<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 25, 1999
OR
[___] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________
TO __________
COMMISSION FILE NUMBER 0-19557
SALTON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3777824
-------- ----------
(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
550 BUSINESS CENTER DRIVE
MOUNT PROSPECT, ILLINOIS 60056
(Address of principal executive (Zip Code)
offices)
(847) 803-4600
(Registrant's telephone number, including area code)
SALTON/MAXIM HOUSEWARES INC.
Former name, former address and former fiscal year, if changed since last year
Indicate by check mark whether this registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of February 4, 2000
11,247,437 shares of its $.01 par value Common Stock.
<PAGE> 2
SALTON, INC.
FORM 10-Q
QUARTER ENDED DECEMBER 25, 1999
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
Consolidated Balance Sheets-December 25, 1999
(Unaudited) and June 26, 1999 3
Consolidated Statements of Earnings (Unaudited)
Thirteen weeks ended December 25, 1999 and December 26, 1998
And Twenty-six weeks ended December 25, 1999 and December 26, 1998 4
Consolidated Statements of Cash Flows (Unaudited)
Twenty-six weeks ended December 25, 1999 and December 26, 1998 5
Notes to Consolidated Financial Statements (Unaudited) 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II OTHER INFORMATION
Item 1: Legal Proceedings 13
Item 6: Exhibits and Reports on Form 8-K 14
Signature 15
</TABLE>
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<PAGE> 3
SALTON, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 25, JUNE 26,
ASSETS 1999 1999
---- ----
<S> <C> <C>
Current Assets:
Cash $ 4,780 $ 11,240
Accounts receivable, net of allowances 208,804 96,179
Inventories 149,942 144,124
Prepaid expenses and other current assets 7,442 6,350
Deferred income taxes 2,021 3,134
------------- ------------
Total current assets 372,989 261,027
Property Plant and Equipment:
Land 928 928
Buildings 4,696 4,696
Molds and tooling 28,907 26,364
Warehouse equipment 6,386 6,142
Office furniture and equipment 7,594 6,097
------------- ------------
48,511 44,227
Less accumulated depreciation (23,373) (19,576)
------------- ------------
25,138 24,651
Intangibles, net of accumulated amortization, and
other non-current assets 164,625 42,638
------------- ------------
TOTAL ASSETS $ 562,752 $ 328,316
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit and other current debt $ 93,537 $ 32,229
Accounts payable 28,252 40,997
Accrued expenses 25,515 21,865
Income taxes payable 19,752
------------ ------------
Total current liabilities 167,056 95,091
Non-current deferred income taxes 157 157
Long-term debt 255,541 182,329
------------ ------------
Total liabilities 422,754 277,577
Stockholders' equity:
Preferred stock, $.01 par value; authorized,
2,000,000 shares, 40,000 shares issued
Common stock, $.01 par value; authorized,
20,000,000 shares; shares issued and outstanding:
2000--11,239,437; 1999--10,251,828 134 201
Treasury stock - at cost (30,961) (90,804)
Additional paid-in capital 59,875 91,900
Accumulated other comprehensive income (loss) 4 (48)
Retained earnings 110,946 49,490
------------- ------------
Total stockholders' equity 139,998 50,739
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 562,752 $ 328,316
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 4
SALTON, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT SHARE DATA) 13 WEEKS ENDED 26 WEEKS ENDED
-------------- --------------
12/25/99 12/26/98 12/25/99 12/26/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $292,767 $142,684 $489,107 $247,072
Cost of goods sold 166,845 84,338 277,246 139,342
Distribution expenses 9,911 4,956 17,031 8,565
------- ------ ------ ------
Gross profit 116,011 53,390 194,830 99,165
Selling, general and administrative expenses 30,684 31,969 81,174 59,749
------ ------ ------ ------
Operating income 85,327 21,421 113,656 39,416
Interest expense 9,244 2,411 14,721 4,810
------ ------ ------ ------
Income before income taxes 76,083 19,010 98,935 34,606
Income taxes 28,525 7,328 37,479 12,105
------ ------ ------ -------
Net income $ 47,558 $ 11,682 $ 61,456 $ 22,501
======== ======== ======== =========
Weighted average common shares outstanding 11,184,333 9,855,147 11,109,058 11,523,084
Weighted average common and common
equivalent shares outstanding 15,457,776 14,035,043 15,378,315 15,061,670
Net income per common share: Basic $ 4.25 $ 1.19 $ 5.53 $ 1.95
Net income per common share: Diluted $ 3.08 $ 0.83 $ 4.00 $ 1.49
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE> 5
SALTON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT SHARE DATA) 26 WEEKS ENDED
--------------
DECEMBER 25, DECEMBER 26,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 61,456 $ 22,501
Adjustments to reconcile net income to net cash from operating activities:
Changes in deferred taxes 1,113 (158)
Depreciation and amortization 8,729 2,309
Imputed interest on note payable 3,168
Purchase reduction of note payable and other non-cash items (221) 12
Changes in assets and liabilities:
Accounts receivable (112,625) (39,588)
Inventories (5,818) (4,749)
Prepaid expenses and other current assets (1,092) (493)
Accounts payable (12,745) (644)
Taxes payable 19,752 (496)
Accrued expenses 3,700 647
----- --------
Net cash from operating activities: (34,583) (20,659)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of George Foreman Trademark (22,750)
Additions to intangibles for patents/trademarks (335)
Equity investment in Amalgamated Appliance Holdings Limited (5,896)
Capital expenditures (4,439) (970)
-------- -------
Net cash from investing activities: (33,420) (970)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds(repayment)from revolving line of credit and other debt 61,308 (50,475)
Repayment of long-term debt (255) (90,000)
Proceeds from long-term debt 90,000
Proceeds from subordinated notes 125,000
Costs associated with refinancing (514) (7,943)
Common stock issuance 1,002 40
Preferred stock issuance 40,000
Purchase of treasury stock (70,799)
Costs associated with preferred stock issuance (2,999)
---------- ---------
Net cash from financing activities: 61,541 32,824
The effect of exchange rate changes on cash 2 -
---------- ----------
Net change in cash (6,460) 11,195
Cash, beginning of period 11,240 661
------ --------
Cash, end of period $ 4,780 $ 11,856
======== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest $ 14,091 $ 4,182
Income taxes $ 16,791 $ 12,601
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In the quarter ended December 25,1999, Salton acquired, effective July 1,
1999, the right to use in perpetuity and worldwide the name "George Foreman" in
connection with the marketing and sale of food preparation and non-alcoholic
drink preparation and serving appliances. The aggregate purchase price payable
to George Foreman and other participants was $137,500, of which $113,750 is
payable in five annual cash installments, and the remaining $23,750 was paid
through the issuance of 779,191 shares of Salton, Inc. common stock issued out
of treasury. The first cash installment of $22,750 was previously paid during
the first half of fiscal 2000. In connection with the transaction Salton issued
a five-year $91,000 non-interest bearing subordinated promissory note initially
recorded at its present value of $74,520 which accreted to a present value of
$77,688 as of December 25, 1999.
In the quarter ended September 26, 1998, Salton repurchased 6,535,072
shares of Salton's common stock from Windmere-Durable Holdings Inc.("Windmere")
for a total purchase price of $90,804. The purchase price included the issuance
of a six and one-half year $15,000 subordinated promissory note which bears
interest at 4% per annum recorded at its fair value of $9,096 and the effective
repayment of Windmere's promissory note to Salton for the principal amount of
$10,848.
See Notes to Consolidated Financial Statements.
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<PAGE> 6
SALTON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS.
The consolidated financial statements have been prepared from Salton's
records without audit and are subject to year end adjustments. The interim
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of financial information. The interim consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Salton, Inc. 1999 Annual
Report to Shareholders and the Annual Report on Form 10-K. The results of
operations for the interim periods should not be considered indicative of
results to be expected for the full year.
2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE.
On June 28, 1999, the Company's Board of Directors authorized a 3-for-2
split of its common stock effective July 28, 1999, for stockholders of record at
the close of business on July 14, 1999. The stock split was effected through the
issuance of treasury shares, and accordingly, the cost attributable to those
shares of $47.5 million was transferred from treasury stock to additional
paid-in capital. Such treasury shares were not subject to the stock split. The
December 25, 1999 share and per-share amounts in the accompanying financial
statements give effect to the split.
During the second quarter of fiscal 2000, the acquisition of the George
Foreman Trademark was completed. All share and per-share amounts have been
updated to give effect to this transaction as of July 1, 1999.
Basic net income per common share is computed based upon the weighted
average number of common shares outstanding. Diluted net income per common share
is computed based upon the weighted average number of common shares outstanding,
adjusted for dilutive common stock equivalents applying the treasury stock
method for options and warrants and the if-converted method for convertible
securities.
3. EFFECT OF NEW ACCOUNTING STANDARDS AND STATEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which was
amended in June 1999 with the issuance of SFAS No. 137. SFAS No. 137 delayed the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
SFAS No. 133 will change accounting and disclosure requirements for derivative
instruments and hedging activities. Salton is in the process of determining the
effect that this new standard will have on its consolidated financial statements
and/or disclosures.
4. EVENTS OF THE TWENTY-SIX WEEKS ENDED DECEMBER 25, 1999
George Foreman Trademark
In the quarter ended December 25,1999, Salton acquired, effective July 1,
1999, the right to use in perpetuity and worldwide the name "George Foreman" in
connection with the marketing and sale of food preparation and non-alcoholic
drink preparation and serving appliances. The aggregate purchase price payable
to George Foreman and other participants was $137.5 million, of which $113.75
million is payable in five annual cash installments, and the remaining $23.75
million was paid through the issuance of 779,191 shares of Salton, Inc. common
stock issued out of treasury. The first cash installment of $22.75 million was
previously paid during the first half of fiscal 2000. In connection with the
transaction Salton issued a five-year $91.0 million non-interest bearing
subordinated promissory note recorded at its present value initially of $74.5
million accreted to the present value of $77.7 million as of December 25, 1999.
The effect of the George Foreman transaction was an elimination of $16.6 million
in royalty expense, partially offset by the recording of amortization of $4.0
million and imputed interest of $3.2 million. The per diluted share effect of
the George Foreman transaction was an increase of $0.52.
The results of the transactions have been included in the consolidated
statements of earnings as of July 1, 1999. The following unaudited pro forma
results of operations assume the transaction occurred at the beginning of the
earliest period presented:
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<PAGE> 7
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
DECEMBER 26, 1998 DECEMBER 26,1998
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Net sales............................... $ 142,684 $ 247,072
Operating income........................ 29,772 54,563
Net income.............................. 15,810 29,808
Net income per share:
Basic.............................. $ 1.49 $ 2.42
Diluted............................ $ 1.07 $ 1.88
</TABLE>
The pro forma results are for informational purposes only and do not
purport to represent what Salton's results of operations would have actually
been had the transaction been consummated for the periods indicated.
TMI Acquisition Note Payable
On October 29, 1999, Salton retired the $4.0 million note payable
recorded associated with the acquisition of Toastmaster Inc. by issuing 109,090
shares of common stock out of treasury.
Amalgamated Appliance Holdings Limited
On October 6, 1999, Salton purchased approximately 21% of the
outstanding shares of Amalgamated Appliance Holdings Limited ("Amalgamated'), a
leading manufacturer and distributor of a wide range of branded consumer
electronics and appliances in South Africa, for approximately $6 million. Based
in South Africa, Amalgamated is a publicly held company, listed on the
Johannesburg Stock Exchange, which owns the rights to the Salton brand name in
South Africa. In conjunction with this transaction, the Chief Executive Officer
of Salton, Inc., was added to Amalgamated's Board of Directors.
Amended Credit Facility
Salton amended and restated the New Credit Agreement (the "Amended
Credit Agreement") during the quarter ended December 25, 1999. Salton increased
its existing revolving credit facility from $80.0 million to $115.0 million. The
Amended Credit Agreement, among Salton, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent and administration agent, and
a syndicate of banks, provides for $160.0 million in a senior secured credit
facility consisting of a $45.0 million Term Loan (the "Term Loan") at an
established base rate (equivalent to the prime rate of interest) plus an
applicable margin of 225 basis points or, at the Company's election, a
eurodollar rate (equivalent to the LIBOR rate) plus an applicable margin of 325
basis points maturing in twenty-four consecutive quarterly installments
commencing on March 26, 1999; and a $115.0 million revolving credit facility
(the "Revolving Credit Facility") at an established base rate (equivalent to the
prime rate of interest) plus an applicable margin or, at the Company's election,
a eurodollar rate (equivalent to the LIBOR rate) based on a range of ratios of
total debt to earnings before interest, taxes, depreciation and amortization
maturing on March 26, 2003. The Amended Credit Facility is secured by a first
lien on substantially all the Company's assets. Credit availability is based on
a formula related to trade accounts receivable, inventories and outstanding
letters of credit.
5. COMPREHENSIVE INCOME
For the 13 weeks and the 26 weeks ended December 25, 1999 and December
26, 1998 components of other comprehensive income include foreign currency
translation adjustments, net of tax.
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
-------------- --------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS) 12/25/99 12/26/98 12/25/99 12/26/98
-------- -------- -------- --------
Net income $ 47,558 $11,682 $ 61,456 $ 22,501
Other comprehensive income 2 2
--------- ------- -------- --------
$ 47,560 $ 11,682 $ 61,558 $ 22,501
========= ======== ======== ========
</TABLE>
Accumulated other comprehensive income is comprised of foreign currency
translation adjustments of $4 as of December 25, 1999 and foreign currency
translation adjustments of $2 and a minimum pension liability charge of $50 as
of June 26, 1999.
-7-
<PAGE> 8
6. OPERATING SEGMENTS
Salton consists of a single operating segment that designs, markets and
distributes housewares, including small appliances, tabletop products and
personal care/time products. This segmentation is appropriate because Salton
makes operating decisions and assesses performance based upon brand management,
and such brand management encompasses a wide variety of products and types of
customers. Most of Salton's products are procured through independent
manufacturers, primarily in the Far East, and are distributed through similar
distribution channels.
Product Information - Net Sales
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
---------------- --------------
(DOLLARS IN THOUSANDS) 12/25/99 12/26/98 12/25/99 12/26/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Small kitchen appliances $ 259,045 $ 134,077 $ 427,990 $ 230,696
Tabletop products 25,939 1,161 47,878 2,785
Personal care & time products 7,783 7,446 13,239 13,591
--------- --------- --------- ---------
Total $ 292,767 $ 142,684 $ 489,107 $ 247,072
========= ========= ========== =========
</TABLE>
7. ACQUISITION
On January 7, 1999, Salton acquired the stock of Toastmaster Inc.
("Toastmaster"), a Columbia, Missouri based manufacturer and marketer of kitchen
and small household electrical appliances and time products (the "Toastmaster
Acquisition"). Salton paid Toastmaster shareholders $7.00 per share in cash, for
a total purchase price of approximately $53.2 million. In addition,
Toastmaster's outstanding debt of $57.8 million was paid by Salton in connection
with the acquisition. The acquisition was accounted for as a purchase. The
purchase price has been preliminarily allocated based upon estimated fair market
values of the acquired assets and liabilities at the date of acquisition,
pending final determination of certain acquired assets and liabilities.
Accordingly, the purchase price allocation may change in subsequent periods. The
excess of the purchase price over the fair values of the net assets acquired has
been recorded as goodwill and is being preliminarily amortized on a
straight-line basis over forty years.
The operating results of Toastmaster have been included in the
consolidated statements of earnings from the date of acquisition. The following
unaudited pro forma results of operations assume the transaction occurred at the
beginning of the period presented:
<TABLE>
<CAPTION> 13 WEEKS ENDED 26 WEEKS ENDED
DECEMBER 26, 1998 DECEMBER 26,1998
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Net sales........................................................ $ 194,833 $ 338,096
Operating income................................................. 20,698 37,385
Net income....................................................... 7,837 16,091
Net income per share:
Basic....................................................... $ 0.79 $ 1.40
Diluted..................................................... $ 0.56 $ 1.07
</TABLE>
The pro forma results are for informational purposes only and do not
purport to represent what Salton's results of operations would have actually
been had the transaction been consummated for the periods indicated.
8. SUBSEQUENT EVENTS
On January 14, 2000, Salton entered into a strategic alliance with
ePods, Inc., an Internet company. Salton will become the exclusive distributor
of ePods products in the U.S., Canada and Mexico. As part of this alliance,
Salton has invested approximately $2 million in convertible preferred stock of
ePods.
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<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED DECEMBER 25, 1999 COMPARED WITH THIRTEEN WEEKS ENDED
DECEMBER 26, 1998.
Net Sales. Net sales in the quarter ended December 25, 1999 ("second
quarter of fiscal 2000") were $292.8 million, an increase of approximately
$150.1 million or 105.2%, compared to net sales of $142.7 million in the quarter
ended December 26, 1998 ("second quarter of fiscal 1999"). This increase is
primarily attributable to increased sales of products within the George
Foreman(R) product line, sales by our wholly-owned subsidiary Toastmaster
acquired in January 1999, and sales of Rejuvenique(R) and Juiceman(R) products.
Net sales of White-Westinghouse(R) products to Kmart and Zellers approximated 8%
of net sales in the second quarter of fiscal 2000 compared to 15% of net sales
in the second quarter of fiscal 1999.
Gross Profit. Gross profit in the second quarter of fiscal 2000 was
$116.0 million or 39.6% of net sales as compared to $53.4 million or 37.4% of
net sales in the same period in fiscal 1999. Cost of goods sold during the
second quarter of fiscal 2000 decreased to 57.0% of net sales compared to 59.1%
in the same period in fiscal 1999. Distribution expenses were $9.9 million or
3.4% of net sales in the second quarter of fiscal 2000 compared to $5.0 million
or 3.5% of net sales in the same period in fiscal 1999. Gross profit in the
second quarter of fiscal 2000 as a percentage of net sales increased primarily
due to a more favorable mix of sales with lower costs in their respective
channels of distribution when compared to the same period in fiscal 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 10.5% of net sales or $30.7 million in the
second quarter of fiscal 2000 compared to 22.4% of net sales or $32.0 million
for the same period in fiscal 1999. Expenditures for television, royalty
expenses, certain other media and cooperative advertising and trade show
expenses were 4.6% of net sales or $13.4 million in the second quarter of fiscal
2000 when compared to 16.5% of net sales or $23.5 million in the same period in
fiscal 1999. The effect of the George Foreman transaction in the second quarter
of fiscal 2000 was an elimination of $16.6 million in royalties associated with
the first quarter of fiscal 2000 partially offset by amortization of $4.0
million ($2.0 million was associated with the first quarter of fiscal 2000),
compared to payments of royalties of $10.4 million in the second quarter of
fiscal 1999. The remaining selling, general and administrative costs increased
to $17.2 million or 5.9% of net sales in the second quarter of fiscal 2000
compared to $8.5 million or 5.9% of net sales in the second quarter of fiscal
1999, primarily attributable to higher costs related to the higher level of
sales and increases due to the acquisition of Toastmaster.
Operating Income. As a result of the foregoing, operating income
increased by $63.9 million or 298.3%, to $85.3 million in the second quarter of
fiscal 2000 from $21.4 million in the same period in fiscal 1999. Operating
income as a percentage of net sales increased to 29.1% in the second quarter of
fiscal 2000 from 15.0% in the same period of fiscal 1999.
Net Interest Expense. Net interest expense was approximately $9.2
million for the second quarter of fiscal 2000 compared to $2.4 million in the
second quarter of fiscal 1999. The increase is primarily attributable to imputed
interest of $3.2 million on the George Foreman note payable of which $1.6
million was related to the first quarter of 2000. Salton's rate of interest on
amounts outstanding was a weighted average annual rate of 9.5% in fiscal 2000
compared to 7.7% in fiscal 1999. The average amount of all debt outstanding was
$241.0 million for the second quarter of fiscal 2000 compared to $117.9 million
for the same period in fiscal 1999. The increases are primarily attributable
higher interest rates and increased borrowings used to complete the acquisition
of Toastmaster and to provide working capital necessary to support the growth in
sales.
Income Tax Expense. Salton had tax expense of $28.5 million in the
second quarter of fiscal 2000 as compared to tax expense of $7.3 million in the
second quarter of fiscal 1999.
Net income. Net income increased 307.1% to $47.6 million in the second
quarter of fiscal 2000, compared to $11.7 million in the second quarter of
fiscal 1999.
Earnings per Share. Basic earnings per common share were $4.25 per
share on weighted average common shares outstanding of 11,184,333 in the second
quarter of fiscal 2000 compared to earnings of $1.19 per share on weighted
average common shares outstanding of 9,855,147 in the same period in fiscal
1999. Diluted earnings per common share were $3.08 per share on weighted average
common shares outstanding, including dilutive common stock equivalents, of
15,457,776 in the second quarter of fiscal 2000 compared to earnings of $0.83
per share on weighted average common shares outstanding, including dilutive
common stock equivalents, of 14,035,043 in the same period in fiscal 1999. All
share counts reflect a 3-for-2 split of Salton's common stock effective July 28,
1999, for stockholders of record at the close of business on July 14, 1999.
-9-
<PAGE> 10
TWENTY-SIX WEEKS ENDED DECEMBER 25, 1999 COMPARED WITH TWENTY-SIX WEEKS
ENDED DECEMBER 26, 1998.
Net Sales. Net sales in the twenty-six weeks ended December
25, 1999 ("first half of fiscal 2000") were $489.1 million, an increase of
approximately $242.0 million or 98.0%, compared to net sales of $247.1 million
in the twenty-six weeks ended December 26, 1998 ("first half of fiscal 1999").
This increase is primarily attributable to increased sales of products within
the George Foreman(R) product line, sales by our wholly-owned subsidiary
Toastmaster acquired in January 1999, and sales of Rejuvenique(R) and
Juiceman(R) products. Net sales of White-Westinghouse(R) products to Kmart and
Zellers approximated 7% of net sales in the first half of fiscal 2000 compared
to 15% of net sales in the first half of fiscal 1999.
Gross Profit. Gross profit in the first half of fiscal 2000 was $194.8
million or 39.8% of net sales as compared to $99.2 million or 40.1% of net sales
in the same period in fiscal 1999. Cost of goods sold during the first half of
fiscal 2000 increased to 56.7% of net sales compared to 56.4% in the same period
in fiscal 1999. Distribution expenses were $17.0 million or 3.5% of net sales in
the first half of fiscal 2000 compared to $8.6 million or 3.5% of net sales in
the same period in fiscal 1999. Gross profit in the first half of fiscal 2000 as
a percentage of net sales decreased primarily due to higher costs of Toastmaster
products. Excluding the cost of Toastmaster products, Salton had a more
favorable mix of sales with lower costs in their respective channels of
distribution when compared to the same period in fiscal 1999.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 16.6% of net sales or $81.2 million in the
first half of fiscal 2000 compared to 24.2% of net sales or $59.7 million for
the same period in fiscal 1999. Expenditures for television, royalty expenses,
certain other media and cooperative advertising and trade show expenses were
10.0% of net sales or $49.0 million in the first half of fiscal 2000 when
compared to 17.2% of net sales or $42.5 million in the same period in fiscal
1999. The effect of the George Foreman transaction related to the first half was
an elimination of $16.6 million in royalties partially offset by amortization of
$4.0 million, compared to payments of royalties of $19.2 million in the second
half of fiscal 1999. The remaining selling, general and administrative costs
increased to $32.2 million or 6.6% of net sales in the first half of fiscal 2000
compared to $17.3 million or 7.0% of net sales in the first half of fiscal 1999,
primarily attributable to higher costs related to the higher level of sales and
increases due to the acquisition of Toastmaster.
Operating Income. As a result of the foregoing, operating income
increased by $74.2 million or 188.4%, to $113.7 million in the first half of
fiscal 2000 from $39.4 million in the same period in fiscal 1999. Operating
income as a percentage of net sales increased to 23.2% in the first half of
fiscal 2000 from 16.0% in the same period of fiscal 1999.
Net Interest Expense. Net interest expense was approximately $14.7
million for the first half of fiscal 2000 compared to $4.8 million in the first
half of fiscal 1999. The increase is primarily attributable to imputed interest
of $3.2 million on the George Foreman note payable. Salton's rate of interest on
amounts outstanding was a weighted average annual rate of 9.4% in fiscal 2000
compared to 8.2% in fiscal 1999. The average amount of all debt outstanding was
$225.0 million for the first half of fiscal 2000 compared to $108.2 million for
the same period in fiscal 1999. The increases are primarily attributable to
higher interest rates and increased borrowings used to complete the acquisition
of Toastmaster, and to provide working capital necessary to support the growth
in sales.
Income Tax Expense. Salton had tax expense of $37.5 million in the
first half of fiscal 2000 as compared to tax expense of $12.1 million in the
first half of fiscal 1999.
Net income. Net income increased 173.1% to $61.5 million in the first
half of fiscal 2000, compared to $22.5 million in the first half of fiscal 1999.
Earnings per Share. Basic earnings per common share were $5.53 per
share on weighted average common shares outstanding of 11,109,058 in the first
half of fiscal 2000 compared to earnings of $1.95 per share on weighted average
common shares outstanding of 11,523,084 in the same period in fiscal 1999.
Diluted earnings per common share were $4.00 per share on weighted average
common shares outstanding, including dilutive common stock equivalents, of
15,378,315 in the first half of fiscal 2000 compared to earnings of $1.49 per
share on weighted average common shares outstanding, including dilutive common
stock equivalents, of 15,061,670 in the same period in fiscal 1999. All share
counts reflect a 3-for-2 split of Salton's common stock effective July 28, 1999,
for stockholders of record at the close of business on July 14, 1999.
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LIQUIDITY AND CAPITAL RESOURCES
During the first half of fiscal 2000, Salton used net cash of $34.6
million in operating activities and $33.9 million in investing activities. This
resulted primarily from the growth in sales in the period and higher levels of
receivables and inventory, the George Foreman transaction, an equity investment
in Amalgamated, as well as, increased investment in capital assets, primarily
tooling. Financing activities provided cash of $62.1 million. This resulted
primarily from draws of $61.0 million under the revolving line of credit.
In the quarter ended December 25,1999, Salton acquired, effective
July 1, 1999, the right to use in perpetuity and worldwide the name "George
Foreman" in connection with the marketing and sale of food preparation and
non-alcoholic drink preparation and serving appliances. The aggregate purchase
price payable to George Foreman and other participants was $137.5 million, of
which $113.75 million is payable in five annual cash installments and the
remaining $23.75 million was paid through the issuance of 779,191 shares of
Salton, Inc. common stock issued out of treasury. The first cash installment of
$22,750 million was previously paid during the first half of fiscal 2000. In
connection with the transaction Salton issued a five-year $91.0 million
non-interest bearing subordinated promissory note recorded at its present value
of $74,520 million accreted to the present value of $77.7 million as of December
25, 1999. The effect of the George Foreman transaction was an elimination of
$16.6 million in royalty expense, partially offset by the recording of
amortization of $4.0 million and imputed interest of $3.2 million.
At December 25, 1999, Salton had debt outstanding of $349.1 million and
had the ability to borrow up to an additional $22.0 million under the revolving
credit facility. Typically, given the seasonal nature of Salton's business,
Salton's borrowings tend to be the highest in mid-fall and early winter.
Salton amended and restated the New Credit Agreement (the "Amended
Credit Agreement") during the quarter ended December 25, 1999. Salton increased
its existing revolving credit facility from $80.0 million to $115.0 million. The
Amended Credit Agreement, among Salton, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent and administration agent, and
a syndicate of banks, provides for $160.0 million in a senior secured credit
facility consisting of a $45.0 million Term Loan (the "Term Loan") at an
established base rate (equivalent to the prime rate of interest) plus an
applicable margin of 225 basis points or, at the Company's election, a
eurodollar rate (equivalent to the LIBOR rate) plus an applicable margin of 325
basis points maturing in twenty-four consecutive quarterly installments
commencing on March 26, 1999; and a $115.0 million revolving credit facility
(the "Revolving Credit Facility") at an established base rate (equivalent to the
prime rate of interest) plus an applicable margin or, at the Company's election,
a eurodollar rate (equivalent to the LIBOR rate) based on a range of ratios of
total debt to earnings before interest, taxes, depreciation and amortization
maturing on March 26, 2003. The Amended Credit Facility is secured by a first
lien on substantially all the Company's assets. Credit availability is based on
a formula related to trade accounts receivable, inventories and outstanding
letters of credit.
Salton's credit agreement and senior subordinated notes contain a
number of significant covenants that, among other things, restrict the ability
of Salton to dispose of assets, incur additional indebtedness, prepay other
indebtedness, pay dividends, repurchase or redeem capital stock, enter into
certain investments, enter into sale and lease-back transactions, make certain
acquisitions, engage in mergers and consolidations, create liens, or engage in
certain transactions with affiliates, and that will otherwise restrict corporate
and business activities. In addition, under the credit agreement, Salton is
required to comply with specified financial ratios and tests, including a
minimum net worth test, a fixed charge coverage ratio, an interest coverage
ratio and a leverage ratio.
Salton's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend upon its future performance, which is subject to
general economic, financial, competitive and other factors that are beyond its
control. Salton's ability to fund its operating activities is also dependent
upon its rate of growth, ability to effectively manage its inventory, the terms
under which it extends credit to customers and its ability to collect under such
terms and its ability to access external sources of financing. Based upon the
current level of operations and anticipated growth, management believes that
future cash flow from operations, together with available borrowings under the
New Credit Agreement and funds anticipated to be available from the issuance of
additional debt and/or equity securities, will be adequate to meet Salton's
anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments over the next 12 months. There can be
no assurance, however, that Salton's business will continue to generate
sufficient cash flow from operations in the future to service its debt and make
necessary capital expenditures after satisfying certain liabilities arising in
the ordinary course of business. If unable to do so, Salton may be required to
refinance all or a portion of its existing debt, to sell assets or to obtain
additional financing. There can be no assurance that any such refinancing would
be available or that any such sales of assets or additional financing could be
obtained.
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SEASONALITY
Salton's business is highly seasonal, with operating results varying
from quarter to quarter. Salton has historically experienced higher sales during
the months of August through November primarily due to increased demand by
customers for Salton's products attributable to holiday sales. This seasonality
has also resulted in additional interest expense to Salton during this period
due to an increased need to borrow funds to maintain sufficient working capital
to finance product purchases and customer receivables for the seasonal period.
FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Salton, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: Salton's degree of leverage; economic conditions
and retail environment; the timely development, introduction and customer
acceptance of Salton's products; competitive products and pricing; dependence on
foreign suppliers and supply and manufacturing constraints; Salton's
relationship and contractual arrangements with key customers, suppliers and
licensors; cancellation or reduction of orders; the integration of Toastmaster,
including the failure to realize anticipated revenue enhancements and cost
savings; the risks relating to pending legal proceedings and other factors both
referenced and not referenced in Salton's filings with the Securities and
Exchange Commission. When used in this Quarterly Report on Form 10-Q, the words
"estimate," "project," "anticipated," "expect," "intend," "believe," and similar
expressions are intended to identify forward-looking statements.
EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE
The results of operations for the periods discussed have not been
significantly affected by inflation or foreign currency fluctuation. Salton
generally negotiates its purchase orders with its foreign manufacturers in
United States dollars. Thus, Salton's cost under any purchase order is not
subject to change after the time the order is placed due to exchange rate
fluctuations. However, the weakening of the United States dollar against local
currencies could result in certain manufacturers increasing the United States
dollar prices for future product purchases.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written to
use two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in systems failure or miscalculations causing
disruptions of operations. Salton currently uses information technology
throughout its operations.
Salton has completed implementation of our Year 2000 remediation plan
on a timely basis, and such remediation plan as implemented addresses all
mission critical systems. Although Salton believes it has completed its Year
2000 project by upgrading its systems, Salton cannot make any assurances that
the upgraded systems will be free of defects. If any such risks materialize,
Salton could experience material adverse consequences to its business, financial
condition and results of operations. As of February 4, 2000 Salton has not
experienced any consequences to its business, financial condition and results of
operations.
Year 2000 compliance may also adversely affect Salton's business,
financial condition and results of operations indirectly by causing
complications of, or otherwise affecting, the operations of any one or more of
its suppliers and customers. Salton has contacted its significant suppliers and
certain of its customers in an attempt to identify any potential Year 2000
compliance issues with them. Salton currently believes that its major suppliers
have made significant progress with respect to Year 2000 compliance issues.
Salton is currently unable to anticipate the magnitude of the operational or
financial impact on it of Year 2000 compliance issues with its customers even
though Salton believes that these customers have implemented significant
programs with respect to Year 2000 compliance issues. Salton has no information
that indicates that significant suppliers may be unable to sell to Salton or
that significant customers may be unable to receive or pay for Salton's
products, in each case because of Year 2000 compliance problems.
Notwithstanding Salton's progress to date, there are several ways in
which its systems could still be affected by the Year 2000 problem. First, the
software code Salton uses in its information systems may not in fact be Year
2000 compliant in all
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<PAGE> 13
instances. Second, Salton may be unable to fully test and monitor the upgrades,
making it difficult for Salton to identify and remedy any problems that might
exist. Third, Salton's customers, suppliers and shippers may not be Year 2000
compliant.
The most reasonably likely worst-case scenario resulting from Salton's
inability, or the inability of its suppliers, customers or shippers, to become
Year 2000 compliant, includes the following adverse effects:
- Salton would be unable to receive products due to Year 2000-related
failure on the part of its suppliers causing Salton to be unable to
fulfill the orders of many of its customers for Salton's products.
- Salton's customers would be unable to place their orders with Salton
because of Salton's own system failure or those of its customers
resulting in delayed or potentially lost orders for Salton's products.
- Salton would be unable to deliver ordered products to its customers on
a timely basis due to a system failure at Salton or at one of its
product shippers leading to delays in arrival of Salton's products and
possibly dissatisfied customers.
- Salton's customers would be unable to receive and/or pay for Salton
products on a timely basis.
Prior to January 1, 2000 Salton had incurred approximately $1,000,000
to resolve and test Salton's Year 2000 compliance issues. All expenses incurred
in connection with Year 2000 compliance were expensed as incurred, other than
acquisitions of new software or hardware, which are capitalized.
Salton's assessment of its Year 2000 compliance is based on numerous
assumptions about future events, including third party modification plans and
other factors. However, there can be no guarantee that this assessment is
correct and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.
PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
Trademark Litigation
In September, 1999, Linda Evans Fitness Centers, Inc. (the "Fitness
Centers"), Mark Golub and Thomas Gergley filed suit against Salton and its
principal executive officers alleging that Salton tortiously interfered with a
contract between the Fitness Centers and Ms. Evans by hiring Ms. Evans to act as
a spokesperson for the Rejuvenique(TM) facial toning system. Before Ms. Evans
was hired by Salton, Ms. Evans had brought suit against the Fitness Centers
seeking a determination that her contract with the Fitness Centers had been
terminated on the basis of fraud and the failure of the Fitness Centers to make
certain payments. Salton believes that it has valid defenses against the claims
made against it by the Fitness Centers. Ms. Evans has agreed to indemnify Salton
against matters relating to her services to Salton.
Environmental
Salton is participating in environmental remediation activities at four
sites which it owns or operates. As of December 25, 1999, Salton has accrued
approximately $225,000 for the anticipated costs of investigation, remediation
and/or operation and maintenance costs at these sites. Although such costs could
exceed that amount, Salton believes that any such excess will not have a
material adverse effect on the financial condition or annual results of
operations of Salton.
Arbitration
On April 20, 1999, an individual filed a notice of arbitration
asserting a breach of contract claim against Salton due to Salton's alleged
failure to pay royalties to this individual for the sale of certain juice
extractors and related health products. This individual also asserts various
other causes of action for an accounting, breach of covenant of good faith and
fair dealing, forgery, trademark infringement, unfair competition, permanent
injunction, fraud, negligent misrepresentation, age discrimination, Lanham Act
violations, breach of fiduciary duty and rescission of contract, and is seeking
compensatory and punitive damages of $15 million. An arbitration hearing solely
with respect the forgery claim was held in October 1999 and the arbitrator ruled
in favor of Salton.
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<PAGE> 14
Salton believes that these claims are without merit, and Salton intends
to vigorously defend itself in the arbitration proceeding.
Other
Salton is a party to various other actions and proceedings incident to
its normal business operations. Salton believes that the outcome of such
litigation will not have a material adverse effect on the financial condition or
annual results of operations of Salton. Salton also has product liability and
general liability insurance policies in amounts it believes to be reasonable
given its current level of business.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.21 Agreement effective as of July 1, 1999 between Salton and George
Foreman. Incorporated by reference to the current report on form 8-K
dated December 9, 1999
10.22 Agreement effective as July 1, 1999 between Salton and Sam Perlmutter.
Incorporated by reference to the current report on form 8-K dated
December 9, 1999
10.23 Agreement effective as of July 1, 1999 between Salton and Michael
Srednick Incorporated by reference to the current report on form 8-K
dated December 9, 1999
10.24 Second amended and restated credit agreement, among Salton, 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 administrative agent and Fleet National Bank as
documentation agent dated as of December 10, 1999.
(b) Reports on Form 8-K
(i) Current Report on Form 8-K dated December 9, 1999 regarding
George Foreman transaction.
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<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SALTON, INC.
Date: February 2, 2000 /s/ JOHN E. THOMPSON
John E. Thompson
Chief Financial Officer and
Senior Vice-President
(Duly Authorized Officer
of the Registrant)
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<PAGE> 16
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
- -------------- -----------------------
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
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<PAGE> 1
Exhibit 10.24
SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
10, 1999, among SALTON, INC., a Delaware corporation (formerly known as
Salton/Maxim Housewares, Inc) (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, arranger and book runner (in
such capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as syndication
agent (in such capacity, the "Syndication Agent"), LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (in such capacity, the "Administrative Agent"), and
FLEET NATIONAL BANK, as documentation agent (in such capacity, the
"Documentation Agent").
WITNESSETH:
WHEREAS, the Borrower is a party to the $125,000,000 Amended and
Restated Credit Agreement, dated as of January 7, 1999, as amended by the First
Amendment, dated as of May 21, 1999, and the Second Amendment, dated as of
August 27, 1999 (the "Existing Credit Agreement"), with the Administrative Agent
and the Lenders parties thereto, pursuant to which such Lenders have agreed to
extend, and have extended, credit to the Borrower; and
WHEREAS, the Borrower has requested certain amendments to the
Existing Credit Agreement, and the Required Lenders and each Lender whose
Revolving Credit Commitment is being increased hereby have agreed to amend and
restate the Existing Credit Agreement as set forth below to, among other things,
increase the Total Revolving Credit Commitments from $80,000,000 to up to
$115,000,000;
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree that on the Second
Amendment and Restatement Effective Date, the Existing Credit Agreement will be
amended and restated in its entirety as follows:
SECTION 10 SECTION 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.
"Account Debtor": any Person who is or who may become obligated
under, with respect to, or on account of an Account.
"Accounts": all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to the Borrower
arising out of the sale of goods by the Borrower, irrespective of whether
earned by performance, and any and all credit insurance, guaranties, or
security therefor.
"Acquisition Agreements": collectively, the Foreman Acquisition
Agreement, the Perlmutter Acquisition Agreement and the Srednick
Acquisition Agreement.
<PAGE> 2
"Adjustment Date": as defined in the Pricing Grid.
"Advance Rate": (i) with respect to Eligible Accounts, 80%; (ii)
with respect to Eligible Inventory, 60%.
"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.
"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 and
(ii) 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.
"Aggregate Funded Exposure": at any time, the sum of (a) the
aggregate principal amount of Term Loans outstanding at such time plus (b)
the aggregate principal amount of Revolving Credit Loans outstanding at
such time plus (c) the aggregate undrawn and unreimbursed face amount of
all Letters of Credit at such time.
"Agreement": this Second Amended and Restated Credit Agreement, as
amended, supplemented or otherwise modified from time to time.
"Applicable Margin": (a) with respect to the Term Loans, 3.25%, in
the case of such Loans which are Eurodollar Loans, and 2.25%, in the case
of such Loans which are Base Rate Loans, and (b) with respect to Revolving
Credit Loans, 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
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<PAGE> 3
(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 Revolving Credit Borrowing Base": at any time, the
difference of (a) the Borrowing Base, minus (b) the aggregate principal
amount of 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.
3
<PAGE> 4
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrowing Base": on any date of determination, the sum (without
duplication) of (a) (x) Eligible Accounts of the Borrower and the
Restricted Subsidiaries on such date times (y) the applicable Advance
Rate, plus (b) (x) Eligible Inventory of the Borrower and the Restricted
Subsidiaries on such date times (y) the applicable Advance Rate; provided,
that at no time shall Eligible Inventory constitute more than 50% of the
Borrowing Base. The Borrowing Base shall be determined by the
Administrative Agent in its reasonable judgment by reference to the most
recent Borrowing Base Certificate delivered to the Administrative Agent.
The Administrative Agent shall determine the Borrowing Base in effect with
respect to the period covered by such Borrowing Base Certificate, and the
Borrowing Base so determined shall remain in effect until the next
determination thereof pursuant to this sentence.
"Borrowing Base Certificate": a certificate duly executed by a
Responsible Officer, substantially in the form of Exhibit E.
"Borrowing Date": any Business Day specified by the Borrower as a
date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"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
4
<PAGE> 5
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
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 were satisfied, which date occurred on January 7, 1999.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
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"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 Term Loan Commitment
and the Revolving Credit Commitment of such Lender.
"Commitment Fee Rate": the rate per annum determined pursuant to the
Pricing Grid.
"Commitment Increase Date": the date that is three Business Days
after the Second Amendment and Restatement Effective Date.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Borrower and which is treated as a single employer under Section 414 of
the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Concentrated Account": the Highly Concentrated Accounts and the
Accounts identified as Concentrated Accounts on Schedule 1.1.
"Consent": the Consent, substantially in the form of Exhibit M, to
be executed and delivered by each Loan Party other than the Borrower on
the Second Amendment and Restatement Effective Date.
"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
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<PAGE> 7
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), (f) the Merger Charges and (g) 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. For
purposes of calculating Consolidated EBITDA of the Borrower and its
Restricted Subsidiaries for any period which includes the Closing Date,
the Consolidated EBITDA of Toastmaster shall be included on a pro forma
basis for such period (assuming the acquisition of Toastmaster occurred on
the first day of such period), and for purposes of calculating
Consolidated EBITDA of the Borrower and its Restricted Subsidiaries for
any period, (a) 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 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 and (b) the Consolidated EBITDA of any Person
Disposed of by the Borrower and its Restricted Subsidiaries during such
period shall be excluded (assuming such Disposition occurred on the first
day of such period).
"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).
"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
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<PAGE> 8
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 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.
"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 Transactions 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.
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"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.
"Eligible Accounts": those Accounts created by the Borrower and its
Subsidiaries in the ordinary course of business that arise out of the
Borrower's sale of goods or rendition of services, that strictly comply
with all of the Borrower's representations and warranties to the
Administrative Agent, and that are and at all times shall continue to be
reasonably acceptable to the Administrative Agent in all respects;
provided, however, that standards of eligibility may be fixed and revised
from time to time by the Administrative Agent in the Administrative
Agent's reasonable credit judgment. Eligible Accounts shall not include
the following:
(a) (i) Accounts that the Account Debtor has failed to pay
within (1) one hundred twenty (120) days of invoice date for Accounts with
selling terms of thirty (30) days or (2) Accounts which the Account Debtor
has failed to pay within one hundred eighty (180) days of invoice date, or
within ninety days (90) days after the due date of the invoice, and (ii)
all Accounts owed by an Account Debtor that has failed to pay fifty
percent (50%) or more of its Accounts owed to the Borrower within the
periods set forth in clauses (i) and (ii) as applicable;
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of the Borrower;
(c) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and
hold, or other terms by reason of which the payment by the Account debtor
may be conditional;
(d) Accounts with respect to which the Account Debtor is not a
resident of the United States or Canada, and which are not either (i)
covered by credit insurance in form and amount, and by an issuer,
satisfactory to the Administrative Agent, or (ii) supported by one or more
letters of credit that are assignable by their terms and have been
delivered to the Administrative Agent in an amount, of a tenor, and issued
by a financial institution, acceptable to the Administrative Agent;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the United
States except for Accounts not subject to the Armed Services Procurement
Regulations or any other government regulation either prohibiting the
assignment of Accounts or requiring special procedures for perfection of
the assignment of Accounts, unless, in each case, all actions required for
perfection have been taken;
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<PAGE> 10
(f) Accounts with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by
the Account Debtor to the Borrower but excluding cooperative advertising
between the Borrower and an Account Debtor;
(g) Accounts with respect to an Account Debtor (other than
Concentrated Accounts) whose total obligations owing to the Borrower
exceed ten percent (10%) of all Eligible Accounts, to the extent the
obligations owing by such Account Debtor are in excess of such percentage;
Accounts with respect to a Concentrated Account whose total obligations
owing to the Borrower exceed twenty percent (20%) of all Eligible
Accounts, to the extent the obligations owing by such Concentrated
Accounts are in excess of such percentage, except that any one (1) of the
following may be true at any time: (A) total obligations owing to the
Borrower with respect to any two (2) Concentrated Account (other than
Highly Concentrated Accounts) may exceed twenty percent (20%) at any time
in the aggregate but shall not exceed thirty percent (30%) in the
aggregate, or (B) total obligations with respect to one (1) of the Highly
Concentrated Accounts may exceed twenty percent (20%) at any time but
shall not and does not exceed thirty percent (30%) at any time, or (C)
Accounts with respect to any two (2) of the Highly Concentrated Accounts
may exceed twenty percent (20%) at any time but shall not, aggregated
together, exceed fifty percent (50%) at any time;
(h) Accounts with respect to which the Account Debtor disputes
liability or makes any material claim with respect thereto, or is subject
to any proceeding of the type described in Section 8(f), or becomes
insolvent, or goes out of business;
(i) That portion of Accounts which have been rebilled to
Account Debtors as a result of the failure of the Account Debtor to pay
invoices representing the Account in full;
(j) Accounts the collection of which the Administrative Agent,
in its reasonable credit judgment, believes to be doubtful by reason of
the Account Debtor's financial condition;
(k) Accounts that are payable in other than United States
Dollars; and
(l) Accounts that represent progress payments or other advance
billings that are due prior to the completion of performance by the
Borrower of the subject contract for goods or services.
"Eligible Inventory": Inventory (net of reserves for slow moving
inventory in an amount acceptable to the Administrative Agent) consisting
of finished goods held for sale in the ordinary course of the Borrower's
business, that are located at the Borrower's premises or such other
locations as identified on Schedule 4.19(a) and replacement parts and
accessories inventory located at the Borrower's premises or such other
locations as identified on Schedule 4.19(a), or "In Transit Inventory,"
which is acceptable to the Administrative Agent in all respects, and
strictly complies with all of the Borrower's representations and
warranties to the Administrative Agent. Eligible Inventory shall not
include obsolete items, restrictive or custom items, work-in-process,
components that are
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not part of finished goods, Estimated Defects and Net Returns in
transit outside the United States, spare parts, packaging and shipping
materials, supplies used or consumed in the Borrower's business, Inventory
at any location other than those set forth on Schedule 4.19(a), Inventory
subject to a security interest or lien in favor of any third Person, bill
and hold goods, Inventory that is not subject to the Administrative
Agent's perfected security interests, defective goods, "seconds," and
Inventory acquired on consignment. Eligible Inventory shall be valued at
the lower of the Borrower's cost on a Landed Cost basis or market value.
As of the date hereof the amount acceptable to the Administrative Agent as
a reserve for slow moving inventory is 1.25% of the Borrower's Eligible
Inventory.
"Estimated Defects": Net Returns being held by the Borrower pending
return to the manufacturer.
"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.
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"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).
"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
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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 Agreement": as defined in the recitals to this
Agreement.
"Existing Fleet Letters of Credit": as defined in Section 3.1(d).
"Existing LaSalle Letters of Credit": as defined in Section 3.1(d).
"Facility": each of (a) the Term Loan Commitments and the Term
Loans made thereunder (the "Term Loan Facility") and (b) 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.
"FEMA": the Federal Emergency Management Agency, or any similar
successor agency of the federal government.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Foreman Acquisition Agreement": the Agreement dated as of July 1,
1999, between George Foreman and the Borrower, a copy of which is attached
as Exhibit P.
"Foreman Security Agreement": the Trademark Security Agreement to
be entered into between George Foreman and the Borrower, substantially in
the form of Exhibit Q.
"Foreman Subordination Agreement": the Subordination Agreement to
be entered into among George Foreman, the Administrative Agent and the
Borrower, substantially in the form of Exhibit R.
"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 ended
September 30, 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
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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 and consistent with those used in the
preparation of the most recent audited financial statements delivered
pursuant to Section 4.1.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantee and Collateral Agreement": the Amended and Restated
Guarantee and Collateral Agreement executed and delivered by the Borrower
and each Subsidiary Guarantor on the Closing Date, a copy of which is
attached as 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
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reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Hazardous Materials": all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances," or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity"; (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gas
liquids, synthetic gas, drilling fluids, produced waters, and other wastes
associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per
million.
"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.
"Highly Concentrated Accounts": the accounts identified as such on
Schedule 1.1.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of
such Person 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; with respect to the Borrower, such term shall include,
without limitation, the Borrower's cash payment obligations
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under the Foreman Acquisition Agreement, the Perlmutter Acquisition
Agreement and the Srednick Acquisition Agreement.
"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.
"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:
(a) 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;
(b) any Interest Period that would otherwise extend beyond
the Scheduled Revolving Credit Termination Date or beyond the date
final payment is due on the
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<PAGE> 17
Term Loans, as the case may be, shall end on the Revolving Credit
Termination Date or such due date, as applicable;
(c) 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
(d) 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.
"In Transit Inventory": Eligible Inventory purchased by the
Borrower where the Borrower has legal title but the goods have not been
received by the Borrower at one of its locations and entered into its
perpetual inventory system.
"Inventory": all present and future inventory in which the Borrower
has any interest, including goods held for sale and all of the Borrower's
present and future raw materials (but excluding any Hazardous Materials),
work in process, finished goods, and packing and shipping materials,
wherever located, and any documents of title representing any of the
above.
"Investments": as defined in Section 7.8.
"Issuing Lender": (i) with respect to the Existing LaSalle Letters
of Credit, LaSalle Bank National Association, (ii) with respect to the
Existing Fleet Letters of Credit, Fleet National Bank and (iii) with
respect to any Letters of Credit issued hereunder after the Second
Amendment and Restatement Effective Date, 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.
"Landed Costs": the Borrower's "book cost" (on a "FIFO" basis in
accordance with GAAP) for Eligible Inventory purchased by the Borrower
from a Person as opposed to the actual amount paid by the Borrower to said
Person and the Borrower's book cost may include tax, freight and duty.
"L/C Commitment": $25,000,000.
"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.
"L/C Participants": the collective reference to all the Revolving
Credit Lenders other than the Issuing Lender.
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<PAGE> 18
"Lehman Entity": any of Lehman Commercial Paper Inc. or any of its
affiliates (including Syndicated Loan Funding Trust).
"Letter of Credit": as defined in Section 3.1(a).
"Lender Addendum": with respect to any Lender which became a party
hereto on the Closing Date, a Lender Addendum, substantially in the form
of Exhibit J, executed and delivered by such Lender as provided in
subsection 10.18.
"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
Consents and the Notes.
"Loan Parties": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
"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
Transactions, (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.
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<PAGE> 19
"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.
"Merger Agreement": the Agreement and Plan of Merger, dated as of
August 26, 1998, pursuant to which the Borrower acquired Toastmaster.
"Merger Charges": up to $6,000,000 in the aggregate of
Merger-related charges, including a $1,900,000 write-off of Toastmaster's
barter receivables, a $1,150,000 inventory restructuring change, a
$1,600,000 write-off of plant, property and equipment of closed
facilities, a $750,000 write-off of discontinued tooling and a $600,000
write-off of an Internal Revenue Service refund.
"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 (which mortgages and/or deeds of
trust shall be in form and substance reasonably satisfactory to the
Administrative Agent), 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 Average Senior Debt": on any date, the average of the amount
of Consolidated Senior Debt outstanding (net of cash and Cash Equivalents
held by the Borrower and its Restricted Subsidiaries) on the last day of
each of the twelve consecutive calender months ended prior to the date of
such determination (or, if fewer than twelve months have elapsed between
the Closing Date and the date of such determination, then on the Closing
Date and the last day of each such month).
"Net Average Senior Debt Ratio": as of the last day of any period
of four consecutive fiscal quarters, the ratio of (a) Net Average Senior
Debt on such day to (b) Consolidated EBITDA for such period.
"Net Average Total Debt": on any date, the average of the amount of
Consolidated Total Debt outstanding (net of cash and Cash Equivalents held
by the Borrower and its Restricted Subsidiaries) on the last day of each
of the twelve consecutive calendar months ended prior to the date of such
determination (or, if fewer than twelve months have elapsed between the
Closing Date and the date of such determination, then on the Closing Date
and the last day of each such month).
"Net Average Total Debt Ratio": as of the last day of any period of
four consecutive fiscal quarters, the ratio of (a) Net Average Total Debt
on such day to (b) Consolidated EBITDA for such period.
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"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.
"Net Returns": inventory previously sold that has been returned to
warehouses designated and owned, leased or otherwise controlled by the
Borrower and its Subsidiaries for investigation and/or repair of claimed
defects.
"New Lender Supplement": a New Lender Supplement, substantially in
the form of Exhibit O.
"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
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.
"Offered Increase Amount": as defined in Section 2.8(b).
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<PAGE> 21
"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).
"Perlmutter Acquisition Agreement": the Agreement dated as of July
1, 1999, between Sam Perlmutter and the Borrower, a copy of which is
attached as Exhibit S.
"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
(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.
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"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 Centre 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": the unaudited pro forma consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as of
September 26, 1998 as set forth in the Offering Memorandum, dated December
11, 1998, with respect to the Senior Subordinated Notes (including the
notes thereto).
"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": Bankers Trust Company.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time and any successor law, rule or regulation having similar effect to
all or a portion thereof.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
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"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. 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 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.
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<PAGE> 24
"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, and participate in
Letters of Credit, 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 (a) in the case of each Lender
that became a Revolving Credit Lender on the Closing Date, on Schedule 1
to the Lender Addendum delivered by such Lender on the Closing Date, (b)
in the case of each Lender that has become or shall become a Revolving
Credit Lender pursuant to an Assignment and Acceptance or a New Lender
Supplement, on Schedule 1 to such Assignment and Acceptance or New Lender
Supplement, as the case may be, (c) in the case of each Lender whose
Revolving Credit Commitment is increased pursuant to a Revolving Credit
Commitment Increase Supplement, on Schedule 1 to such Revolving Credit
Commitment Increase Supplement and (d) in the case of each Lender that
becomes a Revolving Credit Lender on the Second Amendment and Restatement
Effective Date, and each Revolving Credit Lender whose Revolving Credit
Commitment is increased on the Commitment Increase Date, on Schedule 1 to
the Second Lender Addendum executed and delivered by such Lender on the
Second Amendment and Restatement Effective Date (which commitment or
commitment increase, as the case may be, shall become available on the
Commitment Increase Date), in each case as the same may be changed from
time to time pursuant to the terms hereof. The aggregate amount of the
Total Revolving Credit Commitments as of the Commitment Increase Date will
be $103,859,000.
"Revolving Credit Commitment Increase Notice": as defined in
Section 2.8(b).
"Revolving Credit Commitment Increase Supplement": a Revolving
Credit Commitment Increase Supplement, substantially in the form of
Exhibit N.
"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.
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<PAGE> 25
"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 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": January 7, 2004.
"Second Amendment and Restatement Effective Date": the date on
which each of the conditions precedent specified in Section 5.3 shall have
been satisfied.
"Second Lender Addendum": each Second Lender Addendum,
substantially in the form of Exhibit L, to be executed by (a) each Lender
that becomes a Revolving Credit Lender on the Second Amendment and
Restatement Effective Date, (b) each Lender whose Revolving Credit
Commitment is increased on the Commitment Increase Date and (c) each
additional Lender, if any, required to constitute the Required Lenders to
approve this Agreement on the Second Amendment and Restatement Effective
Date.
"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 Note": the $15,000,000 aggregate principal amount
subordinated note of the Borrower made to Windmere-Durable Holdings, Inc.
in connection with the Stock Agreement, dated as of May 6, 1998, among the
Borrower, Windmere-Durable Holdings, Inc., and others.
"Senior Subordinated Note Indenture": the Indenture, dated as of
December 16, 1998, between the Borrower and Norwest Bank Minnesota,
National Association, as trustee, pursuant to which the Senior
Subordinated Notes were issued.
"Senior Subordinated Notes": the 10-3/4% Senior Subordinated Notes
due 2005 of the Borrower, in the aggregate principal amount of
$125,000,000.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
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"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", as defined in
the Senior Subordinated Note Indenture.
"Srednick Acquisition Agreement": the Agreement dated as of July 1,
1999, between Michael Srednick and the Borrower, a copy of which is
attached as Exhibit T.
"Standard Flood Hazard Determination Form": Form 81-93 or any
successor or replacement thereof developed by FEMA pursuant to Section 528
of the National Flood Insurance Reform Act of 1994 (42 U.S.C. 1365(a)),
for determining whether a building or structure is located in an area
identified as an area having special flood hazard, whether flood insurance
is required and whether flood insurance is available under 42 U.S.C. 4001,
et seq.
"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.
"Term Loan": as defined in Section 2.1.
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"Term Loan Commitment": as to any Lender, the obligation of such
Lender, if any, to make a Term Loan to the Borrower hereunder in a
principal amount not to exceed the amount set forth under the heading
"Term Loan Commitment" opposite such Lender's name on Schedule 1 to the
Lender Addendum delivered by such Lender or, as the case may be, in
Schedule 1 to the Assignment and Acceptance pursuant to which such Lender
acquired such commitment. The original aggregate amount of the Term Loan
Commitments is $45,000,000.
"Term Loan Lender": each Lender which has a Term Loan Commitment or
is the holder of a Term Loan.
"Term Loan Percentage": as to any Term Loan Lender at any time, the
percentage which such Lender's Term Loan Commitment then constitutes of
the aggregate Term Loan Commitments (or, at any time after the Closing
Date, the percentage which the aggregate principal amount of such Lender's
Term Loans then outstanding constitutes of the aggregate principal amount
of the Term Loans then outstanding).
"Toastmaster": Toastmaster Inc., a Missouri corporation.
"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.
"Transactions": the Borrower's acquisition of Toastmaster and its
refinancing of indebtedness of Toastmaster outstanding on the date of such
acquisition.
"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.
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"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that
is a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. 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.
(2) 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.
(3) 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.
(4) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(5) Each reference to the "Credit Agreement" in any Loan Document
shall be deemed to be a reference to this Second Amended and Restated
Credit Agreement.
SECTION AMOUNT AND TERMS OF COMMITMENTS
2.1. The Term Loans. Subject to the terms and conditions hereof,
each Term Loan Lender made a term loan (a "Term Loan") to the Borrower on
the Closing Date in an amount not exceeding the lesser of (i) the amount
of the Term Loan Commitment of such Lender and (ii) such Lender's Term
Loan Percentage of the Borrowing Base then in effect. 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
Section 2.11.
2.2 [Reserved] .
2.3 Repayment of Term Loans. The Term Loan of each Lender shall
mature in 24 consecutive quarterly installments, payable on the last
Business Day in each of the Borrower's fiscal quarters, commencing on
March 31, 1999, each of which shall be in an amount equal to such Lender's
Term Loan Percentage multiplied by the amount set forth below opposite
such installment:
Installment Principal Amount
1-20 $ 125,000
21-24 10,625,000
2.4 Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Revolving Credit Lender severally agrees to make
revolving credit loans
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("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 lesser of (i) the amount of such Lender's Revolving Credit Commitment
and (ii) such Lender's Revolving Commitment Percentage of the Available
Revolving Credit Borrowing Base then in effect. 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.
(c) Revolving Credit Loans made under (and as defined in) the
Existing Credit Agreement prior to the Second Amendment and Restatement
Effective Date and outstanding on such date shall constitute Revolving
Credit Loans hereunder.
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. 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 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.
(a) Repayment of Loans; Evidence of Debt. 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
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installments according to the 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(d), 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 I-1 or I-2, respectively, with
appropriate insertions as to date and principal amount.
2.7 Commitment Fees, etc.(a) 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;
provided that on and after the Second Amendment and Restatement Effective
Date, such commitment fee shall be based on the Available Revolving Credit
Commitment of such Lender as of the Commitment Increase Date.
(b) 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.
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(c) 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.
(a) Termination or Reduction of Commitments; Increase 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 or, from time to time, to reduce the amount
of the Revolving Credit 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
then in effect.
(b) In the event that the Borrower wishes to increase the aggregate
Revolving Credit Commitments at any time when no Default or Event of
Default has occurred and is continuing, it shall notify the Administrative
Agent in writing of the amount (the "Offered Increase Amount") of such
proposed increase (such notice, a "Revolving Credit Commitment Increase
Notice"). The Borrower shall offer each of the Lenders the opportunity to
participate in its Revolving Credit Percentage of the Offered Increase
Amount pursuant to paragraph (c) below and if any Lender, in its sole
discretion, elects not to participate in its portion of the Offered
Increase Amount, the Borrower may, with the consent of the Administrative
Agent (which consent shall not be unreasonably withheld), offer one or
more additional banks or financial institutions the opportunity to
participate in such portion of the Offered Increase Amount pursuant to
paragraph (d) below. The Borrower or, if requested by the Borrower, the
Administrative Agent, will notify all Lenders, and, if applicable, the
other banks or financial institutions, of such offer.
(c) Any Lender which accepts an offer to it by the Borrower to
increase its Revolving Credit Commitment pursuant to this Section shall,
in each case, execute a Revolving Credit Commitment Increase Supplement
with the Borrower and the Administrative Agent, whereupon such Lender
shall be bound by and entitled to the benefits of this Agreement with
respect to the full amount of its Revolving Credit Commitment as so
increased.
(d) Any additional bank, financial institution or other entity
which the Borrower selects to offer participation in the increased
Revolving Credit Commitments and which elects to become a party to this
Agreement and provide a Revolving Credit Commitment in an amount so
offered and accepted by it pursuant to this Section shall execute a New
Lender Supplement with the Borrower and the Administrative Agent,
whereupon such bank, financial institution or other entity shall become a
Lender for all purposes and to the same extent as if originally a party
hereto and shall be bound by and entitled to the benefits of this
Agreement, provided that the Revolving Credit Commitment of any such new
Lender shall be in an amount not less than $5,000,000.
(e) Notwithstanding anything to the contrary in this Section, (i)
in no event shall any transaction effected pursuant to this Section cause
the aggregate Revolving Credit Commitments to exceed $115,000,000, and
(ii) no Lender shall have any obligation to increase its Revolving Credit
Commitment unless it agrees to do so in its sole discretion.
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2.9 Optional Prepayments. (a) 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 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.
(b) Notwithstanding anything to the contrary in Section 2.16, with
respect to the amount of any optional prepayment described in Section
2.9(a) that is allocated to Term Loans (such amounts, the "Term Loan
Optional Prepayment Amount"), at any time when Revolving Credit Loans
remain outstanding, the Borrower will, in lieu of applying such amount to
the prepayment of Term Loans as provided in paragraph (a) above, on the
date specified in Section 2.9 for such prepayment, give the Administrative
Agent telephonic notice (promptly confirmed in writing) requesting that
the Administrative Agent prepare and provide to each Term Loan Lender a
notice (each, an "Optional Prepayment Option Notice") as described below.
As promptly as practicable after receiving such notice from the Borrower,
the Administrative Agent will send to each Term Loan Lender an Optional
Prepayment Option Notice, which shall be in the form of Exhibit C-1, and
shall include an offer by the Borrower to prepay on the date (each an
"Optional Prepayment Date") that is 10 Business Days after the date of the
Optional Prepayment Option Notice, the Term Loans of such Lender by an
amount equal to the portion of the Term Loan Optional Prepayment Amount
indicated in such Lender's Optional Prepayment Option Notice as being
applicable to such Lender's Term Loans (which prepayment amount shall be
allocated among the Term Loan Lenders pro rata according to the
outstanding principal amounts of the Term Loans held by the Term Loan
Lenders). On the Optional Prepayment Date, (i) the Borrower shall pay to
the Administrative Agent the aggregate amount necessary to prepay that
portion of the outstanding relevant Term Loans in respect of which Term
Loan Lenders have accepted prepayment (such Lenders, the "Optional
Prepayment Accepting Lenders"), and such amount shall be applied to reduce
the Term Loan Optional Prepayment Amounts with respect to each Optional
Prepayment Accepting Lender, (ii) the Borrower shall pay to the
Administrative Agent an amount equal to the portion of the Term Loan
Optional Prepayment Amount not accepted by the Optional Prepayment
Accepting Lenders, and such amount shall be applied to the prepayment of
the Revolving Credit Loans.
(c) Any optional prepayment of the Term Loans pursuant to this
Section 2.9 made on or prior to the date which is (i) prior to the first
anniversary of the Closing Date shall be accompanied by a prepayment fee
(for the ratable account of the Term Loan Lenders receiving such
prepayment) in the amount equal to 2% of the aggregate principal amount so
prepaid or (ii) subsequent to the first anniversary of the Closing Date
and prior to the third anniversary of the Closing Date shall be
accompanied by a prepayment fee (for the ratable account of the Term Loan
Lenders receiving such prepayment) in the amount equal to 1% of the
aggregate principal amount so prepaid.
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2.10 Mandatory Prepayments and Revolving Credit Commitment
Reductions. 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 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 Revolving Credit Commitments as set forth in Section 2.10(e).
(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 Revolving Credit Commitments as
set forth in Section 2.10(e); 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 Revolving Credit Commitments as set forth
in Section 2.10(e).
(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 75% of such
Excess Cash Flow toward the prepayment of the Term Loans (but not toward
reduction of the Revolving Credit Commitments) as set forth in Section
2.10(e). 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) If, at any time, the Aggregate Funded Exposure exceeds the
Borrowing Base then in effect, the Borrower shall, without notice or
demand, immediately repay first, the Revolving Credit Loans and, second,
the Term Loans, in an aggregate principal amount equal to such excess,
together with interest accrued to the date of such payment or prepayment.
To the extent that after giving effect to any prepayment of the Revolving
Credit Loans or Term Loans, as the case may be, required by the preceding
sentence, the Aggregate Funded Exposure exceeds the Borrowing Base
(because L/C Obligations constitute a portion of the Aggregate Funded
Exposure) the Borrower shall, without notice or demand, immediately
deposit in a cash collateral account with an Issuing Lender identified by
the Administrative Agent, having terms and conditions satisfactory to the
Administrative Agent, as collateral security for the liability of the
Issuing Lender (whether direct or contingent) under any Letters of Credit
then outstanding, an aggregate amount equal to the amount by which the
Aggregate Funded Exposure exceeds the Borrowing Base.
(e) Amounts to be applied in connection with Loan prepayments and
Revolving Credit Commitment reductions made pursuant to paragraphs (a),
(b) and (c) of this Section shall be applied first, to the prepayment of
the Term Loans, and, second, to reduce
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permanently the Revolving Credit Commitments; provided, that the
Excess Cash Flow amounts described in Section 2.10(c) shall not reduce the
Revolving Credit Commitments. 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.
(f) Notwithstanding anything to the contrary in Section 2.10(e) or
2.16, with respect to the amount of any mandatory prepayment described in
Section 2.10 that is allocated to Term Loans (such amounts, the "Term Loan
Mandatory Prepayment Amount"), at any time when Revolving Credit Loans
remain outstanding, the Borrower will, in lieu of applying such amount to
the prepayment of Term Loans as provided in paragraph (e) above, on the
date specified in Section 2.10 for such prepayment, give the
Administrative Agent telephonic notice (promptly confirmed in writing)
requesting that the Administrative Agent prepare and provide to each
Lender a notice (each, a "Mandatory Prepayment Option Notice") as
described below. As promptly as practicable after receiving such notice
from the Borrower, the Administrative Agent will send to each Term Loan
Lender a Mandatory Prepayment Option Notice, which shall be in the form of
Exhibit C-2, and shall include an offer by the Borrower to prepay on the
date (each a "Mandatory Prepayment Date") that is 10 Business Days after
the date of the Mandatory Prepayment Option Notice, the Term Loans of such
Lender by an amount equal to the portion of the Mandatory Prepayment
Amount indicated in such Lender's Mandatory Prepayment Option Notice as
being applicable to such Lender's Term Loans. On the Mandatory Prepayment
Date, (i) the Borrower shall pay to the Administrative Agent the aggregate
amount necessary to prepay that portion of the outstanding relevant Term
Loans in respect of which Term Loan Lenders have accepted prepayment as
described above (such Lenders, the "Mandatory Prepayment Accepting
Lenders") and (ii) the Borrower shall pay to the Administrative Agent an
amount equal to the portion of the Mandatory Prepayment Amount not
accepted by the Mandatory Prepayment Accepting Lenders, and such amount
shall be applied to the prepayment of the Revolving Credit Loans and, in
the case of all mandatory prepayments other than those made pursuant to
Section 2.10(c), to the permanent reduction of the Revolving Credit
Commitments in the amount of such prepayment.
(g) Any mandatory prepayment of the Term Loans pursuant to
paragraphs (a) or (b) of this Section 2.10 made on or prior to the date
which is (i) prior to the first anniversary of the Closing Date shall be
accompanied by a prepayment fee (for the ratable account of the Term Loan
Lenders receiving such prepayment) in the amount equal to 2% of the
aggregate principal amount so prepaid or (ii) subsequent to the first
anniversary of the Closing Date and prior to the third anniversary of the
Closing Date shall be accompanied by a prepayment fee (for the ratable
account of the Term Loan Lenders receiving such prepayment) in the amount
equal to 1% of the aggregate principal amount so prepaid.
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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.
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.
(a) Interest Rates and Payment Dates. 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
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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. 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.
(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
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(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 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 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 the Term Loans 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
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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 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. 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,
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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 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,
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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 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 U.S. Person as
defined in Section 7701(a)(30) of the Code (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 W-8BEN or Form W-8ECI,
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 F and a Form W-8BEN, 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.
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(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 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 canceled 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
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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.
3. SECTION LETTERS OF CREDIT
3.1 L/C Commitment. 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 (or Toastmaster, as provided in
Section 3.9) 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 Aggregate Funded
Exposure would exceed the Borrowing Base then in effect, (ii) the L/C
Obligations would exceed the L/C Commitment or (iii) the aggregate 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 Schedules 3.1(d)-1
hereto (each, an "Existing LaSalle Letter of Credit") shall be deemed to be a
Letter of Credit hereunder for all purposes, and LaSalle Bank National
Association shall be deemed to be the Issuing Lender in respect of such Letter
of Credit. Each of the letters of credit identified on Schedule 3.1(d)-2 hereto
(each, an "Existing Fleet Letter of Credit") shall be deemed to be a Letter of
Credit hereunder for all purposes and Fleet 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 the
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
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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. 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.
(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. 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 such amount, times 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 a fraction the numerator of which is the number of days
that elapse during such period and the
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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
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 the 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
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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 Loan 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 (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 the Issuing Lender under the applicable Letter of
Credit shall not have constituted gross negligence or willful misconduct
of the 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
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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.
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.
3.9 Toastmaster as Additional Account Party. Notwithstanding any other
provision of this Agreement, the Borrower may cause Toastmaster to execute and
deliver Applications to an Issuing Lender and to request such Issuing Lender to
issue Letters of Credit for the account of Toastmaster (each such Letter of
Credit, a "Toastmaster Letter of Credit"). In respect of each Toastmaster Letter
of Credit and the Application related thereto, Toastmaster and the Issuing
Lender shall have all rights, duties, obligations and liabilities under this
Agreement, and under applicable law, as the Borrower and the relevant Issuing
Lender, respectively, have in respect of Letters of Credit issued for the
Borrower's account and the related Applications. The Borrower hereby irrevocably
and unconditionally guarantees, as primary obligor, the complete and timely
performance by Toastmaster of all its indebtedness, liabilities and obligations
in respect of each Toastmaster Letter of Credit and the related Application, and
all such indebtedness, liabilities and obligations shall be deemed to be a part
of the Obligations secured and guaranteed pursuant to the Security Documents.
Each Toastmaster Letter of Credit shall constitute a Letter of Credit for all
purposes of this Agreement and the other Loan Documents.
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 as of
the Second Amendment and Restatement Effective Date:
4.1 Financial Condition. The audited consolidated balance sheets of the
Borrower as at June 28, 1996, June 28, 1997, June 27, 1998 and June 26, 1999 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 September
30, 1999, and the related
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unaudited consolidated statements of income and cash flows for the three-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 three-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, 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 26, 1999 to and including the date hereof
there has been no Disposition by the Borrower of any material part of its
business or Property.
4.2 No Change. With respect to the Borrower and its Subsidiaries, since
June 26, 1999 there has been no development or event 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 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).
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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.
4.6 No Material Litigation. Set forth in Schedule 4.6 is a description
of certain litigation to which the Borrower is a party. 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 (including the litigation described on
Schedule 4.6) (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. Schedule 6.9(b) lists all parcels of
real property owned in fee by the Borrower or any Subsidiary (together with
improvements thereon).
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.
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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 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. Schedule 4.15 lists all
Subsidiaries of Toastmaster on the Closing Date. The aggregate book value of all
assets of the Subsidiaries of Toastmaster does not exceed $5,000,000.
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4.16 Use of Proceeds. The proceeds of the Term Loans were used to
finance a portion of the cost of the Borrower's acquisition of Toastmaster, to
pay related fees and expenses and for general corporate purposes. The proceeds
of the Revolving Credit Loans and the Letters of Credit have been used and 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 and including the acquisition described in the Acquisition
Agreements.
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;
(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) 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
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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 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. 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, stock certificates
representing such Pledged Stock having been delivered to the Administrative
Agent, and in the case of the other Collateral described in the Guarantee and
Collateral Agreement, financing statements in appropriate form having been filed
in the offices specified on Schedule 4.19, the Guarantee and Collateral
Agreement constitutes 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, subject to the Lien permitted by Section 7.3(k).
4.20 Solvency. Each Loan Party is, and after giving effect to the
acquisition described in the Acquisition Agreements 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 constitute "Senior Debt" of
the Borrower and its Subsidiaries, as such term is defined in the Seller Note
and the Senior Subordinated Note Indenture, and "Senior Indebtedness" of the
Borrower and its Subsidiaries, as such term is defined in the Foreman
Subordination Agreement.
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
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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, has been completed.
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 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.
4.23 Representations and Warranties in Existing Credit Agreement. The
representations and warranties contained in Section 4 of the Existing Credit
Agreement were true and correct in all material respects on and as of the dates
when made pursuant to the Existing Credit Agreement.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The occurrence of the
Closing Date, and the agreement of each Lender to make the initial extension of
credit requested to be made by on the Closing Date, were 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) Merger, Refinancing, etc. The following transactions shall have
been consummated, in each case on terms and conditions reasonably satisfactory
to the Lenders:
(i) the Borrower's acquisition of Toastmaster shall have been
consummated pursuant to the terms of the Merger Agreement without
waiver, amendment, supplement or other modification of the Merger
Agreement, unless approved by the Syndication Agent;
(ii) the Borrower shall have received at least $125,000,000 gross
proceeds in cash from the issuance of the Senior Subordinated Notes;
and
(iii) the capital structure of the Borrower and its Subsidiaries
after giving effect to the Transactions shall be consistent with the
capital structure of the Borrower and its Subsidiaries as reflected in
the Pro Forma Balance Sheet.
(c) No Other Changes. There shall have been no changes to the capital
structure of the Borrower and its Subsidiaries since September 30, 1998 other
than the
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transactions 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) Former Credit Agreement. The Administrative Agent shall have
received satisfactory evidence that all amounts, including principal, interest,
fees, reimbursement obligations, and other obligations, owing under the Credit
Agreement, dated as of July 27, 1998, among the Borrower, Lehman Brothers Inc.,
as arranger, and Lehman Commercial Paper Inc., as syndication agent,
administrative agent and lender, have been repaid in full or are being repaid in
full with the proceeds of the initial Loans and the proceeds of the Senior
Subordinated Notes on the Closing Date.
(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 1997 and 1998 fiscal years, (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, (iv) audited consolidated financial statements of
Toastmaster for the 1997 fiscal year, and (v) satisfactory unaudited interim
consolidated financial statements of Toastmaster for each quarterly period ended
subsequent to the date of the latest applicable financial statements delivered
pursuant to clause (v) of this paragraph as to which such financial statements
are available, as well as unaudited monthly financial statements for the months
of October and November, 1998, and such financial statements shall not, in the
reasonable judgment of the Lenders, reflect any material adverse change in the
consolidated financial condition of Toastmaster 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
Transactions, 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 Merger Agreement, the Seller Note, the Senior Subordinated Note
Indenture, 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
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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 of the Borrower for fiscal years 1999-2001.
(j) 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 and Toastmaster and its Subsidiaries are located, and such search
shall reveal no liens on any of the assets of the Borrower or its Subsidiaries,
or Toastmaster or its Subsidiaries, except for liens permitted by Section 7.3
and liens to be terminated pursuant to documentation satisfactory to the
Syndication Agent.
(k) Environmental Affairs. The Syndication Agent shall be satisfied
with the environmental affairs of the Borrower and its Subsidiaries and
Toastmaster and its Subsidiaries.
(l) 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 D, with appropriate
insertions and attachments.
(m) Borrowing Base Certificate. The Administrative Agent shall have
received, a Borrowing Base Certificate, dated the Closing Date, substantially in
the form of Exhibit D, with appropriate insertions and attachments.
(n) Legal Opinion. The Administrative Agent shall have received the
following executed legal opinion of Sonnenschein Nath & Rosenthal, counsel to
the Borrower and its Subsidiaries, substantially in the form of Exhibit H. 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 for the benefit of the Lenders 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.
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(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
Transactions 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
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.
(d) Borrowing Notice. The Administrative Agent shall have received a
Borrowing Notice, duly executed by the Borrower, substantially in the form of
Exhibit K.
(e) Borrowing Base Certificate. The Administrative Agent shall have
received a Borrowing Base Certificate, certified by a Responsible Officer of the
Borrower as reasonable estimates prepared in good faith, setting forth the
amount of Eligible Accounts and Eligible Inventory of the Borrower and the
Subsidiary Guarantors, in each case, as of the last day of the previous week,
attached to which shall be detailed information, including an aging schedule of
Accounts.
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.
5.3 Conditions to Second Amendment and Restatement Effective Date. The
Second Amendment and Restatement Effective Date shall be the date of
satisfaction of the following conditions precedent:
(a) Agreement; Second Lender Addenda; Consents. The Administrative
Agent shall have executed this Agreement and shall have received counterparts
hereof executed by the Borrower. The Administrative Agent shall have received a
Second Lender Addendum executed by the Required Lenders and each Lender whose
Revolving Credit Commitment is being
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<PAGE> 56
increased hereby. The Administrative Agent shall have received a Consent
executed by each Loan Party other than the Borrower.
(b) Resolutions. The Administrative Agent shall have received, with a
counterpart for each Lender, a copy of the resolutions, in form and substance
satisfactory to the Administrative Agent, of the Board of Directors of the
Borrower authorizing the execution of the Foreman Acquisition Agreement, the
Foreman Security Agreement, the Foreman Subordination Agreement, the Perlmutter
Acquisition Agreement and the Srednick Acquisition Agreement and the performance
of the Borrower's obligations thereunder and authorizing the execution of this
Agreement and the performance of the Borrower's obligations hereunder and any
borrowings hereunder from time to time, certified by the Secretary or an
Assistant Secretary of the Borrower, as of the Second Amendment and Restatement
Effective Date, which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the date
of such certificate.
(c) Incumbency Certificates. The Administrative Agent shall have
received, to the extent that it has not previously received, certificates of the
Secretary or Assistant Secretary each of the Borrower and the other Loan
Parties, dated the Second Amendment and Restatement Effective Date, as to the
authority, incumbency and signature of each of the officers signing this
Agreement or the Consent, as the case may be, and any other instrument or
document delivered by the Borrower in connection herewith, together with
evidence of the incumbency of each such Secretary or Assistant Secretary.
(d) Legal Opinion. The Administrative Agent shall have received, with a
counterpart for each Lender, an executed legal opinion of Sonnenschein Nath &
Rosenthal, counsel to the Loan Parties, dated the Second Amendment and
Restatement Effective Date and addressed to the Administrative Agent and Lenders
which shall cover such matters incident to this Agreement and the transactions
contemplated hereby as may be reasonably requested by the Administrative Agent.
(e) Acquisition Agreements. The Administrative Agent shall have
received true and complete copies of the Foreman Acquisition Agreement, the
Perlmutter Acquisition Agreement and the Srednick Acquisition Agreement,
certified as such by the Secretary or an Assistant Secretary of the Borrower,
and such agreements shall be in full force and effect and shall not have been
amended, supplemented or otherwise modified.
(f) 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 (including reasonable fees, disbursements and other
charges of counsel to the Agents), on or before the Second Amendment and
Restatement Effective Date. All such amounts will be paid with proceeds of Loans
made on the Commitment Increase Date and will be reflected in the funding
instructions given by the Borrower to the Administrative Agent on or before the
Second Amendment and Restatement Effective Date.
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<PAGE> 57
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 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).
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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 arising from a violation of any of the financial
ratio covenants or other financial covenants set forth in Section 7, 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);
(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
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(f) on the last Business Day of each month, a Borrowing Base
Certificate, certified by a Responsible Officer of the Borrower as reasonable
estimates prepared in good faith, setting forth (i) the amount of Eligible
Accounts and Eligible Inventory of the Borrower and the Subsidiary Guarantors
and (ii) the aggregate amount of cash or Cash Equivalents maintained by the
Borrower and the other Loan Parties in their main operating accounts, in each
case, as of the last day of the previous week, attached to which shall be
detailed information, including an aging schedule of Accounts;
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request including such information
necessary to demonstrate any Loan Party's compliance with Section 6.11.
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. Keep all Property useful and
necessary in its business in good working order and condition, ordinary wear and
tear 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:
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(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.
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 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
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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:
(A) 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)),
(B) any Property designated on Schedule 6.9(b) as Property to be
sold which is not disposed of within 120 days after the Second
Amendment and Restatement Effective Date, and
(C) any Property designated on Schedule 6.9(b) as retained property
(the "Retained Property"),
then, promptly after the acquisition thereof (in the case of properties
described in the foregoing clause (A)), within 120 days after the Second
Amendment and Restatement Effective Date (in the case of properties described in
the foregoing clause (B)), and promptly and in any event within 45 days after
the Second Amendment and Restatement Effective Date (in the case of Retained
Properties), the Borrower will (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 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 (iii) a Standard Flood Hazard Determination Form issued
or certified by a Person satisfactory to Administrative Agent for such real
property that is located on real estate covered by a Mortgage and (iv) if
requested by the Administrative Agent, deliver to the Administrative Agent (A)
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 and (B) a satisfactory environmental audit with respect to
such property. Further, in the event such Standard Flood Hazard Determination
Form evidences that the subject structure or improvement is located in a special
flood hazard, as defined by FEMA, the Borrower shall deliver to the
Administrative Agent and the Lenders evidence of appropriate flood insurance in
amounts and under such conditions as identified in Section 6.2(b). At its own
cost and expense, the Borrower shall obtain and maintain during the term of this
Agreement minimum flood insurance as required by FEMA or any other government
agency or when required by federal, state or local law, statute, regulation or
ordinance and as may be required by the Agent and the Lenders.
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(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.
6.10 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
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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.
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:
7.1 Financial Condition Covenants.
(a) Net Average Total Debt Ratio. Permit the Net Average Total Debt
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to exceed the ratio
set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
<S> <C>
FQ3 1999 through FQ2 2000 4.00:1.00
FQ3 2000 through FQ2 2001 3.75:1.00
FQ3 2001 through FQ2 2002 3.50:1.00
FQ3 2002 through FQ2 2004 3.25:1.00
</TABLE>
(b) Net Average Senior Debt Ratio. Permit the Net Average Senior Debt
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to exceed the ratio
set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
<S> <C>
FQ3 1999 through FQ4 2000 2.00:1.00
FQ1 2001 through FQ4 2002 1.75:1.00
FQ1 2003 through FQ2 2004 1.50:1.00
</TABLE>
(c) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower ending with any fiscal quarter set forth below to be less than the
ratio set forth opposite such fiscal quarter; provided, that for the purposes of
determining the Consolidated Interest Coverage Ratio for FQ3 1999, FQ4 1999 and
FQ1 2000, 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.
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<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
<S> <C>
FQ3 1999 through FQ2 2000 2.00:1.00
FQ3 2000 through FQ2 2001 2.25:1.00
FQ3 2001 through FQ2 2004 2.50:1.00
</TABLE>
(d) Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
of the Borrower ending with any fiscal quarter set forth below to be less than
the ratio set forth opposite such fiscal quarter; provided, that for the
purposes of determining the Consolidated Fixed Charge Coverage Ratio for FQ3
1999, FQ4 1999 and FQ1 2000, Consolidated Fixed Charges for the relevant period
shall be deemed to equal Consolidated Fixed Charges 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.:
<TABLE>
<CAPTION>
FISCAL QUARTER RATIO
<S> <C>
FQ3 1999 1.10:1.00
FQ4 1999 1.15:1.00
FQ1 2000 THROUGH FQ4 2000 1.20:1.00
FQ1 2001 THROUGH FQ2 2004 1.30:1.00
</TABLE>
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;
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(f) (i) Indebtedness of the Borrower in respect of the Senior
Subordinated Notes 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;
(g) Indebtedness of the Borrower in respect of the Seller Note; and
(h) Indebtedness of the Borrower in accordance with the terms described
in the Foreman Acquisition Agreement, the Perlmutter Acquisition Agreement and
the Srednick Acquisition Agreement, in each case in connection with the
acquisition permitted under Section 7.8(i); provided that (i) the Indebtedness
of the Borrower in connection with the Foreman Acquisition Agreement shall be
subordinated in accordance with the terms of the Foreman Subordination Agreement
and (ii) the Indebtedness of the Borrower in connection with the Perlmutter
Acquisition Agreement and the Srednick Acquisition Agreement shall be
subordinated on terms reasonably satisfactory to the Administrative Agent.
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(d), 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;
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(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 filings of financing statements in
respect of equipment leased by the Borrower or its Restricted Subsidiaries in
the ordinary course of business;
(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; and
(k) the Lien created pursuant to the Foreman Security Agreement,
provided that such Lien does not at any time encumber any Property other than
the Property described in Section 4 of the Foreman Security Agreement as of the
Second Amendment and Restatement Effective Date.
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;
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(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 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) $14,000,000 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;
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(e) the Transactions;
(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;
(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; and
(i) in addition to Investments permitted by Section 7.8(g) (and without
Investments under this Section 7.8(i) being included in any calculations under
Section 7.8(g)), Investments constituted by the acquisition described in the
Acquisition Agreements.
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 Notes, the Seller Note or the obligations of
the Borrower under any of the Acquisition Agreements, (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.
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7.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of
the Borrower to end on a day other than the Saturday closest to 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 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),
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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 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
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(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly
Controlled Entity, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion
of the Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or
(vi) any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could, 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 the Borrower; (ii) the board of
directors of the 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
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Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan
Party, the trustee in respect of the Senior Subordinated Notes; or
(m) The Borrower shall default in the observance or performance of any
agreement contained in the Foreman Acquisition Agreement, the Foreman
Subordination Agreement, the Foreman Security Agreement, the Perlmutter
Acquisition Agreement or the Srednick Acquisition Agreement, or any of the
Foreman Acquisition Agreement, the Foreman Security Agreement, the Foreman
Subordination Agreement, the Perlmutter Acquisition Agreement or the Srednick
Acquisition Agreement shall be amended, supplemented or otherwise modified
without the written consent of the Administrative Agent.
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, and (ii)
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
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,
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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 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
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Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, 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 or Issuing Lenders. The Administrative Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders (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 each 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
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case of each Issuing Lender, immediately prior to such date), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (including, without limitation, at any time following the
payment of the Loans) be imposed on, incurred by or asserted against 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.
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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 or
amount 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 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; (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; (vii) amend, modify or waive any provision of
Section 3, Section 9.6 (or any other term hereof affecting the obligations or
rights of any Issuing Lender), without the consent of such Issuing Lender,
(viii) change any Advance Rate without the written consent of Lenders whose
Aggregate Exposure Percentages constitute at least 66 2/3% or (ix) amend, modify
or waive any provision of Section 2.9 or 2.10 without the consent of the
Required Prepayment Lenders. Any such waiver and any such amendment, supplement
or modification shall apply equally to each of
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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 any Lender, as set forth on Schedule 1
to the Second Lender Addendum, delivered by such Lender (or if such Lender did
not deliver a Second Lender Addendum, as set forth in Schedule 1 to the Lender
Addendum delivered by such Lender), 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, Inc.
550 Business Center Drive
Mt. Prospect, Ill. 60056
Attention: William Rue
Telecopy: (847) 803-8080
Telephone: (847) 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.
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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 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
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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. 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.
(a) 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.
(b) 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 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
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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 G, 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.
(c) 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
"canceled". The Register shall be available for inspection by the Borrower or
any Lender (with respect to entries relating to such Lender's Loans) at any
reasonable time and from time to time upon reasonable prior notice.
(d) 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 or to a Lehman Entity or (z) in the case
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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 and/or applicable Term Note, 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 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 and/or Term Loans, as
the case may be, upon request, a new Revolving Credit Note and/or Term Note, as
the case may be, to the order of the Assignor in an amount equal to the
Revolving Credit 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.
(e) 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. 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.
(a) 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
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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;
(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;
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(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 Acknowledgments. 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
about a Lender's investment portfolio in connection with ratings issued with
respect to such Lender (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document or (j) to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty's
professional advisor (so long as such contractual counterparty or professional
advisor to such contractual counterparty agrees to be bound by the provisions of
this Section 10.14).
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
83
<PAGE> 84
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), (i) the Borrower would have been in pro forma
compliance with the covenants in this Agreement if such designation had occurred
on the first day of four consecutive fiscal quarters most recently ended and
(ii) 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.
10.18 Delivery of Lender Addenda. (a) Each Lender that became a party
to this Agreement on the Closing Date became such a party by delivering to the
Administrative Agent, the Syndication Agent and the Borrower a Lender Addendum
duly executed by such Lender, the Borrower, the Administrative Agent and the
Syndication Agent. Each Lender Addendum is deemed incorporated herein by this
reference.
(b) Each Person becoming a Lender on the Second Amendment and
Restatement Effective Date, each Revolving Credit Lender whose Revolving Credit
Commitment is being increased on the Commitment Increase Date and each other
Lender, if any, required to constitute the Required Lenders to approve this
Agreement on the Second Amendment and Restatement Effective Date, shall execute
and deliver to the Administrative Agent a Second Lender Addendum, which shall be
accepted by the Administrative Agent and the Borrower. Each Second Lender
Addendum is deemed incorporated herein by the reference.
10.19 Effect of Amendment and Restatement of the Existing Credit
Agreement. (a) On the Second Amendment and Restatement Date, the Existing Credit
Agreement shall be amended, restated and superseded in its entirety. The parties
hereto acknowledge and agree that (i) this Agreement and the other Loan
Documents, whether executed and delivered in connection herewith or otherwise,
do not constitute a novation, payment and reborrowing, or termination of the
"Obligations" (as defined in the Existing Credit Agreement) under the Existing
Credit Agreement as in effect prior to the Amendment and Restatement Effective
Date; (ii) such "Obligations" are in all respects continuing (as amended and
restated hereby); (iii) the Liens and security interests as granted under the
Security Documents securing payment of such
84
<PAGE> 85
"Obligations" are in all respects continuing and in full force and effect; (iv)
references in the Security Documents to the "Credit Agreement" shall be deemed
to be references to this Agreement, and to the extent necessary to effect the
foregoing, each such Security Document is hereby deemed amended accordingly; and
(v) the participating interest of each Revolving Credit Lender in the Letters of
Credit and the L/C Obligations shall be such Revolving Credit Lender's Revolving
Credit Percentage (after giving effect to the amendments to the Existing Credit
Agreement effected hereby) of such amounts.
(b) On, or as soon as practicable after, the Commitment Increase Date,
the Borrower shall make such borrowings and repayments of Revolving Credit Loans
(to the extent it can do so without incurring any "breakage costs" pursuant to
Section 2.19) such that, after giving effect thereto, the amount of the
Revolving Extensions of Credit of each Revolving Credit Lender will equal such
Revolving Credit Lender's Revolving Credit Percentage of the Total Revolving
Extensions of Credit, and all borrowings and payments in respect of Revolving
Credit Loans following the Commitment Increase Date shall be applied
consistently with the foregoing. To permit the borrowings and repayments
described in the preceding sentence to occur, the provisions of Section 2.16
shall be inapplicable thereto.
10.20 Effectiveness of Revolving Credit Commitment Increases. On, or as
soon as practicable after, the date of any increase in any Lender's Revolving
Credit Commitment pursuant to a Revolving Credit Commitment Increase Supplement
or of any new Revolving Credit Commitment pursuant to a New Lender Supplement,
the Borrower shall make such borrowings and repayments of Revolving Credit Loans
(to the extent it can do so without incurring any "breakage costs" pursuant to
Section 2.19) such that, after giving effect thereto, the amount of the
Revolving Extensions of Credit of each Revolving Credit Lender will equal such
Revolving Credit Lender's Revolving Credit Percentage of the Total Revolving
Extensions of Credit, and all borrowings and payments in respect of Revolving
Credit Loans following the date of such increase in a Lender's Revolving Credit
Commitment or of such new Revolving Credit Commitment, as the case may be, shall
be applied consistently with the foregoing. To permit the borrowings and
repayments described in the preceding sentence to occur, the provisions of
Section 2.16 shall be inapplicable hereto.
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<PAGE> 86
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, INC.
By:
------------------------------------------
Name:
Title:
<PAGE> 87
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:
<PAGE> 88
FLEET NATIONAL BANK, as an Issuing Lender
and as Documentation Agent
By:
------------------------------------------
Name:
Title:
<PAGE> 89
LASALLE BANK NATIONAL ASSOCIATION,
as an Issuing Lender
By:
-------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 12(A)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
SALTON, INC.
<TABLE>
<CAPTION>
26 WEEKS
ENDED YEAR ENDED
12/25/99
(THOUSANDS, EXCEPT RATIOS) (UNAUDITED) 1999 1998 1997 1996 1995
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges
Interest and amortization
of debt issuance costs on
all indebtedness $14,874 $15,864 $7,336 $4,967 $3,934 $3,057
Add interest element
implicit in rentals 989 1,158 521 394 222 211
------- ------ ----- ----- ---- ----
Total fixed charges $15,863 $17,022 $7,857 $5,361 $4,156 $3,268
======= ====== ===== ===== ===== =====
Income
Income before income
taxes $98,935 $53,863 $32,168 $6,400 $1,146 $671
Add fixed charges 15,863 17,022 7,857 5,361 4,156 3,268
------ ------ ----- ----- ----- -----
Income before fixed
charges and income taxes $114,798 $70,885 $40,043 $11,761 $5,302 $3,939
======== ======= ======= ======= ====== ======
Ratio of earnings to
fixed charges 7.24 4.16 5.10 2.19 1.28 1.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from balance
sheet and statement of operations.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUN-27-1999
<PERIOD-END> DEC-25-1999
<CASH> 4,780
<SECURITIES> 0
<RECEIVABLES> 223,304
<ALLOWANCES> 14,500
<INVENTORY> 149,942
<CURRENT-ASSETS> 372,989
<PP&E> 48,511
<DEPRECIATION> (23,373)
<TOTAL-ASSETS> 562,752
<CURRENT-LIABILITIES> 167,056
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 139,864
<TOTAL-LIABILITY-AND-EQUITY> 562,752
<SALES> 489,107
<TOTAL-REVENUES> 489,107
<CGS> 277,246
<TOTAL-COSTS> 294,277
<OTHER-EXPENSES> 81,174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,721
<INCOME-PRETAX> 98,935
<INCOME-TAX> 37,479
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,456
<EPS-BASIC> 5.53
<EPS-DILUTED> 4.00
</TABLE>
