made available pursuant to the
preceding sentence, such amount with interest thereon at the rate per annum
equal to the daily average Federal Funds Effective Rate. Nothing herein shall
be deemed to limit the rights of the Administrative Agent or any Lender against
the Borrower.
2.17 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender or the Issuing Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Lender or Issuing Lender to any tax of any
kind whatsoever with respect to this Agreement, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender or Issuing Lender in respect thereof
(except for Non-Excluded Taxes covered by Section 2.18 and changes in the
rate of tax on the overall net income of such Lender or Issuing Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans,
letters of credit or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender or Issuing Lender
which is not otherwise included in the determination of the Eurodollar
Rate hereunder; or
(iii) shall impose on such Lender or Issuing Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender
or Issuing Lender, by an amount which such Lender or Issuing Lender deems to be
material, of making, converting into, continuing or maintaining Eurodollar
Loans or issuing or participating in Letters of Credit, or to reduce any amount
receivable hereunder in respect thereof, then, in any such case, the Borrower
shall promptly pay such Lender or Issuing Lender, upon its demand, any
additional amounts necessary to compensate such Lender for such increased cost
or reduced amount receivable. If any Lender or Issuing Lender becomes entitled
to claim any additional amounts pursuant to this Section, it shall promptly
notify the Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled.
(b) If any Lender or Issuing Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding capital adequacy
or in the interpretation or application thereof or compliance by such Lender or
Issuing Lender or any corporation controlling such Lender or Issuing Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority made subsequent to the date
hereof shall have the effect of reducing the rate of return on such Lender's or
Issuing Lender's or such corporation's capital as a consequence of its
obligations hereunder or under or in respect of any Letter of Credit to a level
below that which such
<PAGE> 39
34
Lender or Issuing Lender or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's or
Issuing Lender's or such corporation's policies with respect to capital
adequacy) by an amount deemed by such Lender or Issuing Lender to be material,
then from time to time, after submission by such Lender to the Borrower (with a
copy to the Administrative Agent) of a written request therefor, the Borrower
shall pay to such Lender or Issuing Lender such additional amount or amounts as
will compensate such Lender or Issuing Lender for such reduction.
(c) A certificate as to any additional amounts payable pursuant to this
Section submitted by any Lender or Issuing Lender to the Borrower (with a copy
to the Administrative Agent) shall be conclusive in the absence of manifest
error. The obligations of the Borrower pursuant to this Section shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
2.18 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on any Agent or any Lender as a result of a present or former connection
between such Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from such
Agent or such Lender having executed, delivered or performed its obligations or
received a payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are
required to be withheld from any amounts payable to any Agent or any Lender
hereunder, the amounts so payable to such Agent or such Lender shall be
increased to the extent necessary to yield to such Agent or such Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of paragraph (d) or (e) of this Section or (ii) that are United
States withholding taxes imposed on amounts payable to such Lender at the time
the Lender becomes a party to this Agreement, except to the extent that such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Non-Excluded Taxes
pursuant to Section 2.18(a).
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or 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 or Other Taxes when due to the appropriate taxing authority
or fails to remit to the Agents the required receipts or other required
<PAGE> 40
35
documentary evidence, the Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by any Agent or any Lender as a result of any such failure. The
agreements in this Section 2.18 shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
(d) Each Lender (or Transferee) that is not a citizen or resident of the
United States of America, a corporation, partnership or other entity created or
organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest" a statement substantially in the form of
Exhibit D and a Form W-8, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by
applicable law or reasonably requested by the Borrower, such properly completed
and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that
such Lender is legally entitled to complete, execute and deliver such
documentation and in such Lender's reasonable judgment such completion,
execution or submission would not materially prejudice the legal position of
such Lender.
2.19 Indemnity. The Borrower agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of (a) default by the Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a
<PAGE> 41
36
day which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2.20 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a 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 2.19.
2.21 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.17, 2.18(a) or
2.20 with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.17, 2.18(a) or 2.20.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the
Issuing Lender, in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day during the
Revolving Credit Commitment Period in such form as may be approved from time to
time by the Issuing Lender; provided that the Issuing Lender shall have no
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the
aggregate
<PAGE> 42
37
amount of the Available Revolving Credit Commitments would be less than zero.
Each Letter of Credit shall (i) be denominated in Dollars and (ii) expire no
later than the earlier of (x) the first anniversary of its date of issuance and
(y) the date which is five Business Days prior to the Scheduled Revolving Credit
Termination Date, provided that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (y) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State of New York.
(c) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
(d) Each of the letters of credit identified on Schedule 3.1(d) hereto
shall be deemed to be a Letter of Credit hereunder for all purposes and the
Lasalle National Bank shall be deemed to be the Issuing Lender in respect of
each such Letter of Credit.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may from
time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender and the Administrative Agent at its address for
notices specified herein an Application therefor, completed to the satisfaction
of the Issuing Lender, and such other certificates, documents and other papers
and information as the Issuing Lender may request. The Administrative Agent
shall provide the Issuing Lender with a notice as to whether the Borrower has
satisfied the conditions precedent hereunder to the issuance of a Letter of
Credit and a calculation of availability under Section 3.1 as a condition to
Issuing Lender's obligation to issue a Letter of Credit hereunder. Upon receipt
of any Application, the Issuing Lender will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed to by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof. The Issuing Lender shall promptly furnish to
the Administrative Agent, which shall in turn promptly furnish to the Lenders,
notice of the issuance of each Letter of Credit (including the amount thereof).
3.3 Fees and Other Charges. (a) The Borrower will pay to the
Administrative Agent a fee on all outstanding Letters of Credit at a per annum
rate equal to the Applicable Margin then in effect with respect to Eurodollar
Loans under the Revolving Credit Facility, shared ratably among the Revolving
Credit Lenders and payable quarterly in arrears on each L/C Fee Payment Date
after the issuance date. In addition, the Borrower shall pay to the Issuing
Lender for its own account a fronting fee, in an amount agreed upon by the
Borrower and the Issuing Bank, payable quarterly in arrears on each L/C Fee
Payment Date after the Issuance Date.
<PAGE> 43
38
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses
(as agreed upon by the Borrower and the Issuing Lender) as are incurred or
charged by the Issuing Lender in issuing, negotiating, effecting payment under,
amending or otherwise administering any Letter of Credit.
3.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the Issuing
Lender, on the terms and conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided interest equal to such L/C
Participant's Revolving Credit Percentage in the Issuing Lender's obligations
and rights under each Letter of Credit issued hereunder and the amount of each
draft paid by the Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the Issuing Lender that, if a draft
is paid under any Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at
the Issuing Lender's address for notices specified herein an amount equal to
such L/C Participant's Revolving Credit Percentage (a calculation of which shall
be provided by the Administrative Agent) of the amount of such draft, or any
part thereof, which is not so reimbursed. Any demand by the Issuing Lender may
be made through the Administrative Agent.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate during the period from and including the date such
payment is required to the date on which such payment is immediately available
to the Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of which is
360. If any such amount required to be paid by any L/C Participant pursuant to
Section 3.4(a) is not made available to the Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, the
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to Base Rate Loans under the Revolving Credit
Facility. A certificate of the Issuing Lender submitted to any L/C Participant
with respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment under
any Letter of Credit and has received from any L/C Participant its pro rata
share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from
the Borrower or otherwise, including proceeds of collateral applied thereto by
the Issuing Lender), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share thereof;
provided, however, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall
<PAGE> 44
39
return to the Issuing Lender the portion thereof previously distributed by the
Issuing Lender to it.
3.5 Reimbursement Obligation of the Borrower. (a) The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing Lender notifies
the Borrower of the date and amount of a draft presented under any Letter of
Credit and paid by the Issuing Lender for the amount of (a) such draft so paid
and (b) any taxes, fees, charges or other costs or expenses incurred by the
Issuing Lender in connection with such payment. Each such payment shall be made
to the Issuing Lender at its address for notices specified herein in lawful
money of the United States of America and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by the
Borrower under this Section from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment in full at the
rate set forth in (i) until the second Business Day following the date of the
applicable drawing, Section 2.13(b) and (ii) thereafter, Section 2.13(c). Each
drawing under any Letter of Credit shall (unless an event of the type described
in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with
respect to the Borrower, in which case the procedures specified in Section 3.4
for funding by L/C Participants shall apply) constitute a request by the
Borrower to the Administrative Agent for a borrowing pursuant to Section 2.5 of
Base Rate Loans in the amount of such drawing. The Borrowing Date with respect
to such borrowing shall be the date of such drawing.
(b) The obligation of the Borrower to reimburse Issuing Lender for
drawings honored under the Letters of Credit issued by it and to repay any
Revolving Credit Loans made by L/C Participants pursuant to Section 3.5 and the
obligations of L/C Participants under Section 3.4 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms hereof
under all circumstances including any of the following circumstances: (i) any
lack of validity or enforceability of any Letter of Credit; (ii) the existence
of any claim, set-off, defense or other right which the Borrower or any L/C
Participant may have at any time against a beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such transferee may be acting),
the Issuing Lender, any L/C Participant or any other Person or, in the case of
a L/C Participant, against the Borrower, whether in connection herewith, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between the Borrower or one of its Subsidiaries and the
beneficiary for which any Letter of Credit was procured); (iii) any draft or
other document presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; provided that such draft or other
document appeared on its face to comply with the requirements of the Letter of
Credit under which it was presented; (iv) payment by Issuing Lender under any
Letter of Credit against presentation of a draft or other document which does
not substantially comply with the terms of such Letter of Credit, provided that
such draft or other document appeared on its face to comply with the
requirements of the Letter of Credit under which it was presented; (v) any
adverse change in the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Borrower or any of its Subsidiaries;
(vi) any breach hereof or any other Credit Document by any party thereto; (vii)
any other circumstance or happening whatsoever, whether or not similar to any
of the foregoing; provided that such draft or other document appeared on its
face to comply with the requirements of the Letter of Credit under which it was
presented; or
<PAGE> 45
40
(viii) the fact that an Event of Default or a Default shall have occurred and be
continuing; provided, in each case described in the foregoing clause (i) through
(vii), that payment by Issuing Lender under the applicable Letter of Credit
shall not have constituted gross negligence or willful misconduct of Issuing
Lender under the circumstances in question (as determined by a final judgment of
court of competent jurisdiction).
(c) In addition to amounts payable as provided herein, the Borrower hereby
agrees to protect, indemnify, pay and save harmless the Issuing Lender from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable fees, expenses and disbursements of
counsel and allocated costs of internal counsel) which the Issuing Lender may
incur or be subject to as a consequence, direct or indirect, of (i) the
issuance of any Letter of Credit by the Issuing Lender, other than as a result
of (1) the gross negligence or willful misconduct of the Issuing Lender as
determined by a final judgment of a court of competent jurisdiction, or (2) the
wrongful dishonor by the Issuing Lender of a proper demand for payment made
under any Letter of Credit issued by it, or (ii) the failure of the Issuing
Lender to honor a drawing under any such Letter of Credit as a result of any
governmental act.
3.6 Obligations Absolute. The Borrower's obligations under this Section 3
shall be absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with the Issuing
Lender that the Issuing Lender shall not be responsible for, and the Borrower's
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee. The Issuing Lender
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Issuing Lender. The Borrower agrees that any action taken or omitted by the
Issuing Lender under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence or willful
misconduct and in accordance with the standards or care specified in the Uniform
Commercial Code of the State of New York and/or the Uniform Customs, shall be
binding on the Borrower and shall not result in any liability of the Issuing
Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower of the date and amount thereof. The responsibility of the Issuing
Lender to the Borrower in connection with any draft presented for payment under
any Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit in
connection with such presentment appear on their face to be in accordance with
the terms and conditions of such Letter of Credit in conformity with such Letter
of Credit.
<PAGE> 46
41
3.8 Applications. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement and to
make the Loans and issue or participate in the Letters of Credit, the Borrower
hereby represents and warrants to each Agent and each Lender that:
4.1 Financial Condition. (a) The unaudited pro forma consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at March 28,
1998 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of
which have heretofore been furnished to each Lender, has been prepared giving
effect (as if such events had occurred on such date) to (i) the consummation of
the Stock Repurchase (including the issuance of the Seller Note), (ii) the
issuance of the Convertible Preferred Stock, (iii) the Loans to be made on the
Closing Date and the use of proceeds thereof and (iv) the payment of fees and
expenses in connection with the foregoing. The Pro Forma Balance Sheet has been
prepared based on the best information available to the Borrower as of the date
of delivery thereof, and presents fairly on a pro forma basis the estimated
financial position of Borrower and its consolidated Subsidiaries as at March 28,
1998, assuming that the events specified in the preceding sentence had actually
occurred at such date.
(b) The audited consolidated balance sheets of the Borrower as at June
28, 1996 and June 28, 1997, and the related consolidated statements of income
and of cash flows for the fiscal years ended on such dates, reported on by and
accompanied by an unqualified report from Deloitte & Touche, present fairly the
consolidated financial condition of the Borrower as at such dates, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheet
of the Borrower as at March 28, 1998, and the related unaudited consolidated
statements of income and cash flows for the nine-month period ended on such
date, present fairly the consolidated financial condition of the Borrower as at
such date, and the consolidated results of its operations and its consolidated
cash flows for the nine-month period then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the
aforementioned firm of accountants and disclosed therein). Except as set forth
on Schedule 4.1(b), the Borrower and its Subsidiaries do not have any material
Guarantee Obligations, contingent liabilities and liabilities for taxes, or any
long-term leases or unusual forward or long-term commitments, including,
without limitation, any interest rate or foreign currency swap or exchange
transaction or other obligation in respect of derivatives, which are not
reflected in the most recent financial statements referred to in this
paragraph. During the period from June 28, 1997 to and including the date
hereof there has been no Disposition by the Borrower of any material part of
its business or Property.
<PAGE> 47
42
(c) The Consolidated EBITDA of the Borrower and its consolidated
Subsidiaries for the fiscal year ended June 27, 1998 equals or exceeds
$29,000,000.00.
4.2 No Change. Since June 28, 1997 there has been no development or event
(other than the Stock Repurchase) which has had or could reasonably be expected
to have a Material Adverse Effect.
4.3 Corporate Existence; Compliance with Law. Each of the Borrower and
its Restricted Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
Property, to lease the Property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party and, in the case of the Borrower, to
authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the Stock Repurchase or the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices have been obtained or made and are in full force and effect and (ii) the
filings referred to in Section 4.19. Each Loan Document has been duly executed
and delivered on behalf of each Loan Party thereto. This Agreement constitutes,
and each other Loan Document upon execution will constitute, a legal, valid and
binding obligation of each Loan Party party thereto, enforceable against each
such Loan Party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any Contractual Obligation of the Borrower or any of its
Subsidiaries and will not result in, or require, the creation or imposition of
any Lien on any of their respective properties or revenues pursuant to any
Requirement of Law or any such Contractual Obligation (other than the Liens
created by the Security Documents). No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
<PAGE> 48
43
4.6 No Material Litigation. Except as described in Schedule 4.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against any
of their respective properties or revenues (a) with respect to any of the Loan
Documents or any of the transactions contemplated hereby or thereby, or (b)
which could reasonably be expected to have a Material Adverse Effect.
4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its Restricted
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other Property, and none of such Property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. Except as set forth on Schedule 4.9, the
Borrower and each of its Restricted Subsidiaries owns, or is licensed to use,
all Intellectual Property necessary for the conduct of its business as currently
conducted, no material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any Intellectual Property, nor does the Borrower know of any
valid basis for any such claim, and the use of Intellectual Property by the
Borrower and its Restricted Subsidiaries does not infringe on the rights of any
Person in any material respect.
4.10 Taxes. Except as set forth on Schedule 4.10, each of the Borrower
and each of its Restricted Subsidiaries has filed or caused to be filed all
Federal, state and other material tax returns which are required to be filed and
has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its Property and all other taxes, fees or
other charges imposed on it or any of its Property by any Governmental Authority
(other than any the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower or its
Restricted Subsidiaries, as the case may be); no tax Lien has been filed, and,
to the knowledge of the Borrower, no claim is being asserted, with respect to
any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will be
used for any purpose which violates the provisions of the Regulations of the
Board. If requested by any Lender or the Administrative Agent, the Borrower
will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of Form FR U-1 or FR G-3,
as applicable referred to in Regulation U.
4.12 Labor Matters. There are no strikes or other labor disputes against
the Borrower or any of its Restricted Subsidiaries pending or, to the knowledge
of the Borrower, threatened that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other
<PAGE> 49
44
applicable Requirement of Law dealing with such matters that (individually or in
the aggregate) could reasonably be expected to have a Material Adverse Effect.
All payments due from the Borrower or any of its Restricted Subsidiaries on
account of employee health and welfare insurance that (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect if not
paid have been paid or accrued as a liability on the books of the Borrower or
the relevant Restricted Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan
which has resulted or could reasonably be expected to result in a material
liability under ERISA, and neither the Borrower nor any Commonly Controlled
Entity would become subject to any material liability under ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
4.15 Subsidiaries. The Subsidiaries listed on Schedule 4.15 constitute
all the Subsidiaries of the Borrower at the date hereof.
4.16 Use of Proceeds. The proceeds of the Tranche A Term Loans shall be
used to finance a portion of the Stock Repurchase and repay the Borrower's
existing Indebtedness to Foothill Capital Corporation, to pay related fees and
expenses and for general corporate purposes. The proceeds of the Delayed Draw
Term Loans shall be used to finance Permitted Acquisitions. The proceeds of the
Revolving Credit Loans and the Letters of Credit, shall be used to finance
working capital needs, including inventory, and for general corporate purposes,
including any Permitted Acquisition made in the ordinary course of business in
respect of which the consideration does not exceed $1,000,000.
4.17 Environmental Matters. Except to the extent that the failure of the
following statements, either individually or in the aggregate, to be correct
could not reasonably be expected to have a Material Adverse Effect;
<PAGE> 50
45
(a) The facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain, and have
not previously contained, any Materials of Environmental Concern in amounts or
concentrations or under circumstances which (i) constitute or constituted a
violation of, or (ii) could give rise to liability under, any Environmental
Law.
(b) The Properties and all operations at the Properties are in material
compliance, and have in the last five years been in material compliance, with
all applicable Environmental Laws, and there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to the
Properties or the business operated by the Borrower or any of its Subsidiaries
(the "Business") which could materially interfere with the continued operation
of the Properties or materially impair the fair saleable value thereof.
Neither the Borrower nor any of its Subsidiaries has assumed any liability of
any other Person under Environmental Laws.
(c) Neither the Borrower nor any of its Subsidiaries has received or is
aware of any notice of violation, alleged violation, non-compliance, liability
or potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business, nor
does the Borrower have knowledge or reason to believe that any such notice will
be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location which could give rise to liability under, any Environmental Law, nor
have any Materials of Environmental Concern been generated, treated, stored or
disposed of at, on or under any of the Properties in violation of, or in a
manner that could give rise to liability under, any applicable Environmental
Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named
as a party with respect to the Properties or the Business, 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 Properties or the Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could give rise to liability under Environmental
Laws.
4.18 Accuracy of Information, etc. No statement or information contained
in this Agreement, any other Loan Document, or any other document, certificate
or statement that has been or will be prepared by or under the direction of any
Loan Party and made available to the Administrative Agent or the Lenders or any
of them, for use in connection with the transactions contemplated by this
Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished, any untrue statement of a
material fact or omitted to state a material fact necessary
<PAGE> 51
46
in order to make the statements contained herein or therein not misleading. The
projections and pro forma financial information contained in the materials
referenced above are based upon good faith estimates and assumptions believed by
management of the Borrower to be reasonable at the time made, it being
recognized by the Lenders that such financial information as it relates to
future events is not to be viewed as fact and that actual results during the
period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. As of the date
hereof, the representations and warranties contained in the Stock Repurchase
Agreement and the Preferred Stock Purchase Agreement are true and correct in all
material respects. There is no fact known to any Loan Party that could
reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents, or in any other
documents, certificates and statements furnished to the Agents and the Lenders
for use in connection with the transactions contemplated hereby and by the other
Loan Documents.
4.19 Security Documents. The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of the Pledged Stock
described in the Guarantee and Collateral Agreement, when stock certificates
representing such Pledged Stock are delivered to the Administrative Agent, and
in the case of the other Collateral described in the Guarantee and Collateral
Agreement, when financing statements in appropriate form are filed in the
offices specified on Schedule 4.19(a), the Guarantee and Collateral Agreement
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of the Loan Parties in such Collateral and the proceeds
thereof, as security for the Obligations (as defined in the Guarantee and
Collateral Agreement), in each case prior and superior in right to any other
Person.
4.20 Solvency. Each Loan Party is, and after giving effect to the Stock
Repurchase and the incurrence of all Indebtedness and obligations being incurred
in connection herewith and therewith will be and will continue to be, Solvent.
4.21 Senior Indebtedness. The Obligations will constitute "Senior Debt"
of the Borrower, as such term is defined in the Seller Note, and "Senior
Indebtedness" of the Borrower (or an equivalent classification), as such term
shall be defined in the Senior Subordinated Note Indenture.
4.22 Year 2000 Matters. Any reprogramming required to permit the proper
functioning (but only to the extent that such proper functioning would otherwise
be impaired by the occurrence of the year 2000) in and following the year 2000
of computer systems and other equipment containing embedded microchips, in
either case owned or operated by the Borrower or any of its Subsidiaries or used
or relied upon in the conduct of their business (including any such systems and
other equipment supplied by others or with which the computer systems of the
Borrower or any of its Subsidiaries interface), and the testing of all such
systems and other equipment as so reprogrammed, will be completed by March 31,
1999. The costs to the Borrower and its Subsidiaries that have not been
incurred as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper functioning of
other computer systems and equipment
<PAGE> 52
47
containing embedded microchips due to the occurrence of the year 2000 could not
reasonably be expected to result in a Default or Event of Default or to have a
Material Adverse Effect. Except for any reprogramming referred to above, the
computer systems of the Borrower and its Subsidiaries are and, with ordinary
course upgrading and maintenance, will continue for the term of this Agreement
to be, sufficient for the conduct of their business as currently conducted.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date, of the following conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer
of the Borrower, (ii) the Guarantee and Collateral Agreement, executed
and delivered by a duly authorized officer of the Borrower and each
Subsidiary Guarantor and (iii) for the account of each relevant Lender,
Notes conforming to the requirements hereof and executed and delivered by
a duly authorized officer of the Borrower.
(b) Stock Repurchase, etc. The following transactions shall have
been consummated, in each case on terms and conditions reasonably
satisfactory to the Lenders:
(i) the Stock Repurchase shall have been consummated in
accordance with the terms of the Stock Repurchase Agreement;
(ii) the Borrower shall have received at least $40,000,000 in
cash from the issuance of the Convertible Preferred Stock; and
(iii) the Seller Note shall have been issued in the form set
forth in Exhibit A to the Stock Repurchase Agreement.
(c) No Other Changes. There shall have been no changes to the
capital structure of the Borrower and its Subsidiaries since March 28,
1998 other than the recapitalization described in Section 5.1(b) and the
borrowing of the Loans to be borrowed on the Closing Date and the use of
the proceeds thereof.
(d) Existing Credit Facility. The Administrative Agent shall have
received satisfactory evidence (i) that all amounts, including principal,
interest, fees, reimbursement obligations, and other obligations, owing
under the Existing Credit Facility have been repaid in full or are being
repaid in full with the proceeds of the initial Loans on the Closing
Date, and (ii) that all collateral, if any, securing the Existing Credit
Facility has been released or is being released upon such repayment.
<PAGE> 53
48
(e) Pro Forma Balance Sheet; Financial Statements. The Lenders
shall have received (i) the Pro Forma Balance Sheet, (ii) audited
consolidated financial statements of the Borrower for the 1996 and 1997
fiscal years and (iii) satisfactory unaudited interim consolidated
financial statements of the Borrower for each fiscal quarterly period
ended subsequent to the date of the latest applicable financial
statements delivered pursuant to clause (ii) of this paragraph as to
which such financial statements are available, and such financial
statements shall not, in the reasonable judgment of the Lenders, reflect
any material adverse change in the consolidated financial condition of
the Borrower and its consolidated Subsidiaries, as reflected in the
financial statements or projections delivered by the Borrower to the
Syndication Agent prior to the date hereof.
(f) Approvals. All governmental and third party approvals
necessary, or in the discretion of the Syndication Agent, advisable in
connection with the Stock Repurchase, the continuing operations of the
Borrower and its Subsidiaries and the transactions contemplated hereby
shall have been obtained and be in full force and effect.
(g) Related Agreements. The Administrative Agent shall have
received (in a form reasonably satisfactory to the Syndication Agent),
with a copy for each Lender, true and correct copies, certified as to
authenticity by the Borrower, of the Stock Repurchase Agreement, the
Seller Note, the Preferred Stock Purchase Agreement, the Certificate of
Designation in respect of the Convertible Preferred Stock, and such other
documents or instruments as may be reasonably requested by the
Syndication Agent, including, without limitation, a copy of any other
debt instrument, security agreement or other material contract to which
the Loan Parties may be a party.
(h) Fees. The Lenders, Syndication Agent and the Administrative
Agent shall have received all fees required to be paid, and all expenses
for which invoices have been presented, on or before the Closing Date.
All such amounts will be paid with proceeds of Loans made on the Closing
Date and will be reflected in the funding instructions given by the
Borrower to the Administrative Agent on or before the Closing Date.
(i) Business Plan. The Lenders shall have received a satisfactory
business plan for fiscal year 1999.
(j) Solvency Opinion. The Lenders shall have received a solvency
opinion from Houlihan Lokey Howard & Zukin which shall document the
solvency of the Borrower and its Subsidiaries considered as a whole after
giving effect to the Stock Repurchase and the other transactions
contemplated hereby.
(k) Lien Searches. The Administrative Agent shall have received
the results of a recent lien search in each of the jurisdictions where
assets of the Loan Parties are located, and such search shall reveal no
liens on any of the assets of the Borrower or its Subsidiaries except for
liens permitted by Section 7.3 and liens to be terminated pursuant to
documentation satisfactory to the Syndication Agent.
<PAGE> 54
49
(l) Environmental Affairs. The Syndication Agent shall be
satisfied with the environmental affairs of the Borrower and its
Subsidiaries.
(m) Closing Certificate. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of each Loan
Party, dated the Closing Date, substantially in the form of Exhibit C,
with appropriate insertions and attachments.
(n) Legal Opinion. The Administrative Agent shall have received
the executed legal opinion of Sonnenschein Nath & Rosenthal, counsel to
the Borrower and its Subsidiaries, substantially in the form of Exhibit
F. Such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(o) Pledged Stock; Stock Power; Pledged Notes. The Administrative
Agent shall have received (i) the certificates representing the shares of
Capital Stock pledged pursuant to the Guarantee and Collateral Agreement,
together with an undated stock power for each such certificate executed
in blank by a duly authorized officer of the pledgor thereof and (ii)
each promissory note pledged to the Administrative Agent pursuant to the
Guarantee and Collateral Agreement endorsed (without recourse) in blank
(or accompanied by an executed transfer form in blank satisfactory to the
Syndication Agent) by the pledgor thereof.
(p) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by the Security Documents or under law or reasonably
requested by the Administrative Agent to be filed, registered or recorded
in order to create in favor of the Administrative Agent, for the benefit
of the Lenders, a perfected Lien on the Collateral described therein,
prior and superior in right to any other Person (other than with respect
to Liens expressly permitted by Section 7.3), shall be in proper form for
filing, registration or recordation.
(q) Insurance. The Administrative Agent shall have received
insurance certificates satisfying the requirements of Section 5.3 of the
Guarantee and Collateral Agreement.
(r) Regulations of Board. The Lenders shall be satisfied that the
Stock Repurchase and the financing contemplated hereby will not violate
Regulations T, U or X of the Board of Governors of the Federal Reserve
System.
5.2 Conditions to Each Extension of Credit. The agreement of each Lender
to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) Representations and Warranties. Each of the representations
and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be
<PAGE> 55
50
true and correct in all material respects on and as of such date as if
made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions
of credit requested to be made on such date.
(c) Regulations of Board; Forms FR G-3 and FR U-1. If such Loan is
a Purpose Credit (as defined in Regulation U), each Lender shall be
satisfied that the Regulations of the Board shall not be violated. Each
Lender shall have received a duly completed and executed Form FR U-1 or
FR G-3, as applicable, of the Board, demonstrating such compliance.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in this
Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall and shall cause
each of its Restricted Subsidiaries to:
6.1 Financial Statements. Furnish to each Agent and each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited
consolidated (and, in respect of any such period in which there is an
Unrestricted Subsidiary, unaudited consolidating) balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such year and
the related audited consolidated (and, in respect of any such period in
which there is an Unrestricted Subsidiary, unaudited consolidating)
statements of income and of cash flows for such year, setting forth in
each case in comparative form the figures for the previous year, reported
on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Deloitte & Touche
or other independent certified public accountants of nationally
recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated (and, in respect of any
such period in which there is an Unrestricted Subsidiary, unaudited
consolidating) balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated (and, in respect of any such period in which there is an
Unrestricted Subsidiary, unaudited consolidating) statements of income
and of cash flows for such quarter and the portion of the fiscal year
through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
<PAGE> 56
51
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 45 days
after the end of each month occurring during each fiscal year of the
Borrower (other than the third, sixth, ninth and twelfth such month), the
unaudited consolidated (and, in respect of any such period in which there
is an Unrestricted Subsidiary, unaudited consolidating) balance sheets of
the Borrower and its Subsidiaries as at the end of such month and the
related unaudited consolidated (and, in respect of any such period in
which there is an Unrestricted Subsidiary, unaudited consolidating)
statements of income and of cash flows for such month and the portion of
the fiscal year through the end of such month, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to each Agent and each
Lender, or, in the case of clause (f), to the relevant Lender:
(a) concurrently with the delivery of the audited financial
statements referred to in Section 6.1(a), a certificate of the
independent certified public accountants reporting on such audited
financial statements stating that in making the examination necessary
therefor no knowledge was obtained of any Default or Event of Default,
except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer
stating that, to the best of each such Responsible Officer's knowledge,
each Loan Party during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained
in this Agreement and the other Loan Documents to which it is a party to
be observed, performed or satisfied by it, and that such Responsible
Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate and (ii) in the case of quarterly
or annual financial statements, (x) a Compliance Certificate containing
all information necessary for determining compliance by the Borrower and
its Restricted Subsidiaries with the provisions of this Agreement
referred to therein as of the last day of the fiscal quarter or fiscal
year of the Borrower, as the case may be, and (y) to the extent not
previously disclosed to the Administrative Agent, a listing of any county
or state within the United States where any Loan Party keeps inventory or
equipment and of any material Intellectual Property acquired by any Loan
Party since the date of the most recent list delivered pursuant to this
clause (y) (or, in the case of the first such list so delivered, since
the Closing Date);
<PAGE> 57
52
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a detailed
consolidated budget for the following fiscal year (including a projected
consolidated balance sheet of the Borrower and its Restricted
Subsidiaries as of the end of the following fiscal year, and the related
consolidated statements of projected cash flow, projected changes in
financial position and projected income), and, as soon as available,
significant revisions, if any, of such budget and projections with
respect to such fiscal year (collectively, the "Projections"), which
Projections shall in each case be accompanied by a certificate of a
Responsible Officer stating that such Projections are based on reasonable
estimates, information and assumptions and that such Responsible Officer
has no reason to believe that such Projections are incorrect or
misleading in any material respect;
(d) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition
and results of operations of the Borrower and its Restricted Subsidiaries
for such fiscal quarter and for the period from the beginning of the then
current fiscal year to the end of such fiscal quarter, as compared to the
portion of the Projections covering such periods and to the comparable
periods of the previous year;
(e) within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to the holders
of any class of its debt securities or public equity securities and,
within five days after the same are filed, copies of all financial
statements and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority; and
(f) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Restricted Subsidiaries, as the case may be.
6.4 Conduct of Business and Maintenance of Existence, etc. (a) (i)
Preserve, renew and keep in full force and effect its corporate existence and
(ii) take all reasonable action to maintain all rights, privileges and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise permitted by Section 7.4 and except, in the case of
clause (ii) above, to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect; and (b) comply with all Contractual
Obligations and Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all Property useful and
necessary in its business in good working order and condition, ordinary wear and
tear
<PAGE> 58
53
excepted and (b) maintain with financially sound and reputable insurance
companies insurance on all its Property in at least such amounts and against at
least such risks (but including in any event public liability, product liability
and business interruption) as are usually insured against in the same general
area by companies engaged in the same or a similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries with officers and employees of the Borrower and its Subsidiaries
and with its independent certified public accountants; provided that the Lenders
shall make reasonable efforts to coordinate with each other any visits and
discussions hereunder so as not to overly burden the Borrower.
6.7 Notices. Promptly give notice to the Administrative Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of
its Subsidiaries in a material manner in which the amount involved is
$1,000,000 or more and not covered by insurance or in which injunctive or
similar relief is sought;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any
Lien in favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan; and
(e) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
<PAGE> 59
54
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or the relevant Subsidiary proposes to
take with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with, and
ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Interest Rate Protection/Issuance of Senior Subordinated Notes. In
the case of the Borrower, either (i) within 120 days after the Closing Date,
enter into Hedge Agreements to the extent necessary to provide that the
aggregate principal amount of the Tranche A Term Loans is subject to either a
fixed interest rate or interest rate protection for a period of not less than
three years, which Hedge Agreements shall have terms and conditions reasonably
satisfactory to the Syndication Agent or (ii) within 120 days of the Closing
Date, issue $100,000,000 principal amount of Senior Subordinated Notes on terms
and conditions satisfactory to the Syndication Agent.
6.10 Additional Collateral, etc. (a) With respect to any Property
acquired after the Closing Date by the Borrower or any of its Restricted
Subsidiaries (other than (x) any Property described in paragraph (b), (c) or (d)
below and (y) any Property subject to a Lien expressly permitted by Section
7.3(g)) as to which the Administrative Agent, for the benefit of the Lenders,
does not have a perfected Lien, promptly (i) execute and deliver to the
Administrative Agent such amendments to the Guarantee and Collateral Agreement
or such other documents as the Administrative Agent deems necessary or advisable
to grant to the Administrative Agent, for the benefit of the Lenders, a security
interest in such Property and (ii) take all actions necessary or advisable to
grant to the Administrative Agent, for the benefit of the Lenders, a perfected
first priority security interest in such Property, including without limitation,
the filing of Uniform Commercial Code financing statements in such jurisdictions
as may be required by the Guarantee and Collateral Agreement or by law or as may
be requested by the Administrative Agent.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $1,000,000 acquired after
the Closing Date by the Borrower or any of its Restricted Subsidiaries (other
than any such real property subject to a Lien expressly permitted by Section
7.3(g)), promptly (i) execute and deliver a first priority Mortgage in favor of
the Administrative Agent, for the benefit of the Lenders, covering such real
property, (ii) if requested by the Administrative Agent, provide the Lenders
with (x) title and extended coverage insurance covering such real property in an
amount at least equal to the purchase price of such real estate (or such other
amount as shall be reasonably specified by the Administrative Agent) as well as
a current ALTA survey
<PAGE> 60
55
thereof, together with a surveyor's certificate and (y) any consents or
estoppels reasonably deemed necessary or advisable by the Administrative Agent
in connection with such mortgage or deed of trust, each of the foregoing in form
and substance reasonably satisfactory to the Administrative Agent and (iii) if
requested by the Administrative Agent, deliver to the Administrative Agent legal
opinions relating to the matters described above, which opinions shall be in
form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary) created or acquired after the Closing Date (which, for the purposes
of this paragraph, shall include any existing Subsidiary that ceases to be an
Excluded Foreign Subsidiary), by the Borrower or any of its Restricted
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Borrower or any of
its Restricted Subsidiaries, (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, (iii) cause such new
Subsidiary, if it is a Restricted Subsidiary, (A) to become a party to the
Guarantee and Collateral Agreement and (B) to take such actions necessary or
advisable to grant to the Administrative Agent for the benefit of the Lenders a
perfected first priority security interest in the Collateral described in the
Guarantee and Collateral Agreement with respect to such new Subsidiary,
including, without limitation, the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Administrative
Agent, and (iv) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Administrative Agent.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Restricted
Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such
amendments to the Guarantee and Collateral Agreement as the Administrative Agent
deems necessary or advisable in order to grant to the Administrative Agent, for
the benefit of the Lenders, a perfected first priority security interest in the
Capital Stock of such new Subsidiary which is owned by the Borrower or any of
its Subsidiaries (provided that in no event shall more than 65% of the total
outstanding Capital Stock of any such new Subsidiary be required to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Restricted
Subsidiary, as the case may be, and take such other action as may be necessary
or, in the opinion of the Administrative Agent, desirable to perfect the Lien of
the Administrative Agent thereon, and (iii) if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
<PAGE> 61
56
6.11 Further Assurances. (a) In the case of the Borrower, from time
to time execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates or documents, and take all such actions, as
the Administrative Agent may reasonably request, for the purposes of
implementing or effectuating the provisions of this Agreement and the other Loan
Documents, or of more fully perfecting or renewing the rights of the
Administrative Agent and the Lenders with respect to the Collateral (or with
respect to any additions thereto or replacements or proceeds thereof or with
respect to any other property or assets hereafter acquired by the Borrower which
may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the
exercise by the Administrative Agent or any Lender of any power, right,
privilege or remedy pursuant to this Agreement or the other Loan Documents which
requires any consent, approval, recording, qualification or authorization of any
Governmental Authority, the Borrower will execute and deliver, or will cause the
execution and delivery of, all applications, certifications, instruments and
other documents and papers that the Administrative Agent or such Lender may be
required to obtain from the Borrower or any of its Subsidiaries for such
governmental consent, approval, recording, qualification or authorization.
6.12 Year 2000 Matters. Undertake the testing and reprogramming
described in the first sentence of Section 4.22, and complete such testing and
reprogramming by March 31, 1999, so that the representations and warranties made
pursuant to such Section 4.22 are true and correct in all material respects on
and as of March 31, 1999 as if made on such date.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly
(provided that, after the Borrower determines the aggregate principal amount of
Senior Subordinated Notes it will issue on the Refinancing Date, the Borrower
may propose amendments to be made to this Section 7 to be in effect from and
after the Refinancing Date, and the Lenders agree to negotiate in good faith to
make any amendments to this Section 7 as may be appropriate in light of the
aggregate principal amount of the Senior Subordinated Notes to be so issued):
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth on Schedule 7.1(a) to
exceed the Applicable Leverage Ratio for such fiscal quarter, as determined in
accordance with Schedule 7.1(a).
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters subsequent to the
Closing Date) ending with any fiscal quarter set forth on Schedule 7.1(b) to be
less than the Applicable Interest Coverage Ratio for such fiscal quarter, as
determined in accordance with Schedule 7.1(b); provided, that for
<PAGE> 62
57
the purposes of determining the ratio described above for FQ2 1999, FQ3 1999 and
FQ4 1999 Consolidated Interest Expense for the relevant period shall be deemed
to equal Consolidated Interest Expense for such fiscal quarter (and, in the case
of the latter two such determinations, each previous fiscal quarter commencing
after the Closing Date) multiplied by 4, 2 and 4/3, respectively.
(c) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrower (or, if less, the number of full fiscal quarters subsequent to
the Closing Date) ending with any fiscal quarter set forth on Schedule 7.1(c) to
be less than the Applicable Fixed Charge Coverage Ratio for such fiscal quarter,
as determined in accordance with Schedule 7.1(c).
7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any Wholly
Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
provided that any such Indebtedness of the Borrower or any Subsidiary
Guarantor to any Subsidiary which is not a Subsidiary Guarantor shall be
subordinated, in a manner satisfactory to the Administrative Agent, to the
Obligations and any other obligations of the Borrower or such Subsidiary
Guarantor hereunder and under the other Loan Documents;
(c) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(d) and any refinancings, refundings, renewals or extensions
thereof (without any increase in the principal amount thereof or any
shortening of the maturity of any principal amount thereof);
(e) Guarantee Obligations made in the ordinary course of business by
the Borrower or any of its Restricted Subsidiaries of obligations of the
Borrower or any Subsidiary Guarantor;
(f) (i) Indebtedness of the Borrower in respect of the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$125,000,000 and (ii) Guarantee Obligations of any Subsidiary Guarantor in
respect of such Indebtedness; provided that such Guarantee Obligations are
subordinated to the same extent as the obligations of the Borrower in
respect of the Senior Subordinated Notes; and
(g) Indebtedness of the Borrower in respect of the Seller Note.
<PAGE> 63
58
7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property (other than any Restricted Margin Stock), whether
now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Restricted Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 30 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the Property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Restricted Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(f), provided that no such
Lien is spread to cover any additional Property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Restricted Subsidiary incurred pursuant to Section 7.2(c) to finance the
acquisition of fixed or capital assets, provided that (i) such Liens shall
be created substantially simultaneously with the acquisition of such fixed
or capital assets, (ii) such Liens do not at any time encumber any
Property other than the Property financed by such Indebtedness and (iii)
the purchase price of such Property does not exceed 125% of the amount of
Indebtedness secured thereby.
(h) Liens created pursuant to the Security Documents;
(i) Liens created by precautionary fillings of financing statements
in respect of equipment leased by the Borrower or its Restricted
Subsidiaries in the ordinary course of business; and
<PAGE> 64
59
(j) any interest or title of a lessor under any lease entered into by
the Borrower or any other Restricted Subsidiary in the ordinary course of
its business and covering only the assets so leased.
7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, except that:
(a) any Restricted Subsidiary may be merged or consolidated with or
into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Subsidiary Guarantor (provided
that the Subsidiary Guarantor shall be the continuing or surviving
corporation); and
(b) any Restricted Subsidiary may Dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary Guarantor.
7.5 Limitation on Disposition of Property. Dispose of any of its
Property (including, without limitation, receivables and leasehold interests,
but excluding Restricted Margin Stock), whether now owned or hereafter acquired,
or, in the case of any Subsidiary, issue or sell any shares of such Restricted
Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Subsidiary Guarantor;
(e) the Disposition of other assets having a fair market value not
to exceed $500,000 in the aggregate during the term of this Agreement;
(f) any Asset Sale or Recovery Event, provided that the
requirements of Section 2.10(b) are complied with in connection
therewith; and
(g) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business of the Borrower or its
Subsidiaries in connection with the compromise or collection thereof in
respect of obligors the Borrower reasonably believes is not likely to pay
all of substantially all of its obligation; provided that the Borrower
and its Subsidiaries shall not sell or discount accounts receivable with
an original stated amount of more than $5,000,000 in any fiscal year.
7.6 Limitation on Restricted Payments. Declare or pay any dividend
(other than dividends payable solely in common stock of the Person making such
dividend) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund
<PAGE> 65
60
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any Capital Stock of the Borrower or any Subsidiary, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (collectively, "Restricted Payments"), except that any Subsidiary
may make Restricted Payments to the Borrower or any Subsidiary Guarantor.
7.7 Limitation on Capital Expenditures. Make or commit to make any
Capital Expenditure, except (a) Capital Expenditures of the Borrower and its
Restricted Subsidiaries in the ordinary course of business not exceeding in any
fiscal year the lesser of (i) $8,000,000 and (ii) 2.00% of the amount of net
sales of the Borrower and its Restricted Subsidiaries for such fiscal year,
determined in accordance with GAAP and (b) Capital Expenditures made with the
proceeds of any Reinvestment Deferred Amount.
7.8 Limitation on Investments. Make any advance, loan, extension of
credit (by way of guaranty or otherwise) or capital contribution to, or purchase
any Capital Stock, bonds, notes, debentures or other debt securities of, or any
assets constituting an ongoing business from, or make any other investment in,
any other Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Investments arising in connection with the incurrence of
Indebtedness permitted by Section 7.2(b) and (e) ;
(d) loans and advances to employees of the Borrower or any
Restricted Subsidiaries of the Borrower in the ordinary course of
business (including, without limitation, for travel, entertainment and
relocation expenses) in an aggregate amount for the Borrower and
Restricted Subsidiaries of the Borrower not to exceed $100,000 at any one
time outstanding;
(e) the Stock Repurchase;
(f) Investments in assets useful in the Borrower's business made by
the Borrower or any of its Restricted Subsidiaries with the proceeds of
any Reinvestment Deferred Amount;
(g) Permitted Acquisitions; and
(h) Investments (other than those relating to the incurrence of
Indebtedness permitted by Section 7.8(c)) by the Borrower or any of its
Restricted Subsidiaries in the Borrower or any Person that, prior to such
investment, is a Subsidiary Guarantor.
7.9 Limitation on Optional Payments and Modifications of Debt
Instruments, etc. (a) Make or offer to make any optional or voluntary payment,
prepayment, repurchase or redemption of, or otherwise voluntarily or optionally
defease, the Senior Subordinated
<PAGE> 66
61
Notes or the Seller Note, (b) amend, modify or otherwise change, or consent or
agree to any amendment, modification, waiver or other change to, any of the
terms of the Senior Subordinated Notes or the Seller Note (other than any such
amendment, modification, waiver or other change which (i) would extend the
maturity or reduce the amount of any payment of principal thereof, reduce the
rate or extend the date for payment of interest thereon or relax any covenant or
other restriction applicable to the Borrower or any of its Subsidiaries and (ii)
does not involve the payment of a consent fee), (c) designate any Indebtedness
(other than the Obligations) as "Designated Senior Indebtedness" (or any
equivalent designation) for the purposes of the Senior Subordinated Note
Indenture or (d) amend its certificate of incorporation in any manner determined
by the Administrative Agent to be adverse to the Lenders.
7.10 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of the
Borrower or such Restricted Subsidiary, as the case may be, and (c) upon fair
and reasonable terms no less favorable to the Borrower or such Restricted
Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person which is not an Affiliate; provided, that the
Borrower may pay customary director's fees to members of its Board of Directors.
7.11 Limitation on Sales and Leasebacks. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Restricted
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Borrower or such Restricted Subsidiary to such Person or to
any other Person to whom funds have been or are to be advanced by such Person on
the security of such property or rental obligations of the Borrower or such
Restricted Subsidiary.
7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of
the Borrower to end on a day other than the Saturday next preceeding June 30 or
change the Borrower's method of determining fiscal quarters.
7.13 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
the Borrower or any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its Property or revenues, whether now owned
or hereafter acquired, to secure the Obligations or, in the case of any
guarantor, its obligations under the Guarantee and Collateral Agreement, other
than (a) this Agreement and the other Loan Documents and (b) any agreements
governing any purchase money Liens or Capital Lease Obligations otherwise
permitted hereby (in which case, any prohibition or limitation shall only be
effective against the assets financed thereby).
7.14 Limitation on Restrictions on Subsidiary Distributions. Enter
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (a) make Restricted
Payments in respect of any Capital Stock of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other
<PAGE> 67
62
Restricted Subsidiary, (b) make Investments in the Borrower or any other
Restricted Subsidiary or (c) transfer any of its assets to the Borrower or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents and (ii) any restrictions with respect to a Restricted Subsidiary
imposed pursuant to an agreement which has been entered into in connection with
the Disposition of all or substantially all of the Capital Stock or assets of
such Restricted Subsidiary.
7.15 Limitation on Lines of Business. Enter into any business, either
directly or through any Restricted Subsidiary, except for those businesses in
which the Borrower and its Restricted Subsidiaries are engaged on the date of
this Agreement or which are reasonably related thereto.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount
becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other
Loan Document shall prove to have been inaccurate in any material respect
on or as of the date made or deemed made; or
(c) (i) Any Loan Party shall default in the observance or
performance of any agreement contained in clause (i) or (ii) of Section
6.4(a) (with respect to the Borrower only), Section 6.7(a), Section 7 or
Section 5 of the Guarantee and Collateral Agreement or (ii) an "Event of
Default" under and as defined in any Mortgage shall have occurred and be
continuing; or
(d) Any Loan Party shall default in the observance or performance
of any other agreement contained in this Agreement or any other Loan
Document (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30
days; or
(e) The Borrower or any of its Restricted Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness
(including, without limitation, any Guarantee Obligation, but excluding
the Loans) on the scheduled or original due date with respect thereto; or
(ii) default in making any payment of any interest on any such
Indebtedness beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created; or
(iii) default
<PAGE> 68
63
in the observance or performance of any other agreement or condition
(other than a Margin Stock Restriction) relating to any such Indebtedness
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a trustee or
agent on behalf of such holder or beneficiary) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated
maturity or (in the case of any such Indebtedness constituting a Guarantee
Obligation) to become payable; provided, that a default, event or
condition described in clause (i), (ii) or (iii) of this paragraph (e)
shall not at any time constitute an Event of Default unless, at such time,
one or more defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and
be continuing with respect to Indebtedness the outstanding principal
amount of which exceeds in the aggregate $1,000,000; or
(f) (i) The Borrower or any of its Restricted Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its
assets, or the Borrower or any of its Restricted Subsidiaries shall make
a general assignment for the benefit of its creditors; or (ii) there
shall be commenced against the Borrower or any of its Restricted
Subsidiaries any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of 60 days; or (iii) there shall be
commenced against the Borrower or any of its Restricted Subsidiaries any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed
or bonded pending appeal within 60 days from the entry thereof; or (iv)
the Borrower or any of its Restricted Subsidiaries shall take any action
in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Restricted Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC or a Plan shall arise on the
assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable
Event or commencement of
<PAGE> 69
64
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with
respect to a Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such events or
conditions, if any, could, in the sole judgment of the Required Lenders,
reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Restricted Subsidiaries involving in the aggregate
a liability (not paid or fully covered by insurance as to which the
relevant insurance company has acknowledged coverage) of $1,000,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the entry
thereof; or
(i) Any of the Security Documents shall cease, for any reason
(other than the fault of the Agents or the Lenders), to be in full force
and effect, or any Loan Party or any Affiliate of any Loan Party shall so
assert, or any Lien created by any of the Security Documents shall cease,
for any reason (other than the fault of the Agents or the Lenders), to be
enforceable and of the same effect and priority purported to be created
thereby; or
(j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) (i) Any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), excluding the Permitted Investors and members of
executive management of the Borrower, shall become, or obtain rights
(whether by means or warrants, options or otherwise) to become, the
"beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the
Exchange Act), directly or indirectly, of more than 30% of the
outstanding common stock of Borrower; (ii) the board of directors of
Borrower shall cease to consist of a majority of Continuing Directors; or
(iii) a Specified Change of Control shall occur; or
(l) (i) The Seller Note shall cease, for any reason, to be validly
subordinated to the Obligations or (ii) the Senior Subordinated Notes or
any guarantees thereof shall cease, for any reason, to be validly
subordinated to the Obligations or the obligations of the Subsidiary
Guarantors under the Guarantee and Collateral Agreement, as the case may
be, as provided in the Senior Subordinated Note Indenture, or any Loan
Party, any Affiliate of any Loan Party, the trustee in respect of the
Senior Subordinated Notes;
<PAGE> 70
65
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Majority Revolving Credit Facility Lenders,
the Administrative Agent may, or upon the request of the Majority Revolving
Credit Facility Lenders, the Administrative Agent shall, by notice to the
Borrower declare the Revolving Credit Commitments to be terminated forthwith,
whereupon the Revolving Credit Commitments shall immediately terminate; (ii)
with the consent of the Majority Delayed Draw Term Loan Lenders, the
Administrative Agent may, or upon the request of the Majority Delayed Draw Term
Loan Lenders, the Administrative Agent shall, by notice to the Borrower, declare
any undrawn Delayed Draw Term Loan Commitments to be terminated forthwith,
whereupon any undrawn Delayed Draw Term Loan Commitments shall immediately
terminate; and (iii) with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) to be due and payable forthwith, whereupon the same shall
immediately become due and payable. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to this paragraph, the Borrower shall at such time deposit
in a cash collateral account opened by the Issuing Lender an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts
held in such cash collateral account shall be applied by the Issuing Lender to
the payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the other Loan Documents. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations shall
have been satisfied and all other obligations of the Borrower hereunder and
under the other Loan Documents shall have been paid in full, the balance, if
any, in such cash collateral account shall be returned to the Borrower (or such
other Person as may be lawfully entitled thereto).
SECTION 9. THE AGENTS.
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Agents as the agents of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the such Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision
<PAGE> 71
66
to the contrary elsewhere in this Agreement, no Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against any Agent.
9.2 Delegation of Duties. Each Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. No Agent shall be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except to the extent that any of the foregoing are found by a final and
nonappealable decision of a court of competent jurisdiction to have resulted
from its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Loan Party or any officer thereof
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Agents under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure
of any Loan Party a party thereto to perform its obligations hereunder or
thereunder. The Agents shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Administrative Agent. Each Agent shall be entitled to
rely, and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower or the Loan Parties), independent
accountants and other experts selected by the Administrative Agent. The Agents
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. Each Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Each Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement,
<PAGE> 72
67
all Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
9.5 Notice of Default. No Agent shall 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 the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders and the Issuing Lender. 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 (or, if so specified by this Agreement, all
Lenders); provided that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, no Agent shall have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party which may
come into the possession of such Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in its
capacity as such and the Issuing Lender 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 Aggregate Exposure
Percentages in effect on the date on which indemnification is sought under this
Section (or, if indemnification is sought after the date upon which the
Commitments shall have terminated and the Loans shall have been paid in full,
ratably in accordance with such Aggregate Exposure Percentages, or Revolving
Credit Commitments in the case of the Issuing Lender, immediately prior to such
date), from and
<PAGE> 73
68
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of, the Commitments,
this Agreement, any of the other Loan Documents or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by such 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 which are found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from such Agent's gross negligence or willful misconduct. The
agreements in this Section 9.7 shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with any Loan Party as though such Agent was not an Agent. With respect to its
Loans made or renewed by it and with respect to any Letter of Credit issued or
participated in by it, each Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not an Agent, and the terms "Lender" and "Lenders" shall
include each Agent in its individual capacity.
9.9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 10 days' notice to the Lenders and the Borrower. If
the Administrative Agent shall resign as Administrative Agent under this
Agreement and the other Loan Documents, then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, which successor agent
shall (unless an Event of Default under Section 8(a) or Section 8(f) with
respect to the Borrower shall have occurred and be continuing) be subject to
approval by the Borrower (which approval shall not be unreasonably withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative Agent, and the term "Administrative Agent" shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent's rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent's notice of resignation, the retiring Administrative
Agent's resignation shall nevertheless thereupon become effective, and the
Lenders shall assume and perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. The Syndication Agent may, at any time, by notice
to the Lenders and the Administrative Agent, resign as Syndication Agent
hereunder, whereupon the duties, rights, obligations and responsibilities
hereunder shall automatically be assumed by, and inure to the benefit of, the
Administrative Agent, without any further act by the Syndication Agent, the
Administrative Agent or any Lender. After any retiring Agent's resignation as
Agent, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement and the other Loan Documents.
<PAGE> 74
69
9.10 Authorization to Release Liens. The Administrative Agent is hereby
irrevocably authorized by each of the Lenders to release any Lien covering any
Property of the Borrower or any of its Subsidiaries that is the subject of a
Disposition which is permitted by this Agreement or which has been consented to
in accordance with Section 10.1.
9.11 The Arranger. The Arranger, in its capacity as such, shall have no
duties or responsibilities, and shall incur no liability, under this Agreement
and the other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may, or
(with the written consent of the Required Lenders) the Agents and each Loan
Party party to the relevant Loan Document may, from time to time, (a) enter into
written amendments, supplements or modifications hereto and to the other Loan
Documents for the purpose of adding any provisions to this Agreement or the
other Loan Documents or changing in any manner the rights of the Lenders or of
the Loan Parties hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders, or the Agents, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default or Event of Default and its consequences;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (i) forgive the principal amount or extend the final
scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of any Term Loan, reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof, or increase the amount or extend the expiration date of any Commitment
of any Lender, in each case without the consent of each Lender directly affected
thereby; (ii) amend, modify or waive any provision of this Section or reduce any
percentage specified in the definition of Required Lenders or Required
Prepayment Lenders, consent to the assignment or transfer by the Borrower of any
of its rights and obligations under this Agreement and the other Loan Documents,
release all or substantially all of the Collateral or release all or
substantially all of the Subsidiary Guarantors from their obligations under the
Guarantee and Collateral Agreement, in each case without the consent of all
Lenders; (iii) amend, modify or waive any condition precedent to any extension
of credit under the Revolving Credit Facility or the Delayed Draw Term Loan
Facility set forth in Section 5.2 (including, without limitation, in connection
with any waiver of an existing Default or Event of Default) without the consent
of the Majority Revolving Credit Facility Lenders or the Majority Delayed Draw
Term Loan Lenders, as the case may be; (iv) reduce the percentage specified in
the definition of Majority Facility Lenders with respect to any Facility without
the written consent of all Lenders under such Facility; (v) amend, modify or
waive any provision of Section 9 without the consent of the Agents; (vi) amend,
modify or waive any provision of Section 2.16(a), (b) or (c) without the consent
of each Lender directly affected thereby; or (vii) amend, modify or waive any
provision of Section 3, Section 9.6 (or any other term hereof affecting the
obligations or rights of the Issuing Lender, without the consent of the Issuing
Lender). Any such waiver and any such amendment, supplement or modification
shall apply equally to each
<PAGE> 75
70
of the Lenders and shall be binding upon the Loan Parties, the Lenders, the
Agents and all future holders of the Loans. In the case of any waiver, the Loan
Parties, the Lenders and the Agents shall be restored to their former position
and rights hereunder and under the other Loan Documents, and any Default or
Event of Default waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Default or Event of Default,
or impair any right consequent thereon. Any such waiver, amendment, supplement
or modification shall be effected by a written instrument signed by the parties
required to sign pursuant to the foregoing provisions of this Section; provided,
that delivery of an executed signature page of any such instrument by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.
10.2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by telecopy), and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered, or ten Business Days after being deposited in the
mail, postage prepaid, or, in the case of telecopy notice, when received,
addressed (a) in the case of the Borrower and the Administrative Agent, as
follows and (b) in the case of the Lenders, as set forth on Schedule 1.1A or, in
the case of a Lender which becomes a party to this Agreement pursuant to an
Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case
of any party, to such other address as such party may hereafter notify to the
other parties hereto:
The Borrower: Salton/Maxim Housewares, Inc.
550 Business Center Drive
Mt. Prospect, Ill. 60056
Attention: William Rue
Telecopy: (847) 803-8080
Telephone: (947) 803-4600 x220
The Syndication Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 526-7691
Telephone: (212) 526-0437
The Administrative Agent: Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael O'Brien
Telecopy: (212) 526-7691
Telephone: (212) 526-0437
provided that any notice, request or demand to or upon the any Agent or any
Lender shall not be effective until received.
<PAGE> 76
71
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the any Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations and
warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse the
Agents and the Arranger for all their reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender, the Issuing Lender, the Agents and the Arranger for all
its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including, without limitation, the fees and
disbursements of counsel (including the allocated fees and expenses of in-house
counsel) to each Lender and of counsel to the Agents, the Issuing Lender, and
the Arranger, (c) to pay, indemnify, and hold each Lender, the Issuing Lender,
and the Agents harmless from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, which may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold each Lender, the Agents, the Issuing Lender and the
Arranger and their respective officers, directors, employees, affiliates, agents
and controlling persons (each, an "Indemnitee") harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the other Loan Documents and any such other
documents, including, without limitation, any of the foregoing relating to the
use of proceeds of the Loans or the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of the
Borrower any of its Subsidiaries or any of the Properties (all the foregoing in
this clause (d), collectively, the "Indemnified Liabilities"), provided, that
the Borrower shall have no obligation hereunder to any Indemnitee with respect
to Indemnified Liabilities to the extent such Indemnified Liabilities are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
Indemnitee. Without limiting the foregoing, and to the extent permitted by
applicable law, the Borrower agrees
<PAGE> 77
72
not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries so to waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any indemnitee. The agreements in this Section
shall survive repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Agents, all future holders of the Loans and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agents and each Lender.
(b) Any Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other
Loan Documents, and the Borrower and the Agents shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event
shall any Participant under any such participation have any right to approve
any amendment or waiver of any provision of any Loan Document, or any consent
to any departure by any Loan Party therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Loans or any fees payable hereunder, or postpone the date of the final maturity
of the Loans, in each case to the extent subject to such participation. The
Borrower agrees that if amounts outstanding under this Agreement and the Loans
are due or unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall, to
the maximum extent permitted by applicable law, be deemed to have the right of
setoff in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, provided that, in
purchasing such participating interest, such Participant shall be deemed to
have agreed to share with the Lenders the proceeds thereof as provided in
Section 10.7(a) as fully as if it were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections
2.17, 2.18 and 2.19 with respect to its participation in the Commitments and
the Loans outstanding from time to time as if it was a Lender; provided that,
in the case of Section 2.18, such Participant shall have complied with the
requirements of said Section and provided, further, that no Participant shall
be entitled to receive any greater amount pursuant to any such Section than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable law, at
any time and from time to time assign to any Lender or any affiliate thereof
or, with the
<PAGE> 78
73
consent of the Borrower, the Issuing Lender (in the case of assignments of
Revolving Credit Commitments only) and the Agents (which, in each case, shall
not be unreasonably withheld or delayed) (provided (x) that no such consent of
the Borrower or any Agent need be obtained by Lehman Commercial Paper Inc. for a
period of 180 days following the Closing Date and (y) the consent of the
Borrower need not be obtained with respect to any assignment of funded Term
Loans), to an additional bank, financial institution or other entity (an
"Assignee") all or any part of its rights and obligations under this Agreement
pursuant to an Assignment and Acceptance, substantially in the form of Exhibit
E, executed by such Assignee and such Assignor (and, where the consent of the
Borrower, the Agents or the Issuing Lender is required pursuant to the
foregoing provisions, by the Borrower and such other Persons) and delivered to
the Administrative Agent for its acceptance and recording in the Register;
provided that no such assignment to an Assignee (other than any Lender or any
affiliate thereof) shall be in an aggregate principal amount of less than
$5,000,000 and result in the Assignor having aggregate Commitments of less than
$5,000,000 (other than in the case of an assignment of all of a Lender's
interests under this Agreement), in each case unless otherwise agreed by the
Borrower, the Syndication Agent and the Administrative Agent. Any such
assignment need not be ratable as among the Facilities. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder with a Commitment and/or
Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of an Assignor's rights and obligations under this Agreement, such Assignor
shall cease to be a party hereto). Notwithstanding any provision of this
Section, the consent of the Borrower shall not be required for any assignment
which occurs at any time when any Event of Default shall have occurred and be
continuing.
(d) The Administrative Agent shall maintain at its address referred to in
Section 10.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to, each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Administrative Agent and
the Lenders shall treat each Person whose name is recorded in the Register as
the owner of the Loans and any Notes evidencing such Loans recorded therein for
all purposes of this Agreement. Any assignment of any Loan, whether or not
evidenced by a Note, shall be effective only upon appropriate entries with
respect thereto being made in the Register (and each Note shall expressly so
provide). Any assignment or transfer of all or part of a Loan evidenced by a
Note shall be registered on the Register only upon surrender for registration of
assignment or transfer of the Note evidencing such Loan, accompanied by a duly
executed Assignment and Acceptance; thereupon one or more new Notes in the same
aggregate principal amount shall be issued to the designated Assignee, and the
old Notes shall be returned by the Administrative Agent to the Borrower marked
"cancelled". The Register shall be available for inspection by the Borrower or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
<PAGE> 79
74
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 10.6(c), by each such other Person) together with payment
to the Administrative Agent of a registration and processing fee of $3,500
(except that no such registration and processing fee shall be payable (y) in
connection with an assignment by Lehman Commercial Paper Inc. or (z) in the case
of an Assignee which is already a Lender or is an affiliate of a Lender or a
Person under common management with a Lender), the Administrative Agent shall
(i) promptly accept such Assignment and Acceptance and (ii) on the effective
date determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. On or prior to such effective date, the Borrower, at its own
expense, upon request, shall execute and deliver to the Administrative Agent (in
exchange for the Revolving Credit Note, Delayed Draw Term Loan Commitment and/or
applicable Term Notes, as the case may be, of the assigning Lender) a new
Revolving Credit Note and/or applicable Term Notes, as the case may be, to the
order of such Assignee in an amount equal to the Revolving Credit Commitment,
Delayed Draw Term Loan Commitment and/or applicable Term Loans, as the case may
be, assumed or acquired by it pursuant to such Assignment and Acceptance and, if
the Assignor has retained a Revolving Credit Commitment, Delayed Draw Term Loan
Commitment and/or Term Loans, as the case may be, upon request, a new Revolving
Credit Note and/or Term Notes, as the case may be, to the order of the Assignor
in an amount equal to the Revolving Credit Commitment, Delayed Draw Term Loan
Commitment and/or applicable Term Loans, as the case may be, retained by it
hereunder. Such new Note or Notes shall be dated the Closing Date and shall
otherwise be in the form of the Note or Notes replaced thereby.
(f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve
Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) Except to the extent that this Agreement
provides for payments to be allocated to a particular Lender or to the Lenders
under a particular Facility, if any Lender (a "Benefitted Lender") shall at any
time receive any payment of all or part of the Obligations owing to it, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
Section 8(f), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender's Obligations, such Benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender's Obligations, or shall provide such other Lenders with the benefits of
any such collateral, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral ratably with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
<PAGE> 80
75
(b) In addition to any rights and remedies of the Lenders provided by law,
each Lender and the Issuing Lender shall have the right, without prior notice to
the Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by
the Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise), to set off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower, as the case may be.
Each Lender agrees promptly to notify the Borrower and the Administrative Agent
after any such setoff and application made by such Lender, provided that the
failure to give such notice shall not affect the validity of such setoff and
application.
10.8 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.
10.9 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents represent
the agreement of the Borrower, the Administrative Agent and the Lenders with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Administrative Agent or any Lender relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
<PAGE> 81
76
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower, as the case may be at its address set forth in Section 10.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
10.13 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Administrative Agent and Lenders, on one hand,
and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Borrower and the Lenders.
10.14 Confidentiality. Each of the Agents and the Lenders agrees to keep
confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to the Administrative Agent, any other
Lender or any affiliate of any Lender, (b) to any Participant or Assignee (each,
a "Transferee") or prospective Transferee which agrees to comply with the
provisions of this Section, (c) any of its employees, directors, agents,
attorneys, accountants and other professional advisors, (d) upon the request or
demand of any Governmental Authority having jurisdiction over it, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
which has been publicly disclosed other than in breach of this Section, (h) to
the National Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires access to information
<PAGE> 82
77
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender or (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document.
10.15 Accounting Charges. In the event that any "Accounting Change" (as
defined below) shall occur and such change results in a change in the method of
calculation of financial covenants, standards or terms in this Agreement, then
the Borrower, the Syndication Agent and the Administrative Agent agree to enter
into negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Borrower's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
Until such time as such an amendment shall have been executed and delivered by
the Borrower, the Syndication Agent, the Administrative Agent and the Required
Lenders, all financial covenants, standards and terms in this Agreement shall
continue to be calculated or construed as if such Accounting Changes had not
occurred. "Accounting Changes" refers to changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the Securities and Exchange
Commission (or successors thereto or agencies with similar functions).
10.16 Restricted Subsidiaries. On the Closing Date, all Subsidiaries
shall be Restricted Subsidiaries. The Borrower may, at any time, designate
Salton Hong Kong as an Unrestricted Subsidiary if, after giving pro forma effect
to such designation (as if such designation had occurred on the first day of
each relevant fiscal period for purposes of calculating compliance with
financial covenants in Section 7), the Consolidated Leverage Ratio is no greater
than 4.00 to 1.00 and no Default or Event of Default shall be in existence.
10.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE> 83
78
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
SALTON/MAXIM HOUSEWARES, INC.
By:__________________________________
Name:
Title:
LEHMAN BROTHERS INC.,
as Arranger
By:__________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC., as
Syndication Agent, as Administrative
Agent and as a Lender
By:__________________________________
Name:
Title:
LASALLE NATIONAL BANK, as Issuing Lender
By:__________________________________
Name:
Title:
<PAGE> 84
Annex A
PRICING GRID FOR REVOLVING CREDIT LOANS,
TRANCHE A TERM LOANS, DELAYED DRAW TERM LOANS AND COMMITMENT FEES
I. Prior to the Refinancing Date, the following pricing will be in effect:
<TABLE>
<CAPTION>
Consolidated
Leverage Applicable Margin- Commitment Applicable Margin-
Ratio Eurodollar Loans* Fee* Base Rate Loans*
----- ----------------- ---------- ----------------
<S> <C> <C> <C>
>= 4.0 to 1.0 2.375% .50% 1.375%
>= 3.5 to 1.0 2.125% .50% 1.125%
>= 3.0 to 1.0 1.875% .40% .875%
>= 2.5 to 1.0 1.625% .30% .625%
<2.5 1.375% .30% .375%
</TABLE>
II. From and after the Refinancing Date, the following pricing will be in
effect:
<TABLE>
<CAPTION>
Consolidated
Leverage Applicable Margin- Commitment Applicable Margin-
Ratio Eurodollar Loans* Fee* Base Rate Loans*
----- ----------------- ---------- ----------------
<S> <C> <C> <C>
>= 5.0 to 1.0 2.125% .50% 1.125%
>= 4.5 to 1.0 1.875% .50% .875%
>= 4.0 to 1.0 1.625% .40% .625%
>= 3.5 to 1.0 1.375% .30% .375%
<3.5 1.125% .30% .125%
</TABLE>
Changes in the Applicable Margin with respect to Loans or in the Commitment Fee
Rate resulting from changes in the Consolidated Leverage Ratio shall become
effective on the date (the "Adjustment Date") on which financial statements are
delivered to the Lenders pursuant to Section 6.1 (but in any event not later
than the 45th day after the end of each of the first three quarterly periods of
each fiscal year or the 90th day after the end of each fiscal year, as the case
may be) and shall remain in effect until the next change to be effected
pursuant to this paragraph. If any financial statements referred to above are
not delivered within the time periods specified above, then, until such
financial statements are delivered, the Consolidated Leverage Ratio as at the
end of the fiscal period that would have been covered thereby shall for the
purposes of this definition be deemed to be greater than 4.0 to 1 (prior to the
Refinancing Date) and greater than 5.0 to 1.0 (from and after the Refinancing
Date). Each determination of the Consolidated Leverage Ratio pursuant to this
definition shall be made with respect to the period of four consecutive fiscal
quarters of the Borrower ending at the end of the period covered by the
relevant financial statements.
A-1
<PAGE> 85
* Notwithstanding the foregoing grids, the Applicable Margin and Commitment
Fee rate will be (i) from the Closing Date to the earlier of the
Refinancing Date and the date which is six months after the Closing Date,
those set forth under "I" above opposite the higher of (A) the Consolidated
Leverage Ratio actually in effect from time to time and (B) the
Consolidated Leverage Ratio of >=3.5 to 1.0 and (ii) from the Refinancing
Date to the date which is six months after the Refinancing Date, those set
forth under "II" above opposite the higher of (A) the Consolidated Leverage
Ratio actually in effect from time to time and (B) the Consolidated
Leverage Ratio of >=4.0 to 1.0.
A-2
<PAGE> 1
EXHIBIT 10.6
Salton/Maxim Housewares, Inc.
CERTIFICATE OF DESIGNATION OF SERIES A VOTING
CONVERTIBLE PREFERRED STOCK SETTING FORTH THE
POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF SUCH SERIES
OF PREFERRED STOCK
Salton/Maxim Housewares, Inc. (hereinafter referred to as the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, as amended
(the "Delaware Code"), does HEREBY CERTIFY:
That, pursuant to authority conferred by Article IV of the Second
Amended and Restated Certificate of Incorporation of the Corporation, the Board
of Directors of the Corporation has adopted a resolution providing for the
issuance of a series of Preferred Stock consisting of 40,000 shares designated
"Series A Voting Convertible Preferred Stock", which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors (the "Board") of Salton/Maxim Housewares, Inc., a Delaware
corporation (the "Corporation"), by Article IV of the Second Amended and
Restated Certificate of Incorporation of the Corporation (the "Second
Restated Certificate"), the Board does hereby create, provide for and
approve a series of Preferred Stock, par value $.01 per share (herein
called "Preferred Stock"), of the Corporation to be designated "Series A
Voting Convertible Preferred Stock" (such series being herein called the
"Convertible Preferred Stock"), consisting of 40,000 shares of the
presently authorized but unissued shares of Preferred Stock, and does
hereby fix and herein state and express the designations, powers,
preferences and relative, participating, optional and other special rights,
and the qualifications, limitations and restrictions of the Convertible
Preferred Stock as follows (all terms used herein which are defined in the
<PAGE> 2
Second Restated Certificate shall have the meaning provided in said Second
Restated Certificate):
Section 1. Dividends.
(a) Upon the occurrence and during the continuation of a Restriction
Event described in Section 5(a)(i) or (ii), the holders of shares of Convertible
Preferred Stock shall be entitled to receive, out of funds legally available
therefor, cumulative dividends on the shares of Convertible Preferred Stock at
the Restriction Event Dividend Rate (as defined below) computed as a percentage
of the liquidation preference per share per year, payable quarterly on the 15th
day of each of January, April, July and October, respectively (each, a
"Quarterly Dividend Payment Date"), commencing on the first such Quarterly
Dividend Payment Date after the occurrence of such Restriction Event (except
that if any such date is a Saturday, Sunday or legal holiday, then such dividend
shall be payable on the next day that is not a Saturday, Sunday or legal
holiday). Such dividends shall be payable in cash. The amount of dividends
payable per share of Convertible Preferred Stock for each quarterly dividend
period shall be computed by dividing the annual amount by four. The amount of
dividends payable for the initial dividend period and any period shorter than a
full quarterly dividend period shall be computed on a pro rata basis, based on
the number of days
2
<PAGE> 3
elapsed. For purposes hereof, "Restriction Event Dividend Rate" means a rate
per annum equal to 12 1/2%.
(b) On each Quarterly Dividend Payment Date all dividends which shall
have accrued on each share of Convertible Preferred Stock outstanding on such
date shall accumulate and shall be deemed to have become due. Additional
dividends shall be paid to reflect amounts equivalent to interest on accrued but
unpaid dividends at the Restriction Event Dividend Rate from the Quarterly
Dividend Payment Date with respect to which such dividend was not paid until the
date such dividend is paid.
(c) In addition to the dividend provided hereinabove, in the event the
Board of Directors of the Corporation shall determine to pay any cash or
non-cash dividends or distributions on its Common Stock (other than dividends
payable in shares of its Common Stock, as to which the provisions of Section
3(a) below shall apply), the holders of shares of Convertible Preferred Stock
shall be entitled to receive cash and non-cash dividends or distributions in an
amount and of kind equal to the dividends or distributions that would have been
payable to each such holder if the Convertible Preferred Stock held by such
holder had been converted into Common Stock immediately prior to the record date
for the determination of the holders of Common Stock entitled to each such
dividend or
3
<PAGE> 4
distribution; provided, however, that if the Corporation shall dividend or
otherwise distribute rights to all holders of Common Stock entitling the holders
thereof to subscribe for or purchase shares of capital stock of the Corporation,
which rights (i) until the occurrence of a specified event or events are deemed
to be transferred with such shares of Common Stock and are not exercisable and
(ii) are issued in respect of future issuances of Common Stock, the holders of
shares of the Convertible Preferred Stock shall not be entitled to receive any
such rights until such rights separate from the Common Stock or become
exercisable, whichever is sooner.
(d) No dividends or other distributions, other than dividends payable
solely in shares of Common Stock or other capital stock of the Corporation
ranking junior as to dividends and as to any distribution of assets other than
by way of dividends to the Convertible Preferred Stock, shall be paid, or
declared and set apart for payment by the Corporation, and no purchase,
redemption or other acquisition shall be made by the Corporation or any of its
subsidiaries of, any shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends or as to any distribution of assets
other than by way of dividends to the Convertible Preferred Stock (the "Junior
Stock") unless and until all accrued and unpaid dividends
4
<PAGE> 5
and distributions on the Convertible Preferred Stock, if any, including the full
dividend for the then current dividend period, shall have been paid or declared
and set apart for payment.
Section 2. Voting Rights.
In addition to any voting rights provided by law, the holders of shares
of Convertible Preferred Stock shall have the following voting rights:
(a) So long as the Convertible Preferred Stock is outstanding, each
share of Convertible Preferred Stock shall entitle the holder thereof to
vote on all matters voted on by holders of the capital stock of the
Corporation into which such share of Convertible Preferred Stock is
convertible, voting together as a single class with the other shares
entitled to vote, at all meetings of the stockholders of the Corporation.
With respect to any such vote, each share of Convertible Preferred Stock
shall entitle the holder thereof to cast the number of votes equal to the
number of votes which could be cast in such vote by a holder of the number
of shares of capital stock of the Corporation into which such share of
Convertible Preferred Stock is convertible on the record date for such
vote.
5
<PAGE> 6
(b) So long as any shares of Convertible Preferred Stock are
outstanding, subject to the provisions of Section 275(c) of the Delaware
Code, the Corporation shall not, without consent of the holders of at least
a majority of the number of shares of Convertible Preferred Stock at the
time outstanding, given in person or by proxy, either in writing or by vote
at a special meeting called for the purpose, enter into any plan of
complete liquidation or dissolution or otherwise effect the voluntary
liquidation, dissolution or winding up of the Corporation unless, as a
result of such liquidation, dissolution or winding-up, the liquidation
preference on the Convertible Preferred Stock is satisfied in full pursuant
to Section 6 herein.
(c) Except as otherwise required by applicable law, the consent of a
majority of the number of shares of Convertible Preferred Stock at the time
outstanding, given in person or by proxy, either in writing or by vote, at
a special or annual meeting, shall be necessary to (i) authorize or issue,
or obligate the Corporation to issue, any other capital stock or security
or right convertible or exchangeable for capital stock of the Corporation
that is senior to or on a parity with the Convertible Preferred Stock as to
6
<PAGE> 7
rights on liquidation or which is not Junior Stock for purposes of Section
1(d) herein; (ii) increase the authorized number of shares of the
Convertible Preferred Stock; (iii) enter any agreement, contract or
understanding or otherwise incur any obligation which by its terms would
violate or be in conflict with the holders of Convertible Preferred Stock
hereunder or the Corporation's performance of the terms of its Second
Amended and Restated Articles of Incorporation; (iv) amend the Second
Amended and Restated Articles of Incorporation or By-laws of the
Corporation, if such amendment would adversely affect the rights of the
holders of the Convertible Preferred Stock in any material respect; or (v)
amend or waive any provision of this Certificate of Designation.
Section 3. Conversion.
At the option of the holder thereof and upon surrender thereof for
conversion to the Corporation at the office of the Transfer Agent of the
Corporation s Common Stock (or to the Corporation's principal executive
offices), each share of Convertible Preferred Stock shall be convertible at any
time (or if such share is called or surrendered for redemption, then in respect
of such share to and including, but not after, the close of business on the
redemption date, unless the Corporation shall default in the
7
<PAGE> 8
payment of the redemption price, in which case such right shall not terminate at
such time and date) into that number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100 of a share)
obtained by dividing $1,000.00 by the Conversion Price (as defined below) in
effect at such time.
Each holder that desires to convert Convertible Preferred Stock into
Common Stock pursuant to this Section 3 shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Transfer Agent (or
to the Corporation's principal executive offices) as aforesaid, and shall give
notice to the Corporation at such office that such holder elects to convert the
same and shall state therein the number of shares of Convertible Preferred
Stock being converted. Thereupon the Corporation shall promptly issue and
deliver at such office to such holder certificates for the number of shares of
Common Stock to which such holder is entitled upon conversion. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the certificate representing the shares of
Convertible Preferred Stock to be converted, and the person entitled to receive
the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such Common Stock on such date.
8
<PAGE> 9
The "Conversion Price" shall mean and be $17.00, subject to adjustment
from time to time by the Corporation as follows:
(a) In case the Corporation shall, at any time or from time to time
while any of the shares of Convertible Preferred Stock are outstanding, (i) pay
a dividend or make a distribution on its Common Stock in shares of its Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common Stock into a
smaller number of shares or (iv) issue by reclassification of its shares of
Common Stock any shares of its capital stock (each such transaction being called
a "Stock Transaction"), then and in each such case, the Conversion Price in
effect immediately prior thereto shall be adjusted so that the holder of a share
of Convertible Preferred Stock surrendered for conversion after the record date
fixing stockholders to be affected by such Stock Transaction shall be entitled
to receive upon conversion the number of such shares of Common Stock or other
capital stock of the Corporation that he would have owned or been entitled to
receive after the happening of such event had such share of Convertible
Preferred Stock been converted immediately prior to such record date (or, if no
record date, the effective date). Such adjustment shall be made whenever any of
such events
9
<PAGE> 10
shall happen, but shall also be effective retroactively as to shares of
Convertible Preferred Stock converted between such record date and the date of
the happening of any such event.
(b) (i) In case the Corporation shall, at any time or from time to time
while any of the shares of Convertible Preferred Stock are outstanding, issue,
sell or exchange shares of Common Stock (other than (w) pursuant to any right or
warrant to purchase or acquire shares of Common Stock (including as such a right
or warrant any security convertible into or exchangeable for shares of Common
Stock), (x) pursuant to any employee or director incentive or benefit plan or
arrangement, including any employment, severance or consulting agreement but
excluding any employee stock ownership plan within the meaning of Section
4975(e)(7) of the Internal Revenue Code of 1986, as amended (an "ESOP"), whether
presently existing or, subject to approval by a majority of the disinterested
members of the Board of Directors of the Corporation, to be established in the
future, of the Corporation or any subsidiary of the Corporation heretofore or
hereafter adopted, (y) pursuant to a Minor Acquisition (as defined below) and
(z) in a Permitted Secondary Offering (as defined below)) for a consideration
having a Fair Market Value (as defined below) on the date of such issuance, sale
or exchange that is less
10
<PAGE> 11
than the Market Price (as defined below) of such shares on the date of such
issuance, sale or exchange, then and in each case, the Conversion Price shall be
adjusted by multiplying such Conversion Price by a fraction (which shall not be
greater than 1), the numerator of which shall be the sum of (x) the Current
Market Price per share of Common Stock as of the trading day immediately
preceding the date of the public announcement of the actual terms (including the
pricing terms) of such issuance, sale or exchange (or if there is no such public
announcement prior to the effective date of such issuance, sale or exchange,
such effective date) multiplied by the number of shares of Common Stock
outstanding immediately prior to such issuance, sale or exchange plus (y) the
aggregate Fair Market Value of the consideration received by the Corporation in
respect of such issuance, sale or exchange of shares of Common Stock, and the
denominator of which shall be the product of (x) the Current Market Price per
share of Common Stock referred to in the immediately preceding clause (x)
multiplied by (y) the sum of the number of shares of Common Stock outstanding on
such day plus the number of shares of Common Stock so issued, sold or exchanged
by the Corporation. For purposes of the preceding sentence, the aggregate
consideration receivable by the Corporation in connection with the issuance,
sale or exchange of shares of Common Stock shall
11
<PAGE> 12
be deemed to be equal to the sum of the aggregate offering price (before
deduction of reasonable underwriting discounts or commissions and expenses) of
all such shares.
(ii) In the event the Corporation shall, at any time or from time to
time while any shares of Convertible Preferred Stock are outstanding, issue,
sell or exchange any right or warrant to purchase or acquire shares of Common
Stock (including as such a right or warrant any security convertible into or
exchangeable for shares of Common Stock) (other than (x) any issuance, sale or
exchange to holders of shares of Common Stock as a dividend or distribution
(including by way of a reclassification of shares or a recapitalization of the
Corporation), and (y) pursuant to any employee or director incentive or benefit
plan or arrangement (excluding any ESOP), of the Corporation or any subsidiary
of the Corporation heretofore or, subject to approval by a majority of the
disinterested members of the Board of Directors of the Corporation, hereafter
adopted), for a consideration having a Fair Market Value on the date of such
issuance, sale or exchange less than the Fair Market Value of such rights or
warrants on the date of such issuance, sale or exchange, then and in each case,
the Conversion Price shall be adjusted by multiplying such Conversion Price by a
fraction (which shall not be greater than 1), the numerator of which shall be
the sum of (a) the
12
<PAGE> 13
Current Market Price per share of Common Stock as of the trading date
immediately preceding the date of the public announcement of the actual terms
(including the price terms) of such issuance, sale or exchange (or if there is
no such public announcement prior to the effective date of such issuance, sale
or exchange, such effective date) multiplied by the number of shares of Common
Stock outstanding immediately prior to such issuance, sale or exchange plus (b)
the aggregate Fair Market Value of the consideration received by the Corporation
in respect of such issuance, sale or exchange of such right or warrant, and the
denominator of which shall be the sum of (i) the Current Market Price per share
of Common Stock referred to in the preceding clause (a) multiplied by the number
of shares of Common Stock outstanding immediately prior to such issuance, sale
or exchange plus (ii) the aggregate Fair Market Value of such rights or warrants
at the time of such issuance. For the purposes of the preceding sentence, the
aggregate consideration receivable by the Corporation in connection with the
issuance, sale or exchange of any such right or warrant shall be deemed to be
equal to the sum of the aggregate offering price (before deduction of reasonable
underwriting discounts or commissions and expenses) of all such rights or
warrants.
13
<PAGE> 14
(c) In the event the Corporation or any of its subsidiaries shall, at
any time or from time to time while any shares of Convertible Preferred Stock
are outstanding, repurchase or redeem any of the Corporation s outstanding
capital stock at a premium over the average Market Price per share on the
trading day immediately preceding such repurchase or redemption (a
"Repurchase"), then and in the case of each Repurchase the Conversion Price in
effect immediately prior thereto shall be adjusted by multiplying such
Conversion Price by a fraction, the numerator of which is (i) the product of (x)
the number of shares of Common Stock outstanding immediately before such
repurchase or redemption multiplied by (y) the average Market Price per share of
Common Stock on the five (5) trading days immediately following the consummation
of such Repurchase minus (ii) the aggregate purchase price of the Repurchase and
the denominator of which shall be the product of (x) the number of shares of
Common Stock outstanding immediately before such Repurchase minus the number of
shares of Common Stock repurchased or redeemed by the Corporation multiplied by
(y) the average Market Price per share of Common Stock on such five trading days
referred to in the preceding clause (i)(y); provided, however, that the
conversion price shall not be so adjusted with respect to any Repurchase of the
14
<PAGE> 15
Convertible Preferred Stock pursuant to Section 6 or 7 hereof.
(d) For the purposes of any computation under paragraphs (a) through
(c) of this Section 3, the following definitions shall apply:
(i) "Closing Price" of publicly traded shares of Common Stock or any
other class of capital stock or other security of the Corporation or any
other issuer for a day shall mean the average of the reported closing bid
and asked prices, in either case as reported by the NASDAQ National Market
System or, if such security is not listed or admitted to trading on the
NASDAQ National Market System, the last reported sales price, regular way,
on the principal national securities exchange on which such security is
listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the average of the closing bid and asked
prices on each such day in the over-the-counter market as reported by
NASDAQ or, if bid and asked prices for such security on each such day shall
not have been reported through NASDAQ, the average of the bid and asked
prices of such day as furnished by any New York Stock Exchange member firm
regularly making a market in such security selected for such purpose by the
Board of Directors of
15
<PAGE> 16
the Corporation or a committee thereof. If the Common Stock or other class
of capital stock or security in question is not publicly held, or so
listed, or publicly traded, "Closing Price" shall mean the Fair Market
Value thereof.
(ii) "Current Market Price" per share of Common Stock as of any date
shall be deemed to be the average of the daily Closing Price per share for
the ten (10) consecutive trading days ending on and including the day in
question.
(iii) "Fair Market Value" of any consideration other than cash or of any
securities shall mean the amount which a willing buyer would pay to a
willing seller in an arm s length transaction as determined by an
independent investment banking or appraisal firm experienced in the
valuation of such securities or property selected in good faith by the
Board of Directors of the Corporation or a committee thereof.
(iv) "Market Price" per share at any date shall be the Closing Price on
the specified date; provided, that, in the case of the issuance, sale or
exchange of shares of Common Stock pursuant to paragraph (b) of this
Section 3 that are not registered under the Securities Act of 1933 Market
Price shall be reduced by an amount, if any (as determined by an
independent
16
<PAGE> 17
investment banking or appraisal firm experienced in the valuation of such
securities or property selected in good faith by the Board of Directors of
the Corporation or a committee thereof), to compensate for the fact that
such shares are not so registered, and in making such determination any
registration rights granted by the Company shall be taken into account.
(v) "Minor Acquisition" means any acquisition of the stock or assets
of an unaffiliated third party by the Corporation by merger, purchase,
joint venture or other reorganization or business combination in
consideration for the issuance of Common Stock having a Fair Market Value
not greater than $5,000,000.
(vi) "Permitted Secondary Offering" means any firmly underwritten
public offering of the Common Stock at a price to the public equal to or
greater than the Conversion Price then in effect.
(e) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least $.01 in such
price; provided, however, that any adjustments which by reason of this paragraph
(e) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 3 shall be
made to the nearest one-hundredth of a share.
17
<PAGE> 18
(f) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of any share of Convertible
Preferred Stock. If the conversion thereof results in a fraction, an amount
equal to such fraction multiplied by the Current Market Price per share of
Common Stock (as defined above) as of the conversion date shall be paid to such
holder in cash by the Corporation.
(g) In the event of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (a) of this Section 3), or in case of any merger, consolidation or
other corporate combination of the Corporation with or into another corporation,
or in case of any sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety (each of the
foregoing being referred to as a "Transaction"), each share of Convertible
Preferred Stock shall continue to remain outstanding if the Corporation is the
Surviving Person (as defined below) of such Transaction, and shall be subject to
all the provisions of the Certificate of Designation of Series A Convertible
Preferred Stock which embodies this resolution, as in effect prior to such
Transaction (including, without limitation, the provisions of Section 4 hereof
if such Transaction also constitutes a Change of
18
<PAGE> 19
Control (as hereinafter defined)), or if the Corporation is not the Surviving
Person in such Transaction, then each holder of shares of Convertible Preferred
Stock may elect (which election shall be made within twenty days (20) of the
Transaction) to either (1) have Section 4 hereof be applicable to such holder s
shares of Convertible Preferred Stock or (2) if the consideration to be received
by stockholders of the Corporation in the Transaction does not consist entirely
of cash, have each share of Convertible Preferred Stock be exchanged for a new
series of senior preferred stock of the Surviving Person, or in the case of a
Surviving Person other than a corporation, comparable securities of such
Surviving Person, in either case having economic terms as nearly equivalent as
possible to, and with the same voting and other rights as, the Convertible
Preferred Stock (including the right to convert into Survivor Common Stock);
provided, however, that, at the option of the holder of any shares of
Convertible Preferred Stock (which election shall be made within such twenty
days), each share of Convertible Preferred Stock then outstanding or deemed to
be outstanding, as the case may be, shall entitle the holder thereof to receive,
upon presentation of the certificate therefor to the Surviving Person subsequent
to the consummation of such Transaction the kind and amount of shares of stock
and other securities
19
<PAGE> 20
and property receivable (including cash) upon the consummation of such
Transaction by a holder of that number of shares of Common Stock into which one
share of Convertible Preferred Stock was convertible immediately prior to such
Transaction; provided, further, that if in connection with the Transaction a
tender or exchange offer shall have been made and there shall have been acquired
pursuant thereto more than 50% of the outstanding shares of Common Stock, and if
the holder of shares of Convertible Preferred Stock so designates in the notice
given to the Corporation which specifies such holder s selection of this
alternative, such holder of such shares shall be entitled to receive upon
conversion thereof, the amount of securities or other property to which such
holder would actually have been entitled as a holder of shares of Common Stock
if such holder had converted such shares of Convertible Preferred Stock prior to
the expiration of such tender or exchange offer and accepted such offer and had
sold therein the percentage of all the shares of Common Stock issuable upon
conversion of its shares of Convertible Preferred Stock equal to the percentage
of shares of the then outstanding Common Stock so purchased in the tender or
exchange offer, with the remaining portion of its shares of Convertible
Preferred Stock thereafter being convertible into the amount of securities or
other property to which such holder would
20
<PAGE> 21
actually have been entitled upon the consummation of the Transaction as a holder
of shares of Common Stock if such holder had converted such shares of
Convertible Preferred Stock immediately prior to such Transaction (subject to
adjustments from and after the consummation of the Transaction as nearly
equivalent as possible to the adjustments provided for in this Section 3). In
any such case, if necessary, appropriate adjustment (as determined by the Board
of Directors in good faith) shall be made in the application of the provisions
set forth in this Section 3 with respect to the rights and interests thereafter
of the holders of shares of Convertible Preferred Stock to the end that the
provisions set forth herein for the protection of the conversion rights of the
Convertible Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of the shares of Convertible Preferred
Stock remaining outstanding (with such adjustments in the conversion price and
number of shares issuable upon conversion and such other adjustments in the
provisions hereof as the Board of Directors in good faith shall determine to be
appropriate). In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Section 3 shall be deemed to apply, so
21
<PAGE> 22
far as appropriate and as nearly as may be, to such other securities or
property.
Notwithstanding anything contained herein to the contrary, the
Corporation will not effect any Transaction unless, prior to the consummation
thereof, (i) proper provision is made to ensure that the holders of shares of
Convertible Preferred Stock will be entitled to receive the benefits afforded by
this paragraph (i) of Section 3, and (ii) if, following the Transaction, one or
more entities other than the Corporation shall be required to deliver securities
or other property upon the conversion of the Convertible Preferred Stock, such
entity or entities shall assume, by written instrument delivered to each holder
of shares of Convertible Preferred Stock, if such shares are held by 10 or fewer
holders or group of affiliated holders, or to each Transfer Agent for the shares
of Convertible Preferred Stock, if such shares are held by a greater number of
holders, the obligation to deliver to such holder the amounts in cash to which,
in accordance with the foregoing provisions, such holder is entitled.
For purposes of this paragraph (i) of Section 3, the following terms
shall have the meanings ascribed to them below:
(i) "Surviving Person" shall mean the continuing or surviving Person of
a merger, consolidation or other
22
<PAGE> 23
corporate combination, the Person receiving a transfer of all or a substantial
part of the properties and assets of the Corporation, or the Person
consolidating with or merging into the Corporation in a merger, consolidation or
other corporate combination in which the Corporation is the continuing or
surviving Person, but in connection with which the Convertible Preferred Stock
or Common Stock of the Corporation is exchanged, converted or reclassified into
the securities of any other Person or cash or any other property.
(ii) "Survivor Common Stock" with respect to any Person shall mean
shares of such Person of any class or series which has no preference or priority
in the payment of dividends or in the distribution of assets upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person and which
is not subject to redemption by such Person provided, however, that if (x) the
shares of such class or series are not (or upon consummation of such Transaction
will not be) listed on the New York Stock Exchange or the American Stock
Exchange or quoted by the NASDAQ National Market System or any successor thereto
or comparable system, and (y) the Surviving Person is a direct or indirect
subsidiary of a Qualified Person, the Survivor Common Stock shall be the common
stock (or equivalent equity
23
<PAGE> 24
securities referred to in the definition of "Qualified Person") of such
Qualified Person.
(iii) "Qualified Person" shall mean any Person that, immediately after
giving effect to the applicable Transaction, is a solvent corporation or other
entity organized under the laws of any state of the United States of America
having its common stock or, in the case of an entity other than a corporation,
equivalent equity securities, listed on the New York Stock Exchange or the
American Stock Exchange or quoted by the NASDAQ National Market System or any
successor thereto or comparable system.
(iv) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
(v) "Current Market Price" shall have the meaning set forth in
paragraph (d) of this Section 3.
(h) In case at any time or from time to time, the Corporation shall pay
any dividend or make any other distribution to the holders of its Common Stock
of, or shall offer for subscription pro rata to the holders of its Common Stock,
any additional shares of stock of any class or any other right, or there shall
be any capital reorganization or reclassification of the Common Stock of the
Corporation or merger, consolidation or other corporate combination of the
Corporation with or into another corporation, or any sale or
24
<PAGE> 25
conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up the Corporation, then, in any
one or more of said cases the Corporation shall give written notice at the same
time as, or as soon as practicable after, such event is first communicated
(including by announcement of a record date in accordance with the rules of any
stock exchange on which the Common Stock is listed or admitted to trading) to
holders of Common Stock, but in any event at least 10 days prior to the record
date for such event specified below (the time of mailing of such notice shall be
deemed to be the time of delivery thereof) to the registered holders of the
Convertible Preferred Stock at the addresses of each as shown on the books of
the Corporation maintained by the Transfer Agent thereof of the date on which
(x) the books of the corporation shall close or a record shall be taken for such
stock dividend, distribution or subscription rights or (y) such reorganization,
reclassification, merger, consolidation, corporate combination, sale or
conveyance, dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution,
subscription rights or shall be entitled to exchange their Common Stock
25
<PAGE> 26
for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, corporate combination, sale or
conveyance or participate in such dissolution, liquidation or winding up, as the
case may be, as well as the conversion price and the number of shares into which
each share of Convertible Preferred Stock may be converted at such time. Failure
to give such notice shall not invalidate any action so taken.
(i) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversions of
shares of Convertible Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Convertible
Preferred Stock not theretofore converted. For purposes of this Section 3(i),
the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Convertible Preferred Stock shall be
computed as if at the time of computation all outstanding shares of Convertible
Preferred Stock were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par
26
<PAGE> 27
value (if any) of the shares of Common Stock deliverable upon conversion of the
shares of Convertible Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and non-assessable shares
of Common Stock at such adjusted Conversion Price.
(j) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock upon conversions of shares of Convertible Preferred Stock pursuant
hereto.
(k) Upon any adjustment of the Conversion Price, then, and in each such
case, the Corporation shall promptly deliver to the transfer agent of the
Convertible Preferred Stock and the Common Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Price then in
effect following such adjustment. The Corporation shall also promptly after the
making of such adjustment give written notice to the registered holders of the
Convertible Preferred Stock at the address of each
27
<PAGE> 28
holder as shown on the books of the Corporation maintained by the transfer agent
thereof, which notice shall state the Conversion Price then in effect, as
adjusted, and shall set forth in reasonable detail the method of calculation of
the same and a brief statement of the facts requiring such adjustment. Where
appropriate, such notice to holders of the Convertible Preferred Stock may be
given in advance and included as part of the notice required under the
provisions of Section 3(i).
Section 4. Change of Control.
(a) (i) In the event that any Change of Control (as hereinafter
defined) shall occur at any time and from time to time while any shares of
Convertible Preferred Stock are outstanding, each holder of Convertible
Preferred Stock shall have the right to give notice that it is exercising a
Change of Control election (a "Change of Control Election"), with respect to all
or any number of such holder s shares of Convertible Preferred Stock, during the
period (the "Exercise Period") beginning on the 30th day and ending on the 90th
day after the date of such Change of Control. Upon any such election, the
Corporation shall redeem each such holder s shares for which such an election is
made, to the extent the Corporation shall have capital and surplus lawfully
available therefor, at a redemption price per share
28
<PAGE> 29
equal to the liquidation preference per share plus an amount equivalent to
interest accrued thereon at a rate of 7% per annum compounded annually on each
anniversary date of the original issuance of the Convertible Preferred Stock for
the period from the date of such original issuance through the earlier of the
date of such redemption or the fifth (5th) anniversary of the date of such
original issuance.
(b) As used herein, "Change of Control" shall mean:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934)
(the "Acquiring Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under such Act) of 50% or more of the combined voting power of
the then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors, but excluding, for this purpose, any
such action by (x) the Corporation or any of its subsidiaries, (y) any Purchaser
(as defined in Section 5) or (z) any corporation or other entity with respect to
which, following such acquisition, more than 50% of the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors (or if another entity, more than 50% of
the equivalent controlling interests) is then beneficially
29
<PAGE> 30
owned, directly or indirectly, by individuals and entities who were the
beneficial owners of voting securities of the Corporation immediately prior to
such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors; or
(ii) consummation of a reorganization, merger or consolidation
involving the Corporation, in each case, with respect to which the individuals
and entities who were the respective beneficial owners of at least 80% of the
voting securities of the Corporation immediately prior to such reorganization,
merger or consolidation do not or will not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than 50%
of the combined voting power of the then outstanding voting securities entitled
to vote generally in the election of directors of the corporation resulting from
such reorganization, merger or consolidation; or
(iii) the sale or other disposition of all or substantially all the
assets of the Corporation in one transaction or series of related transactions;
or
(iv) individuals who would constitute a majority of the members of the
Board of Directors elected at any
30
<PAGE> 31
meeting of stockholders or by written consent (without regard to any members of
the Board of Directors elected pursuant to the terms of any series of Preferred
Stock) shall be elected to the Board of Directors and the election or the
nomination for election by the Corporation s Stockholders of such directors was
not approved by a vote of at least a majority of the directors in office
immediately prior to such election or nomination.
(c) On or before the fourteenth (14th) day after a Change of Control,
the Corporation shall mail to all holders of record of the Convertible Preferred
Stock at their respective addresses as the same shall appear on the books of the
Corporation as of such date, a notice disclosing (i) the Change of Control, (ii)
the redemption price per share of the Convertible Preferred Stock applicable
hereunder and (iii) the procedure which the holder must follow to exercise the
redemption right provided above. To exercise such redemption right, if
applicable, a holder of the Convertible Preferred Stock must deliver during the
Exercise Period written notice to the Corporation (or an agent designated by the
Corporation for such purpose) of the holder s exercise of such redemption right,
and, to be valid, any such notice of exercise must be accompanied by each
certificate evidencing shares of the Convertible Preferred Stock with respect to
which the redemption right
31
<PAGE> 32
is being exercised, duly endorsed for transfer. On or prior to the fifth (5th)
business day after receipt of such written notice, the Corporation shall accept
for payment all shares of Convertible Preferred Stock properly surrendered to
the Corporation (or an agent designated by the Corporation for such purpose)
during the Exercise Period for redemption in connection with the valid exercise
of such redemption right and shall cause payment to be made in cash for such
shares of Convertible Preferred Stock. If at the time of any Change of Control,
the Corporation does not have sufficient capital and surplus legally available
to purchase all of the outstanding shares of Convertible Preferred Stock, the
Corporation shall take all measures permitted under the Delaware Code to
increase the amount of its capital and surplus legally available, and the
Corporation shall offer in its written notice of such Change of Control to
purchase as many shares of Convertible Preferred Stock as it has capital and
surplus legally available therefor, ratably from the holders thereof in
proportion to the total number of shares tendered, and shall thereafter,
whenever it shall have capital and surplus legally available therefor, offer to
purchase as many shares of Convertible Preferred Stock as it has capital and
surplus available therefor until it has offered to purchase all of the
outstanding shares of Convertible Preferred Stock.
32
<PAGE> 33
(d) In the event of any Change of Control, proper provision shall be
made to ensure that the holders of shares of Convertible Preferred Stock will be
entitled to receive the benefits afforded by this Section 4; provided, however,
that in the event of any Change of Control effected with the Corporation's
consent, such provision to ensure the benefits of this Section 4 shall be made
prior to such Change of Control. If, following the Change of Control, one or
more entities other than the Corporation shall be required to deliver securities
or other property upon the conversion of the Convertible Preferred Stock, such
entity or entities shall assume, by written instrument delivered to each holder
of shares of Convertible Preferred Stock, if such shares are held by ten (10) or
fewer holders or group of affiliated holders, or to each Transfer Agent for the
shares of Convertible Preferred Stock, if such shares are held by a greater
number of holders; the obligation to deliver to such holder the amounts in cash
to which, in accordance with the foregoing provisions, such holder is entitled.
Section 5. Certain Restrictions.
(a) In case of the happening of any of the following events
("Restriction Events"): (i) the Corporation breaches in any material respect
(x) any of its obligations under Section 6(d) of the Stock Purchase
33
<PAGE> 34
Agreement (the "Stock Purchase Agreement") dated as of July 15, 1998, among the
Corporation and the purchasers named therein (the "Purchasers"), and such breach
shall have continued for ten (10) days after notice thereof by any holder to the
Corporation or (y) any of its other material obligations under the Stock
Purchase Agreement or under the Registration Rights Agreement or this
Certificate of Designation, and such breach shall have continued for twenty days
(20) after notice thereof by any holder; (ii) the Corporation shall not have
redeemed any shares of the Convertible Preferred Stock when required pursuant to
this Certificate; (iii) a default or breach shall occur and be continuing under
any other agreement, document or instrument to which the Corporation is a party
relating to indebtedness for borrowed money incurred by it which is not cured
within any applicable grace period, and such default or breach (x) involves the
failure to make any payment of principal, premium or interest when due in
respect of such indebtedness or (y) results in the acceleration of such
indebtedness prior to its express meaning and, in each case the principal amount
of such indebtedness, together with the principal amount of any other
indebtedness as to which there has been such a payment default or the maturity
of which has been accelerated, aggregates $1,000,000 or more; and (iv) a case or
proceeding shall have been commenced against the
34
<PAGE> 35
Corporation seeking a decree or order in respect of the Corporation (x) under
Title 11 of the United States Code, as now constituted or hereafter amended or
any other applicable federal, state or foreign bankruptcy or other similar law,
(y) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for the Corporation or of any substantial
part of the Corporation's assets, or (z) ordering the winding-up or liquidation
of the affairs of the Corporation, and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court shall enter a
decree or order granting the relief sought in such case or proceeding, then,
until such breach is cured or until such redemption occurs: (x) in the case of
any Restriction Event described in Section 5(a)(i) or (ii), dividends shall
accrue as set forth in Section 1; and (y) in the case of any Restriction Event,
the Corporation shall not:
(1) declare or pay dividends on, or make any other distributions of
cash, properties or securities of the Corporation on or with respect to any
shares of capital stock ranking junior (as to any distribution of assets)
to the Convertible Preferred Stock;
(2) redeem or purchase or otherwise acquire for consideration (or make
any sinking fund, purchase fund or other similar payments in respect of)
any shares of
35
<PAGE> 36
capital stock ranking (as to any distribution of assets) junior to, or on
parity with, the Convertible Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of capital
stock ranking on parity with the Convertible Preferred Stock in exchange
for shares of any capital stock ranking junior to the Convertible Preferred
Stock, or permit any subsidiary of the Corporation to purchase or otherwise
acquire for consideration any shares of capital stock of the Corporation
unless the Corporation could, pursuant to this Section 5, purchase such
shares at such time and in such manner;
(3) make, or permit to remain outstanding after such time when pursuant
to its terms such loan or advance would be due, any loan or advance
(including any guarantee of a loan or advance by a third party) by the
Corporation or a subsidiary to any person who beneficially owns any capital
stock ranking junior (as to any distribution of assets) to the Convertible
Preferred Stock, or any affiliate or associate of such Person; or
(4) without the consent of the holders of at least a majority of the
number of shares of the Convertible Preferred Stock at the time
outstanding, given in person or by proxy, either in writing or by
36
<PAGE> 37
vote at a special meeting called for the purpose, redeem or purchase or
otherwise acquire for consideration or offer to redeem, purchase or acquire
for consideration any shares of Convertible Preferred Stock except as
provided in Section 4 and Section 7.
Section 6. Liquidation Preference.
In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of Convertible
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are stated capital or surplus of any nature, an
amount equal to $1,000.00 per share, plus the amount of any accrued and unpaid
dividends or distributions payable pursuant to Section 1 hereinabove. Such
payments shall be made before any payment shall be made or any assets
distributed to the holders of Common Stock or any other class or series of the
Corporation s capital stock ranking junior as to liquidation rights to the
Convertible Preferred Stock. Neither a consolidation, merger or other business
combination of the Corporation s assets for cash, securities or other property
shall be considered a liquidation, dissolution or winding up of the Corporation
for purposes of this Section 6 (unless in connection
37
<PAGE> 38
therewith the liquidation of the Corporation is specifically approved).
Section 7. Optional and Mandatory Redemption.
(a) The Corporation may not redeem the Convertible Preferred Stock
prior to July 15, 2003.
(b) The Corporation, at its option, may at any time on and after July
15, 2003 redeem the Convertible Preferred Stock in whole or in part, at a cash
redemption price per share equal to 100% of the liquidation preference, if the
daily Closing Price (as defined in Section 3(c)) per share of the Common Stock
for the 20 consecutive trading days ending two days preceding the mailing of the
redemption notice provided in Section 7(d) is greater than or equal to 200% of
the then current Conversion Price.
(c) On September 15, 2008, the Corporation shall redeem all outstanding
shares of Convertible Preferred Stock at a redemption price equal to the
liquidation preference per share. The redemption price shall be paid, at the
Corporation s option, in cash or in shares of Common Stock which shall be
registered for resale pursuant to a permanent shelf registration statement or
for which any subsequent public distribution shall not require registration or
qualification of such shares under applicable federal and state securities laws.
If the redemption price is paid in
38
<PAGE> 39
shares of freely tradeable Common Stock, each share of Common Stock shall be
valued at the product of (1) .95 and (2) the average of the daily Closing Prices
per share of the Common Stock for the twenty (20) consecutive trading days
immediately ending two (2) days preceding the redemption date.
(d) Not more than sixty (60) nor less than thirty (30) days prior to
the redemption date, notice by first class mail, postage prepaid, shall be given
to each holder of record of the Convertible Preferred Stock to be redeemed, at
such holder s address as it shall appear upon the stock transfer books of the
Corporation. Each such notice of redemption shall be irrevocable and shall
specify the date fixed for redemption, the Redemption Price (or the method by
which such price will be determined), whether such redemption price shall be
paid in cash or in shares of Common Stock, the identification of the shares to
be redeemed (if fewer than all the outstanding shares are to be redeemed), the
place or places of payment, that payment will be made upon presentation and
surrender of the certificate(s) evidencing the shares of Convertible Preferred
Stock to be redeemed, the then effective Conversion Price pursuant to Section 3
and that the right of holders to convert shares called for redemption shall
terminate at the close of business on the redemption date
39
<PAGE> 40
(unless the Corporation defaults in the payment of the Redemption Price).
(e) Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of the Convertible
Preferred Stock receives such notice; and failure to give such notice by mail,
or any defect in such notice, to the holders of any shares designated for
redemption shall not affect the validity of the proceedings for the redemption
of any other shares of Convertible Preferred Stock. On or after the date fixed
for redemption as stated in such notice, each holder of the shares called for
redemption shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice and shall thereupon be
entitled to receive payment of the Redemption Price in the manner set forth in
the notice. If fewer than all the shares represented by any such surrendered
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares. If, on the date fixed for redemption, funds (or shares of
Common Stock) necessary for the redemption shall be available therefor and shall
have been irrevocably deposited or set aside, then, notwithstanding that the
certificates evidencing any shares so called for redemption shall not have been
surrendered, the shares shall no longer be deemed outstanding, the holders
thereof shall
40
<PAGE> 41
cease to be stockholders, and all rights whatsoever with respect to the shares
so called for redemption (except the right of the holders to receive the
Redemption Price without interest upon surrender of their certificates therefor)
shall terminate.
(f) In the event that any shares of Convertible Preferred Stock shall
be converted into Common Stock pursuant to Section 3, then (i) the Corporation
shall not have the right to redeem such shares and (ii) any funds which shall
have been deposited for the payment of the Redemption Price for such shares
shall be returned to the Corporation immediately after such conversion.
(i) If fewer than all the shares outstanding are to be redeemed, the
Corporation shall select the shares to be redeemed pro rata.
Section 8. Rank.
All shares of Convertible Preferred Stock shall rank, as to
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, prior to all classes and series
of the Corporation s Preferred Stock, par value $.01 per share, and prior to all
of the Corporation s now or hereafter issued Common Stock. The term "Common
Stock" shall mean the Common Stock, $.01 par value per share, of the Corporation
41
<PAGE> 42
as the same exists at the date hereof or as such stock may be constituted from
time to time, except that for the purpose of Section 3, the term "Common Stock"
shall also mean and include stock of the Corporation of any class, whether now
or hereafter authorized, which shall have the right to participate in the
distribution of either dividends or assets of the Corporation upon liquidation,
dissolution or winding up, without limit as to the amount or percentage.
Section 9. Notice. All notices hereunder shall be in writing.
Section 10. Reacquired Shares. Any shares of Convertible Preferred
Stock converted, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares of Convertible Preferred Stock shall upon their
cancellation, and upon the filing of an appropriate certificate with the
Secretary of the State of Delaware, become authorized but unissued shares of
Preferred Stock, par value $.01 per share, of the Corporation, undesignated as
to series, and may be reissued as part of another series of Preferred Stock, par
value $.01 per share, of the Corporation subject to the conditions of
restrictions on issuance set forth therein.
42
<PAGE> 1
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT dated as of July 15, 1998 by and among
SALTON/MAXIM HOUSEWARES, INC., a Delaware corporation (the "Company"), and each
of the parties listed on the signature pages hereto under the caption
"Purchasers" (each, a "Purchaser," and collectively, the "Purchasers").
This Agreement is made pursuant to the Stock Purchase Agreement (the
"Purchase Agreement"), dated as of July 15, 1998, by and among the Company and
the Purchasers, whereby the Company has agreed, among other things, to issue to
the Purchasers 40,000 shares of its Series A Voting Convertible Preferred Stock,
par value $0.01 per share (the "Preferred Stock"). The Preferred Stock is
convertible into shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), at a conversion price of $17.00 per share, as such price
may be adjusted pursuant to the Certificate of Designation of the relative
powers, preferences and rights and qualifications of the Preferred Stock.
In order to induce the Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. This
<PAGE> 2
Agreement shall become effective upon the issuance of the shares of Preferred
Stock to the Purchasers pursuant to the Purchase Agreement.
In consideration of the foregoing and the respective covenants and
agreements herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1. Definitions. Capitalized terms used and not defined
herein have the meanings assigned to such terms in the Purchase Agreement. As
used herein, unless the context otherwise requires, the following terms have the
following respective meanings:
"Blue Sky Filing" is defined in Section 2.07(a) of this Agreement.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" is defined in the introduction to this Agreement.
"Company" is defined in the introduction to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all
2
<PAGE> 3
as the same shall be in effect at the time. Reference to a particular section
therein shall include a reference to the comparable section, if any, of any such
successor federal statute.
"Person" means a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Preferred Stock" is defined in the introduction to this Agreement.
"Purchase Agreement" is defined in the introduction to this Agreement.
"Purchasers" is defined in the introduction to this Agreement.
"Registrable Securities" means any (i) shares of Preferred Stock, (ii)
shares of Common Stock issued upon the conversion of the Preferred Stock and
(iii) securities issued or issuable with respect to any shares of Preferred
Stock or Common Stock by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration
3
<PAGE> 4
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been sold
to the public pursuant to Rule 144 (or any successor provision) under the
Securities Act, (c) they shall have been otherwise transferred, new certificates
for them not bearing a legend restricting further transfer shall have been
delivered by the Company and in the opinion of counsel reasonably satisfactory
to the Company subsequent public distribution of them shall not require
registration or qualification of them under the Securities Act or any similar
state law then in force, or (d) they shall have ceased to be outstanding.
"Registration Expenses" is defined in Section 2.09(a) of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section therein shall include a reference to the comparable section,
if any, of any such similar federal statute.
4
<PAGE> 5
SECTION 2. Registration under Securities Act.
SECTION 2.01. Demand Registration. (a) Request. At any time after
the date hereof, upon the written request of the Purchasers that the Company
effect the registration under the Securities Act of all or part (subject to
Section 2.01(f)) of the Purchasers' Registrable Securities and specifying the
types of Registrable Securities to be registered and the intended method of
disposition thereof, the Company will give prompt written notice of such request
to all registered holders of Registrable Securities, and thereupon the Company
will, subject to the terms of this Agreement, use its reasonable best efforts to
effect the registration under the Securities Act of:
(i) the Registrable Securities which the Company has been
requested to register by the Purchasers, and
(ii) all other Registrable Securities which the Company has
been requested to register by written request of the holders
thereof given to the Company within 30 days after the giving of
the aforesaid written notice by the Company (specifying the
intended method of disposition of such Registrable Securities),
all to the extent
5
<PAGE> 6
requisite to permit the intended disposition of the Registrable
Securities to be so registered.
(b) Registration of Other Securities. Whenever the Company shall
effect a registration pursuant to this Section 2.01 in connection with
an underwritten offering by one or more holders of Registrable
Securities, no securities other than Registrable Securities shall be
included among the securities covered by such registration unless (i)
the managing underwriter of such offering shall have advised the
Purchasers in writing that the inclusion of such other securities would
not adversely affect such offering or (ii) the Purchasers shall have
consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section
2.01 shall be on such appropriate registration form of the Commission
(i) as shall be selected by the Company and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the
intended method or methods of disposition specified in their request
for such registration; provided, however, that if at the time of such
registration the Company satisfies the eligibility requirements for use
of a registration statement on Form S-3 under the Securities Act, the
Purchasers may request a registration on Form S-3 for an offering to
be
6
<PAGE> 7
made on a continuous basis pursuant to Rule 415 under the Securities
Act (a "Shelf Registration") and the Company shall use all reasonable
efforts to cause the registration to be made on such form. The Company
agrees to include in any such registration statement all information
which, in the opinion of counsel to the Purchasers or counsel to the
Company, is required to be included.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.01 shall not be deemed to have been effected
and will not be considered one of the three demand registrations which
may be requested pursuant to this Agreement (i) if the registration
statement with respect thereto does not become effective, (ii) if after
it has become effective, it does not remain effective for a period of
at least 90 days or, in the case of a Shelf Registration, one year (or
in each case such shorter period during which all the Registrable
Securities registered thereunder are sold or disposed of) or such
registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason and has not thereafter become effective, or (iii)
if the conditions to closing specified in the underwriting agreement
entered into in connection with such registration are not satisfied
7
<PAGE> 8
or waived other than by reason of the failure or refusal of a holder of
Registrable Securities to satisfy or perform a condition to such
closing or a default by an underwriter. If a demand is made pursuant to
Section 2.01 and the Company files a registration statement and causes
(or is in the process of causing) such registration statement to become
effective and the holders requesting registration decide not to proceed
with such registration for reasons other than a breach by the Company
of its obligations hereunder or the Company's inability or failure to
obtain the effectiveness of such registration statement, such request
shall nevertheless count as one demand under Section 2.01.
(e) Priority in Demand Registrations. If a demand registration
pursuant to this Section 2.01 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a
copy sent to each holder of the Registrable Securities requesting
registration) that the number of securities requested to be included in
such registration exceeds the number which can be sold in such offering
within a price range acceptable to the Purchasers or such other person
entitled to make a demand registration pursuant to Section 8 hereof,
such registration will include only that number of Registrable
Securities which the Company is so advised can be sold in
8
<PAGE> 9
such offering, drawn pro rata from the holders of the Registrable
Securities requesting such registration on the basis of the percentage
of Registrable Securities held by the holders of Registrable Securities
which have requested that such securities be included. In connection
with any such registration, no securities other than Registrable
Securities shall be covered by such registration.
(f) Limitations on Registration; Expenses. The Company will not
be required to effect, in the aggregate, more than three demand
registrations pursuant to this Section 2.01 (or any other provision of
this Agreement), of which the Company shall pay all Registration
Expenses in connection with all three demand registrations. The
Company shall not be required to effectuate any registration pursuant
to this Section 2.01 within less than six months after the end of the
effectiveness period of any other registration pursuant to Section
2.01. Notwithstanding the foregoing, no demand may be made in respect
of a number of Registrable Securities by all holders demanding
registration which is less than the lesser of (x) 25% of the total
Registrable Securities originally issued (or the equivalent thereof in
the case of securities issued upon the conversion thereof) or (y) the
number of Registrable Securities having
9
<PAGE> 10
a market value (as reasonably estimated in good faith by the holders
requesting registration) of at least $10,000,000.
SECTION 2.02. Incidental Registration.
(a) Right to Include the Registrable Securities. If the Company at any
time proposes to register any of its securities under the Securities Act by
registration on Forms S-l, S-2 or S-3 or any successor or similar form(s),
whether or not for sale for its own account, it will each such time give
prompt written notice to the Purchasers and all other holders of
Registrable Securities of its intention to do so and of such holders'
rights under this Section 2.02. Upon the written request of any such
holder made within 30 days after the receipt of any such notice (15 days if
the Company gives telephonic notice to all holders of Registrable
Securities, with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such
shorter period of time is required because of a planned filing date) (which
request shall specify the Registrable Securities to be disposed of by such
holder), the Company will, subject to the next sentence, use its reasonable
best efforts to effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register
by the holders thereof, to the extent requisite to permit the disposition
10
<PAGE> 11
of such Registrable Securities to be so registered. If the Company
thereafter determines for any reason not to register or to delay
registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of the obligation to register such Registrable
Securities in connection with such registration (but not from any
obligation of the Company to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights (if any) of the
Purchasers or an assignee to request that such registration be effected as
a registration under Section 2.01, and (ii) in the case of a determination
to delay registration, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registration of
such other securities. All obligations of the Company with respect to any
registration described in this Section 2.02(a) shall be subject to the
rights of the Company set forth in the immediately preceding sentence. No
registration effected under this Section 2.02 shall relieve the Company of
its obligation to effect any registration upon request under Section 2.01.
The Company will pay all Registration Expenses in connection with
registration of
11
<PAGE> 12
Registrable Securities requested pursuant to this Section 2.02. If such
offering is to be underwritten, the holders seeking to sell such
Registrable Securities agree to join in such underwritten offering.
(b) Priority in Incidental Registrations. In a registration pursuant
to this Section 2.02 involving an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company
by or through one or more underwriters of recognized standing, if the
managing underwriter of such underwritten offering shall inform the Company
and the holders of Registrable Securities requesting registration in such
offering by letter of its belief that the number or type of securities to
be included in such registration would interfere with the successful
marketing of the securities being distributed by such underwriters, then
the Company will be required to include in such registration only that
number and type of Registrable Securities which it is so advised can be
sold in such offering, drawn pro rata from the holders of Registrable
Securities requesting such registration and the holders of any other
securities to be registered (whether or not pursuant to the exercise of a
demand registration right by such holders) on the basis of the number of
securities the registration of which shall have been requested by such
12
<PAGE> 13
holders (it being understood that this provision shall not limit the number
of securities that the Company shall be entitled to register for sale for
its own account).
SECTION 2.03. Registration Procedures. In connection with the
Company's obligations pursuant to Sections 2.01 and 2.02 hereof, the
Company will use its reasonable best efforts to effect such registrations
to permit the sale of Registrable Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
(a) prepare and, as soon as reasonably practicable and in any
event within 30 days after the end of the period within which
requests for registration may be given to the Company, file with the
Commission (but not earlier than 90 days after the end of the
Company's fiscal year or 45 days after the end of the last fiscal
quarter), a registration statement or registration statements on the
appropriate form under the Securities Act, which form shall be
available for the sale of the Registrable Securities by the holders
thereof in accordance with the intended method or methods of
distribution thereof, and use its reasonable best
13
<PAGE> 14
efforts to cause such registration statement to become effective and
to remain continuously effective for a period of 90 days following
the date on which such registration statement is declared effective
(or, in the case of a Shelf Registration, for a period of one year
following such date); provided that the Company shall have no
obligation to maintain the effectiveness of such registration
statement after the sale of all Registrable Securities registered
thereunder or for a period longer than that specified in this
paragraph (a);
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be
necessary to keep such registration statement effective for the
applicable period; cause the related 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 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
14
<PAGE> 15
methods of disposition by the sellers thereof set forth in such
registration statement or supplement to such prospectus;
(c) notify the selling holders of Registrable Securities, and the
managing underwriters, if any, promptly, and (if requested by any
such Person) confirm such advice in writing, (i) when a prospectus or
any prospectus supplement or post-effective amendment has been filed,
and, with respect to a registration statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (iii)
of the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (iv) if at any time the representations
and warranties of the Company made as contemplated by Section 2.04(a)
below cease to be true and correct in any material respect, (v) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of any of the
15
<PAGE> 16
Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose, (vi) of the
happening of any event which requires the making of any changes in a
registration statement or related prospectus so that such documents
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (vii) if the Company
reasonably determines that a post-effective amendment to a
registration statement would be appropriate;
(d) use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
Registrable Securities for sale in any jurisdiction and, if any such
order is issued, to obtain the withdrawal of any such order at the
earliest possible moment.
(e) if requested by the managing underwriters or any holder of
Registrable
16
<PAGE> 17
Securities being sold in connection with an underwritten offering,
immediately incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriters and such
holder agree should be included therein relating to the sale and
distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being
paid therefor by such underwriters and with respect to any other
terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all
required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in
such prospectus supplement or post-effective amendment; and
supplement or make amendments to any registration statement if
requested by any holder of Registrable Securities covered by such
registration statement or any underwriter of such Registrable
Securities;
17
<PAGE> 18
(f) furnish to each selling holder of Registrable Securities and
each managing underwriter, without charge, at least one signed copy
of the registration statement or statements and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(g) deliver to each holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the
prospectus or prospectuses (including each preliminary Prospectus)
and any amendment or supplement thereto as such Persons may
reasonably request; the Company consents to the use of such
prospectus or any amendment or supplement thereto by each of the
selling holders of Registrable Securities and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus or any amendment or supplement
thereto;
(h) prior to any public offering of Registrable Securities, use
its reasonable best
18
<PAGE> 19
efforts to register or qualify or cooperate with the selling holders
of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions as any selling
holder or underwriter reasonably requests in writing; keep each such
registration or qualification effective during the period such
registration statement is required to be kept effective and do any
and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable
Securities covered by the applicable registration statement; provided
that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process
in any such jurisdiction where it is not then so subject;
(i) cooperate with the selling holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely
19
<PAGE> 20
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends unless
required by applicable law; and enable such Registrable Securities to
be in such denominations and registered in such names as the managing
underwriters may request at least two business days prior to any sale
of Registrable Securities to the underwriters;
(j) use its reasonable best efforts to cause the Registrable
Securities covered by the applicable 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 underwriters, if any, to consummate the disposition of
such Registrable Securities;
(k) upon the occurrence of any event contemplated by paragraph
(c)(vi) above, prepare a supplement or post-effective amendment to
the applicable 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
20
<PAGE> 21
the Registrable Securities being sold thereunder, such prospectus
will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading;
(l) take all such actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable
Securities;
(m) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(n) permit any holder of Registrable Securities, which holder, in
the judgment of its counsel, might be deemed to be a "control person"
of the Company (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), to participate in the
preparation of such registration statement and include therein
material, furnished to the Company in writing which, in the
reasonable judgment of such holder
21
<PAGE> 22
and its counsel, is required to be included therein;
(o) use its reasonable best efforts to cause all such Registrable
Securities to be listed on each securities exchange, if any, on which
Registrable Securities of the type then being registered are listed;
and
(p) provide and cause to be maintained a transfer agent and
registrar (if applicable) for all Registrable Securities covered by
such registration statement from and after a date not later than the
effective date of such registration statement.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such holder and the distribution of such
Registrable Securities as the Company may from time to time reasonably
request in writing in order to comply with the Securities Act. Each
holder of Registrable Securities as to which any registration is being
effected agrees to notify the Company, as promptly as practicable, of any
inaccuracy or change in information previously furnished by such holder
to the Company or of the happening of any event in either case as a
22
<PAGE> 23
result of which any prospectus relating to such registration contains an
untrue statement of a material fact regarding such holder or the
distribution of such Registrable Securities or omits to state any
material fact regarding such holder or the distribution of such
Registrable Securities required to be stated therein or necessary to make
the statement therein not misleading in light of the circumstances then
existing, and to promptly furnish to the Company any additional
information required to correct and update any previously furnished
information or required such that such prospectus shall not contain, with
respect to such holder or the distribution of such Registrable
Securities, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing.
Each holder of Registrable Securities agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind
described in Section 2.03(c)(ii), (iii), (v), (vi) or (vii) hereof, such
holder will forthwith discontinue disposition of such Registrable
Securities covered by such registration statement or prospectus until
such holder's receipt of the copies of the supplemented or amended
prospectus relating to such registration statement
23
<PAGE> 24
or prospectus, or until it is advised in writing by the Company that the
use of the applicable prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by
reference in such Prospectus, and, if so directed by the Company, such
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 the Registrable Securities current at the time of
receipt of such notice.
SECTION 2.04. Underwritten Offerings.
(a) Demand Underwritten Offerings. In any offering by holders of
Registrable Securities pursuant to a registration requested under Section
2.01, sales shall, at the request of the Purchasers, be made through a
nationally recognized investment banking firm (or syndicate managed by
such a firm) selected by the holders of at least a majority in aggregate
principal amount of the Registrable Securities to be included in such
offering and approved by the Company (which approval shall not be
unreasonably withheld) and the Company shall enter into an underwriting
agreement which shall be reasonably satisfactory in form and substance to
each holder and the underwriters and which shall contain representations,
warranties and agreements (including
24
<PAGE> 25
indemnification agreements to the effect and to the extent provided in
Section 2.07(a)) as are customarily included by an issuer in underwriting
agreements with respect to primary distributions. The holders of
Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at their option, require
that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such holders of Registrable
Securities. Any such holder of Registrable Securities shall not be
required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder s Registrable Securities
and such holder's intended method of distribution and any other
representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by
25
<PAGE> 26
Section 2.02 and such securities are to be distributed by or through one
or more underwriters, the Company will, if requested by any holder of
Registrable Securities as provided in Section 2.02 and subject to the
provisions of Section 2.02(b), use its reasonable best efforts to arrange
for such underwriters to include all the Registrable Securities to be
offered and sold by such holder among the securities to be distributed by
such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters. Any such holder of
Registrable Securities shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters other
than representations, warranties or agreements regarding such holder,
such holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law.
SECTION 2.05. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
holders of Registrable Securities to be registered under such
registration statement, their underwriters, and their respective counsel
and accountants the opportunity to
26
<PAGE> 27
participate in the preparation of such registration statement, each
prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders and such underwriters'
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
SECTION 2.06. Limitations, Conditions and Qualifications to
Obligations Under Registration Covenants. The obligations of the Company
to use its reasonable efforts to cause the Registrable Securities to be
registered under the Securities Act are subject to each of the following
limitations, conditions and qualifications:
(a) The Company shall not be obligated to file or keep effective any
registration statement pursuant to Section 2.01 hereof at any time if the
Company would be required to include financial statements audited as of
any date other than the end of its fiscal year.
(b) The Company shall be entitled to postpone for a reasonable period
of time (but not exceeding 30 days and not more than once in any
six-month period) the filing or
27
<PAGE> 28
effectiveness of any registration statement otherwise required to be
prepared and filed by it pursuant to Section 2.01 if the Company
determines, in its reasonable judgment, that (i) the Company is in
possession of material information that has not been disclosed to the
public and the Company reasonably determines that it would be
significantly detrimental to the Company and its stockholders to disclose
such information at such time in a registration statement or (ii) such
registration and offering would significantly interfere with any
financing, acquisition, corporate reorganization or other material
transaction involving the Company or any of its Affiliates (as defined in
the rules and regulations adopted under the Exchange Act) and, in any
such case, the Company promptly gives the requesting holders of
Registrable Securities written notice of such determination, containing a
general statement of the reasons for such postponement and an
approximation of the anticipated delay. If the Company shall so postpone
the filing of a registration statement, the requesting holders of
Registrable Securities shall have the right to withdraw the request for
registration by giving written notice to the Company within 30 days after
receipt of the notice of postponement and, in the event of such
withdrawal, such request shall not be counted for purposes
28
<PAGE> 29
of the requests for registration to which the Purchasers and their
assignees are entitled pursuant to Section 2.01 hereof.
(c) No holder of Registrable Securities may participate in any
underwritten offering hereunder unless such holder (i) agrees to sell
such holder's Registrable Securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements.
SECTION 2.07. Indemnification. (a) Indemnification by the Company.
In the event of any registration of any Registrable Securities under the
Securities Act, the Company will, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, the holder of any
Registrable Securities whose Registrable Securities are covered by such
registration statement, its directors and officers, each other Person who
participates as an underwriter in the offering or sale of such securities
and each other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act, against any and all
losses, claims, damages, liabilities and
29
<PAGE> 30
expenses, joint or several, (or actions or proceedings, whether commenced
or threatened, in respect thereof) to which they or any of them may
become subject under the Securities Act or any other statute or common
law, including any amount paid in settlement of any litigation, commenced
or threatened, and to reimburse them for any reasonable legal or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such losses, claims, damages,
liabilities, expenses or actions arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained
in the registration statement or prospectus relating to the sale of such
securities or any post-effective amendment thereto or in any filing made
in connection with the qualification of the offering under Blue Sky or
other securities laws of jurisdictions in which the Registrable
Securities are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) any
untrue statement or alleged untrue statement of a material fact contained
in any preliminary prospectus, if used prior to the effective date of
such registration statement (unless
30
<PAGE> 31
such statement is corrected in the final prospectus and the Company has
previously furnished copies thereof to any holder of Registrable
Securities seeking such indemnification and the underwriters), or
contained in the final prospectus (as amended or supplemented if the
Company shall have filed with the Commission any amendment thereof or
supplement thereto) if used within the period during which the Company is
required to keep the registration statement to which such prospectus
relates current, or the omission or alleged omission to state therein (if
so used) a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the indemnification agreement
contained herein shall not (i) apply to such losses, claims, damages,
liabilities, expenses or actions arising out of, or based upon, any such
untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company by
such seller or such underwriter specifically stating that it is for use
in connection with preparation of the registration statement, any
preliminary prospectus or final prospectus contained in the registration
statement, any such amendment or supplement thereto or any
31
<PAGE> 32
Blue Sky Filing or (ii) inure to the benefit of any underwriter or any
person controlling such underwriter, to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, to the
person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of
the sale of Registrable Securities to such person if such statement or
omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such seller or any such
director, officer or controlling person and shall survive the transfer of
such securities by such seller.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Section 2.01 or 2.02, that the Company shall
have received an undertaking satisfactory to it from the prospective
seller of such securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a) of this
Section 2.07(a)) the Company, each
32
<PAGE> 33
director of the Company, each officer of the Company and each other
person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any untrue statement or alleged untrue
statement in, or omission or alleged omission from, such registration
statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, if such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in such
registration statement, preliminary prospectus, final prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller. In no event
shall any indemnity or contribution paid by any seller to the Company
pursuant to this Section 2.07, or otherwise, exceed the proceeds received
by such seller in such offering. In the case of an underwritten offering
of Registrable Securities, each holder of Registrable Securities shall
agree to indemnify such underwriters, their officers and directors, if
any, and each person, if any, who controls such underwriters within the
33
<PAGE> 34
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, with respect to information furnished by them for use in
the registration statement or prospectus to the extent customary in the
circumstances for a selling stockholder in an underwritten public
offering.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving
a claim referred to in the preceding subdivisions of this Section
2.07(a), such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter
within five days of the commencement of such action; provided that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 2.07(a), except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and, unless in
such indemnified party's reasonable good faith judgment a conflict of
interest between such indemnified and indemnifying parties may exist in
respect of such claim, to assume the defense thereof, jointly with any
other
34
<PAGE> 35
indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party for any legal or other expenses
subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. In the event that
the indemnifying party advises an indemnified party that it will contest
a claim for indemnification hereunder, or fails, within thirty (30) days
of receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole cost
and expense, any action, proceeding or claim (or discontinues its defense
at any time after it commences such defense), then the indemnified party
may, at its option, defend, settle or otherwise compromise or pay such
action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such
claim, proceeding or action, the indemnified party's reasonable
out-of-pocket costs and expenses arising out of the defense, settlement
or compromise of any such action, claim or proceeding shall be losses
subject to indemnification hereunder. The
35
<PAGE> 36
indemnified party shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by
the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party which relates
to such action or claim. The indemnifying party shall keep the
indemnified party fully appraised at all times as to the status of the
defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with
counsel of its choice at its sole cost and expense. If the indemnifying
party does not assume such defense, the indemnified party shall keep the
indemnifying party appraised at all times as to the status of the
defense; provided, however, that the failure to keep the indemnifying
party so informed shall not affect the obligations of the indemnifying
party hereunder. No indemnifying party shall be liable for any
settlement of any action, claim or proceeding effected without its
written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying
party shall, without the consent of the indemnified party (which consent
shall not be
36
<PAGE> 37
unreasonably withheld, delayed or conditioned), consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect to such
claim or litigation.
(d) Contribution. (i) If the indemnification from the indemnifying
party as provided in this Section 2.07 is unavailable or is otherwise
insufficient to hold harmless an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party shall, to the fullest extent permitted by
law, contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative
fault of such indemnifying party shall be determined by reference to,
among other things, whether any action in question, including any untrue
(or alleged untrue) statement of a material fact or omission (or alleged
omission) to state a
37
<PAGE> 38
material fact, has been made, or related to information supplied by such
indemnifying party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 2.07(c), any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 2.07 were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. 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. If however, indemnification is available
under this Section 2.07, the indemnifying parties shall indemnify each
indemnified party to the fullest extent provided in Section 2.07(a) and
(b) hereof without regard to the relative fault of said indemnifying
party or indemnified
38
<PAGE> 39
party or any other equitable consideration provided for in this Section
2.07(d).
(e) Indemnification Payments. The indemnification and contribution
required by this Section 2.07(a) shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as
and when bills are received or expense, loss, damage or liability is
incurred.
(f) Other Rights; Liabilities. The indemnity agreements contained
herein shall be in addition to (i) any cause of action or similar right
of the indemnified party against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to pursuant to
the law.
SECTION 2.08. Adjustments Affecting Registrable Securities.
(a) During any period commencing on either (i) the date a request for
a demand registration has been made pursuant to Section 2.01(a) hereof or
(ii) the date on which any holder of Registrable Securities makes written
request in accordance with the terms of Section 2.02(a) hereof to have
its Registrable Shares registered, and in either event, terminating on
the date which is the earlier of (i) 180 days after the date on which the
registration statement
39
<PAGE> 40
registering such Registrable Securities becomes effective and (ii) the
date on which all Registrable Securities registered under such
registration statement are sold, transferred or disposed of, the Company
will not, without the consent of the Purchasers, effect, permit to occur
or announce any future intent to effect or permit to occur, any
combination or subdivision of shares which would materially adversely
affect the ability of the holders of Registrable Securities to include
Registrable Securities in any registration of securities contemplated by
this Section 2 or the marketability of Registrable Securities under any
such registration.
SECTION 2.09. Registration Expenses. (a) Except as provided in
Section 2.09(b), all expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation (i) any
allocation of salaries and expenses of Company personnel or other general
overhead expenses of the Company, or other expenses for the preparation
of historical and pro forma financial statements or other data normally
prepared by the Company in the ordinary course of business or customarily
prepared by the issuer in a public offering; (ii) all registration,
application, filing, listing, transfer and registrar fees; (iii) all
National Association of Securities Dealers fees
40
<PAGE> 41
and fees and expenses of registration or qualification of Registrable
Securities under state securities or blue sky laws; (iv) all word
processing, duplicating and printing expenses, messenger and delivery
expenses; and (v) the fees and disbursements of counsel for the Company
and the reasonable fees and disbursements of one counsel retained by the
holder or holders a majority of the Registrable Securities being
registered and the fees and disbursements of the Company's independent
public accountants, including the expenses of customary "cold comfort"
letters required by or incident to such performance and compliance; and
(vi) subject to the proviso hereinbelow, any fees and disbursements of
underwriters and broker-dealers customarily paid by issuers or sellers of
securities (all such expenses being herein called "Registration
Expenses") will be borne or caused to be borne by the Company whether or
not any of the Registration Statements become effective provided,
however, that in all cases in which the Company is required to pay
Registration Expenses hereunder, Registration Expenses shall exclude, and
the sellers of the Registrable Securities being registered shall pay, all
underwriting discounts and commissions and transfer taxes in respect of
the Registrable Securities under state securities or blue sky laws.
41
<PAGE> 42
SECTION 2.10. Other Sales. (a) The Company hereby agrees not to
effect, any public sale or distribution of any securities of the same
class as (or otherwise similar to) the Registrable Securities, or any
securities which, with notice, lapse of time and/or payment of monies,
are exchangeable or exercisable for or convertible into any such
securities, or to enter into any agreement to make, file a registration
statement for, or announce any such public sale or distribution of, any
such securities, excluding the grant and exercise of employee stock
options and the issuance of shares in connection with acquisitions as
long as all executive officers, directors and other affiliates of the
entity being acquired have agreed in writing to the restrictions set
forth in this Section 2.10(a), during the 15-day period prior to, and
during the 90-day period commencing on, the effective date of a
registration statement filed with the Commission in connection with an
underwritten offering effected pursuant to Section 2.1 of this Agreement
without the prior written consent of the managing underwriters of such
offering.
(b) The Purchasers (and their assigns) agree, during the 10-day
period prior to, and during the 90-day period commencing on, the
effective date of a registration statement filed with the Commission
(other than on Form S-8)
42
<PAGE> 43
in connection with an underwritten offering of securities of the same
class as the then outstanding Registrable Securities (or any securities
issuable upon conversion or exchange thereof), not to make any sales of
Registrable Securities (or such other securities) pursuant to Rule 144,
provided that they were given the opportunity, if required by (and
subject to) Section 2.02 hereof, to include in such registration
statement all such Registrable Securities as they may have requested.
SECTION 3. Rule 144. The Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such
securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission including,
without limiting the generality of the foregoing, filing on a timely
basis all reports required to be filed by the Exchange Act. Upon the
request of any holder of Registrable Securities, the Company will deliver
to such holder a written statement as to whether it has complied with
such requirements. Notwithstanding anything herein to the contrary, no
holder may exercise any right to require the registration of a
43
<PAGE> 44
number of Registrable Securities which he is at such time able to sell
pursuant to Rule 144 (without being limited by any volume restriction
therein with respect to Registrable Securities desired to be sold
immediately by such holder).
SECTION 4. Entire Agreement; Amendments and Waivers. This
Agreement, together with the Purchase Agreement and the agreements,
schedules, exhibits and annexes referred to therein, and the Certificate
of Designation, represents the entire agreement and understanding among
the parties hereto with respect to the subject matter hereof and
supersedes any and all prior oral and written agreements, arrangements
and understandings among the parties hereto with respect to such subject
matters. This Agreement may be amended, waived or modified only by a
written instrument signed by the Company and the holder or holders of a
majority of the shares of Registrable Securities.
SECTION 5. Other Registration Rights. The Company hereby covenants
and agrees not to hereafter enter into any agreement, arrangement or
understanding with respect to its securities which conflicts with or is
inconsistent with the rights granted to the holders of Registrable
Securities under this Agreement.
44
<PAGE> 45
SECTION 6. Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as
the holder of such securities for purposes of any request or other action
by any holder or holders of securities pursuant to this Agreement or any
determination of any number or percentage of shares of securities held by
any holder or holders of securities contemplated by this Agreement. If
the beneficial owner of any Registrable Securities so elects, the Company
may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
SECTION 7. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be
deemed to have been duly given (i) on the date of service if personally
served or transmitted via telecopy, (ii) on the next business day after
delivery to an overnight carrier or (iii) on the third day after mailing
if mailed to the party to whom notice is to be given, by first class
mail, registered, return receipt requested, postage prepaid and (a) if
addressed to the Purchasers, addressed to such party in the manner set
forth in the Purchase Agreement, or at such other address as such
45
<PAGE> 46
party shall have furnished to the Company in writing, or (b) if addressed
to any other holder of Registrable Securities, at the address that such
holder shall have furnished to the Company in writing, or, until any such
other holder so furnishes to the Company an address, then to and at the
address of the last holder of such securities who has furnished an
address to the Company, or (c) if addressed to the Company, at 550
Business Center Drive, Mount Prospect, Illinois, 60656 attention of the
General Counsel or at such other address, or to the attention of such
other officer, as the Company shall have furnished to each holder of
Registrable Securities at the time outstanding.
SECTION 8. Assignment. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and
their respective successors by merger, consolidation or amalgamation and
permitted assigns. The Company may not assign any of its rights and
obligations hereunder without the consent of the holders of all the
Registrable Securities then outstanding. Any Purchaser may assign its
rights hereunder without the consent of the Company to any Purchaser
Affiliate (as defined in the Purchase Agreement) or successor or to any
Person who purchases or otherwise duly receives title to 10% or more of
the Registrable Securities then outstanding; provided that
46
<PAGE> 47
such assignee agrees in writing to be bound by the terms of this
Agreement. This Agreement shall not inure to the benefit of any person
who is not a party hereto or a successor to or permitted assignee of a
party hereto.
SECTION 9. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning
hereof.
SECTION 10. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, APPLICABLE TO CONTRACTS TO BE MADE, EXECUTED, DELIVERED AND
PERFORMED WHOLLY WITHIN SUCH STATE AND, IN ANY CASE, WITHOUT REGARD TO
THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.
SECTION 11. Severability. If at any time subsequent to the date
hereof, any provision of this Agreement shall be held by any court of
competent jurisdiction to be illegal, void or unenforceable, such
provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and shall
not impair the enforceability of any other provision of this Agreement.
47
<PAGE> 48
SECTION 12. Equitable Remedies. The parties hereto agree that
irreparable harm would occur in the event that any of the agreements and
provisions of this Agreement were not performed fully by the parties
hereto in accordance with their specific terms or conditions or were
otherwise breached, and that money damages are an inadequate remedy for
breach of this Agreement because of the difficulty of ascertaining and
quantifying the amount of damage that will be suffered by the parties
hereto in the event that this Agreement is not performed in accordance
with its terms or conditions or is otherwise breached. It is accordingly
hereby agreed that the parties hereto shall be entitled to an injunction
or injunctions to restrain, enjoin and prevent breaches of this Agreement
by the other parties and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having
jurisdiction, such remedy being in addition to and not in lieu of, any
other rights and remedies to which the other parties are entitled to at
law or in equity.
SECTION 13. No Waiver. The failure of any party at any time or times
to require performance of any provision hereof (within the time
limitations contained herein) shall not affect the right at a later time
to enforce the same. No waiver by any party of any condition, and no
breach of
48
<PAGE> 49
any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be construed as a further or continuing
waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
SECTION 14. Counterparts. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute
one and the same instrument.
49
<PAGE> 50
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
THE COMPANY
SALTON/MAXIM HOUSEWARES, INC.
By:________________________________
Name:
Title:
THE PURCHASERS:
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By:________________________________
Bruce G. Pollack
Managing Director
50
<PAGE> 51
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Centre Parallel Management Partners,
L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By:_______________________________________
Bruce G. Pollack
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By:__________________________________
Bruce G. Pollack
Managing Director
51
<PAGE> 1
Ex-99.1
FOR: Salton/Maxim Housewares, Inc.
APPROVED BY: William Rue
Chief Operating Officer
(847) 803-4600
CONTACT: Investor Relations:
Cheryl Schneider/Gordon McCoun
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
SALTON/MAXIM HOUSEWARES, INC REPURCHASES
WINDMERE-DURABLE HOLDINGS' 50% INTEREST IN SALTON
Mt. Prospect, IL, July 28, 1998 - Salton/Maxim Housewares, Inc.
(Nasdaq:SALT) today announced that it has repurchased the 6,535,072 shares of
Salton common stock owned by Windmere-Durable Holdings, Inc. (NYSE:WND) in
accordance with the previously announced agreement between the parties. The
repurchase price was $12 per share in cash plus a $15 million subordinated
promissory note. The note, which has a term of six and one-half years and bears
interest at 4% per annum payable annually, is subject to offsets of 5% of the
total purchase price paid by Salton for product purchases from Windmere and its
affiliates during the term of the note.
In connection with the repurchase of Windmere's 50% interest in Salton,
(i) Windmere repaid in full the $10,847,620 promissory note, which it issued to
Salton in July 1996; and (ii) Salton repurchased for approximately $3.3 million
Wimdmere's option to purchase up to 458,500 shares of Salton, which option was
granted by Windmere in July 1996.
Effective upon the repurchase of Windmere's 50% interest, the four
directors designated by Windmere to serve on Salton's board (Messrs. David
Friedson, Harry D. Schulman, Lawrence S. Chud, M.D. and James Connolly),
resigned from Salton's Board of Directors
LEONHARD Dreimann, PRESIDENT AND Chief Executive Officer of Salton, said,
"We are extremely pleased to have closed our repurchase of Windmere's 50%
interest in Salton. Management believes that Salton has never been better
positioned to implement its business strategy and take advantage of
opportunities in its industry."
Simultaneously with the repurchase of Windmere's 50% interest, (i) Salton
entered into a $215 million senior credit facility with Lehman Brothers Inc.
and (ii) Salton issued $40 million of convertible preferred stock to affiliates
of Centre Partners Management LLC in accordance with its previously
-more-
<PAGE> 2
SALT: REPURCHASES WINDMERE-DURABLE
HOLDINGS' 50% INTEREST IN SALTON PAGE 2
announced agreement with Centre Partners. A portion of the funds obtained from
Salton from its new credit facility were used to repurchase Windmere's 50%
interest and to repay all of Salton's outstanding indebtedness to Foothill
Capital Corporation.
The convertible preferred stock issued by Salton to Centre Partners is
non-dividend bearing and is convertible into 2,352,941 shares of Salton COMMON
STOCK (reflecting a $17 per share conversion price). Two directors designated
by Centre Partners, Messrs. Bruce G. Pollack and Robert A. Bergmann, have
joined Salton's Board of Directors.
Salton/Maxim Housewares, Inc. designs and markets an extensive line of
kitchen and home appliances, personal and beauty care products and decorative
quartz wall and alarm clocks under the brand names Salton(R), Maxim(R),
Breadman(R) Juiceman(R), Salton Creation(R), Salton Time(R),
White-Westinghouse(R), and Farberware(R). The company also designs and markets
a broad range of tabletop products, including china, crystal and glassware,
under the brand names Block(R) China, Atlantis(R) Crystal, and Gear(R).
###
