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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): November 19, 1998
THE HOCKEY COMPANY
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(Exact name of registrant specified in Charter)
DELAWARE 0-19596 13-36-32297
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(State or other (Commission (I.R.S. Employee
jurisdiction of File Number) Identification No.)
incorporation)
C/O MASKA U.S., INC., 139 HARVEST LANE
P.O. BOX 1200, WILLISTON, VT 05495
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(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE, INCLUDING AREA CODE: (802) 872-4226
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(Former name and former address, if changed since last report)
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<PAGE>
ITEM 5. OTHER EVENTS.
On November 19, 1998, after the consummation by The Hockey Company
(formerly known as SLM International, Inc.) (the "Company") of the acquisition
of Sports Holding Corp. (the "Acquisition"), General Electric Capital
Corporation ("GECC") and General Electric Capital Canada Inc. ("GE Canada")
provided revolving working capital loans to subsidiaries of the Company in an
aggregate amount equal to $70,000,000.
Pursuant to the Credit Agreement, dated as of November 19, 1998, among
Sport Maska Inc. ("Maska"), a wholly owned subsidiary of the Company, and
Tropsport Acquisitions Inc. ("Tropsport" and together with Maska, the
"Borrowers"), a wholly owned subsidiary of Maska, the other Credit Parties
signatory thereto, GE Canada, for itself, as Lender, and as Agent for Lenders,
and the other Lenders signatory thereto from time to time (the "Canadian Credit
Agreement"), the Lenders extended a revolving term credit facility (the
"Canadian Credit Facility") to Borrowers of up to $35,000,000 in the aggregate
for the purpose of funding certain transaction costs and expenses in connection
with the Acquisition and refinancing certain indebtedness of Tropsport and Maska
and to provide working capital financing for Borrowers and funds for other
general corporate purposes of Borrowers. As of January 31, 1999, $361,788 was
outstanding under the Canadian Credit Facility.
Pursuant to the Credit Agreement, dated as of November 19, 1998, among
Maska U.S., Inc., a wholly owned subsidiary of the Company, and SHC Hockey Inc.,
a wholly owned subsidiary of the Company (collectively, the "U.S. Borrowers"),
the other Credit Parties signatory thereto, GECC, for itself, as Lender, and as
Agent for Lenders, and the other Lenders signatory thereto from time to time
(the "U.S. Credit Agreement"), the Lenders extended a revolving term credit
facility (the "U.S. Credit Facility") to U.S. Borrowers of up to $35,000,000 in
the aggregate (including a Letter of Credit Subfacility for up to $10,000,000)
for the purpose of funding certain transaction costs and expenses in connection
with the Acquisition and refinancing certain indebtedness of the Company and
certain of its subsidiaries and to provide working capital financing for U.S.
Borrowers and funds for other general corporate purposes of U.S. Borrowers. As
of January 31, 1999, $731,445 was outstanding under the U.S. Credit Facility.
The Acquisition was financed with the Canadian dollar equivalent of a
$87,500,000 credit facility (the "Caisse Credit Facility") from Caisse de Depot
et Placement du Quebec ("Caisse") pursuant to a Credit Agreement, dated November
19, 1998 (the "Caisse Credit Agreement") among the Company, Maska and Caisse
which was an exhibit to the Current Report on Form 8-K of the Company filed on
February 9, 1999 with the United States Securities and Exchange Commission. As
of January 31, 1999, $87,500,000 was outstanding under the Caisse Credit
Facility.
The secured parties to each of the Canadian Credit Agreement, the U.S.
Credit Agreement and the Caisse Credit Agreement (the "Secured Parties") have
each obtained assignments, security interests, hypothecs and other liens in
certain assets of the credit parties to each of the Canadian Credit Agreement
and the U.S. Credit Agreement under the assignments, hypothecs, security
agreements and other security documents entered into in connection with the U.S.
Credit Agreement, the Canadian Credit Agreement and the Caisse Credit Agreement.
GECC, GE Canada, Caisse, the Company and certain affiliates of the Company
signatory thereto entered into an Intercreditor Agreement, dated as of November
19, 1998, regarding the relative priority of the respective liens of the Secured
Parties and certain other rights, priorities and interests.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
10.1 Credit Agreement, dated as of November 19, 1998, among Maska
U.S., Inc., SHC Hockey Inc., the other Credit Parties signatory
thereto, General Electric Capital Corporation and the other
Lenders signatory thereto from time to time.
10.2 Credit Agreement, dated as of November 19, 1998, between Sport
Maska Inc., Tropsport Acquisitions Inc., the Company, the other
Credit Parties signatory thereto, the Lenders signatory thereto
from time to time and General Electric Capital Canada Inc.
10.3 Intercreditor Agreement, dated as of November 19, 1998, among
General Electric Capital Corporation, General Electric Capital
Canada Inc., Caisse de Depot et Placement du Quebec, the Company
and certain affiliates of the Company signatory thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Current Report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
THE HOCKEY COMPANY
By: /s/ RUSSELL J. DAVID
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Name: Russell J. David
Title: Senior Vice President, Finance
March 9, 1999
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
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10.1 Credit Agreement, dated as of November 19, 1998, among Maska U.S.
Inc., SHC Hockey Inc., the other Credit Parties signatory
thereto, General Electric Capital Corporation and the other
Lenders signatory thereto from time to time.
10.2 Credit Agreement, dated as of November 19, 1998, between Sport
Maska Inc., Tropsport Acquisitions Inc., the Company, the other
Credit Parties signatory thereto, the Lenders signatory thereto
from time to time and General Electric Capital Canada Inc.
10.3 Intercreditor Agreement, dated as of November 19, 1998, among
General Electric Capital Corporation, General Electric Capital
Canada Inc., Caisse de Depot et Placement du Quebec, the Company
and certain affiliates of the Company signatory thereto.
Execution Copy
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CREDIT AGREEMENT
Dated as of November 19, 1998
among
MASKA U.S., INC. and SHC HOCKEY INC.
as Borrowers
THE OTHER CREDIT PARTIES SIGNATORY HERETO
as Credit Parties
and
THE LENDERS SIGNATORY HERETO FROM TIME TO TIME
as Lenders
and
GENERAL ELECTRIC CAPITAL CORPORATION
as Agent and Lender
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TABLE OF CONTENTS
Page
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SECTION 1. AMOUNT AND TERMS OF CREDIT......................................2
1.1 Credit Facilities................................................2
1.2 Letters of Credit................................................5
1.3 Prepayments......................................................5
1.4 Use of Proceeds..................................................7
1.5 Interest and Applicable Margins..................................8
1.6 Eligible Accounts...............................................11
1.7 Eligible Inventory..............................................13
1.8 Cash Management Systems.........................................15
1.9 Fees............................................................15
1.10 Receipt of Payments.............................................16
1.11 Application and Allocation of Payments..........................16
1.12 Loan Account and Accounting.....................................17
1.13 Indemnity.......................................................18
1.14 Access..........................................................19
1.15 Taxes...........................................................19
1.16 Capital Adequacy; Increased Costs; Illegality...................21
1.17 Single Loan.....................................................23
1.18 Obligations of Canadian Credit Parties..........................23
SECTION 2. CONDITIONS PRECEDENT...........................................23
2.1 Conditions to the Initial Loans.................................23
2.2 Further Conditions to Each Loan.................................25
SECTION 3. REPRESENTATIONS AND WARRANTIES.................................26
3.1 Corporate Existence; Compliance with Law........................26
3.2 Executive Offices; FEIN.........................................27
3.3 Corporate Power, Authorization, Enforceable
Obligations....................................................27
3.4 Financial Statements and Projections and Other
Reports........................................................28
3.5 Material Adverse Effect.........................................29
3.6 Ownership of Property; Liens....................................29
3.7 Labor Matters...................................................30
3.8 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness.........................................30
3.9 Government Regulation...........................................31
3.10 Margin Regulations..............................................31
3.11 Taxes...........................................................31
3.12 ERISA...........................................................32
3.13 No Litigation...................................................33
3.14 Brokers.........................................................33
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Page
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3.15 Intellectual Property...........................................33
3.16 Full Disclosure.................................................34
3.17 Environmental Matters...........................................34
3.18 Insurance.......................................................35
3.19 Deposit and Disbursement Accounts...............................35
3.20 Government Contracts............................................35
3.21 Customer and Trade Relations....................................35
3.22 Agreements and Other Documents..................................36
3.23 Solvency........................................................36
3.24 Reorganization Agreement........................................36
3.25 Status of Ultimate Parent; SHC; WAP; and CCM....................37
3.26 Senior Debt.....................................................37
3.27 Leased Premises.................................................37
3.28 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices............................................37
SECTION 4. FINANCIAL STATEMENTS AND INFORMATION...........................38
4.1 Reports and Notices.............................................38
4.2 Communication with Accountants..................................38
SECTION 5. AFFIRMATIVE COVENANTS..........................................38
5.1 Maintenance of Existence and Conduct of Business................38
5.2 Payment of Obligations..........................................39
5.3 Books and Records...............................................39
5.4 Insurance; Damage to or Destruction of Collateral...............40
5.5 Compliance with Laws............................................42
5.6 Supplemental Disclosure.........................................42
5.7 Intellectual Property...........................................43
5.8 Environmental Matters...........................................43
5.9 Landlords' Agreements, Mortgagee Agreements and
Bailee Letters.................................................44
5.10 Further Assurances..............................................45
5.11 Year 2000 Problems..............................................45
SECTION 6. NEGATIVE COVENANTS.............................................45
6.1 Mergers, Subsidiaries, Etc......................................45
6.2 Investments; Loans and Advances.................................46
6.3 Indebtedness....................................................47
6.4 Employee Loans and Affiliate Transactions.......................50
6.5 Capital Structure and Business..................................50
6.6 Guaranteed Indebtedness.........................................51
6.7 Liens...........................................................51
6.8 Sale of Stock and Assets........................................52
6.9 ERISA...........................................................52
6.10 Financial Covenants.............................................52
6.11 Hazardous Materials.............................................52
6.12 Sale-Leasebacks.................................................52
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Page
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6.13 Cancellation of Indebtedness....................................53
6.14 Restricted Payments.............................................53
6.15 Change of Corporate Name or Location; Change of
Fiscal Year....................................................54
6.16 No Impairment of Intercompany Transfers.........................54
6.17 No Speculative Transactions.....................................54
6.18 Changes Relating to Other Indebtedness..........................54
6.19 Credit Parties Other Than Borrowers; Inactive
Subsidiaries; CCM..............................................55
6.20 Deposit and Disbursement Accounts...............................55
6.21 Intellectual Property Licences; CCM Shareholder's
Agreement......................................................56
6.22 Locations Leased from Designated Quebec Landlords and
Taft Corners Associates........................................56
6.23 Inventory at Warehouse and Distribution Facilities..............56
6.24 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices............................................57
SECTION 7. TERM...........................................................57
7.1 Termination.....................................................57
7.2 Survival of Obligations Upon Termination of Financing
Arrangements...................................................57
SECTION 8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES.........................58
8.1 Events of Default...............................................58
8.2 Remedies........................................................60
8.3 Waivers by Credit Parties.......................................61
SECTION 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT............61
9.1 Assignment and Participations...................................61
9.2 Appointment of Agent............................................63
9.3 Agent's Reliance, Etc...........................................64
9.4 GE Capital and Affiliates.......................................65
9.5 Lender Credit Decision..........................................65
9.6 Indemnification.................................................65
9.7 Successor Agent.................................................66
9.8 Setoff and Sharing of Payments..................................66
9.9 Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.............................................67
SECTION 10. SUCCESSORS AND ASSIGNS.........................................70
10.1 Successors and Assigns..........................................70
SECTION 11. MISCELLANEOUS..................................................70
11.1 Complete Agreement; Modification of Agreement...................70
11.2 Amendments and Waivers..........................................70
11.3 Fees and Expenses...............................................72
11.4 No Waiver.......................................................74
11.5 Remedies........................................................74
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Page
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11.6 Severability....................................................74
11.7 Conflict of Terms...............................................75
11.8 Confidentiality.................................................75
11.9 GOVERNING LAW...................................................75
11.10 Notices.........................................................76
11.11 Section Titles..................................................77
11.12 Counterparts....................................................77
11.13 WAIVER OF JURY TRIAL............................................77
11.14 Press Releases..................................................77
11.15 Reinstatement...................................................78
11.16 Advice of Counsel...............................................78
11.17 No Strict Construction..........................................78
SECTION 12. CROSS-GUARANTY.................................................78
12.1 Cross-Guaranty..................................................78
12.2 Waivers by Borrowers............................................79
12.3 Benefit of Guaranty.............................................79
12.4 Subordination of Subrogation, Etc...............................79
12.5 Election of Remedies............................................80
12.6 Limitation......................................................80
12.7 Contribution with Respect to Guaranty Obligations...............81
12.8 Liability Cumulative............................................82
INDEX OF APPENDICES
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b)(ii) - Form of Swing Line Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Responsible Individual
Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Schedule 3.2 - Executive Offices; FEIN
Schedule 3.4(A) - Financial Statements
Schedule 3.4(B) - Pro Forma
Schedule 3.4(C) - Projections
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Labor Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.11 - Tax Matters
Schedule 3.12 - ERISA Plans
Schedule 3.13 - Litigation
Schedule 3.15 - Intellectual Property
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<PAGE>
Schedule 3.17 - Hazardous Materials
Schedule 3.18 - Insurance
Schedule 3.19 - Deposit and Disbursement Accounts
Schedule 3.20 - Government Contracts
Schedule 3.22 - Material Agreements
Schedule 5.1 - Trade Names
Schedule 6.3 - Indebtedness
Schedule 6.4(a) - Transactions with Affiliates
Schedule 6.7 - Existing Liens
Annex A (Recitals) - Definitions
Annex B (Section 1.2) - Letters of Credit
Annex C (Section 1.8) - Cash Management System
Annex D (Section 2.1(a)) - Schedule of Additional Closing Documents
Annex E (Section 4.1(a)) - Financial Statements and Projections--
Reporting
Annex F (Section 4.1(b)) - Collateral Reports
Annex G (Section 6.10) - Financial Covenants
Annex H (Section 9.9(a)) - Lenders' Wire Transfer Information
Annex I (Section 11.10) - Notice Addresses
Annex J (from Annex A - Commitments as of Closing Date
Commitments definition)
v
<PAGE>
CREDIT AGREEMENT, dated as of November 19, 1998, among MASKA U.S.,
INC., a Vermont corporation ("Maska US"), and SHC HOCKEY INC., a Vermont
corporation ("SHC Hockey") (Maska US and SHC Hockey are sometimes collectively
referred to herein as the "Borrowers" and individually as a "Borrower"), the
other Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a
New York corporation (in its individual capacity, "GE Capital"), for itself, as
Lender, and as Agent for Lenders, and the other Lenders signatory hereto from
time to time.
RECITALS
WHEREAS, Borrowers desire that Lenders extend a revolving credit
facility to Borrowers of up to Thirty-Five Million Dollars ($35,000,000) in the
aggregate (including a Letter of Credit Subfacility of up to $10,000,000) for
the purpose of funding certain transaction costs and expenses in connection with
the Acquisition and refinancing certain indebtedness of SLM International, Inc.,
a Delaware corporation ("Ultimate Parent"), and certain of its Subsidiaries and
to provide (a) working capital financing for Borrowers, and (b) funds for other
general corporate purposes of Borrowers; and for these purposes, Lenders are
willing to make certain loans and other extensions of credit to Borrowers of up
to such amount upon the terms and conditions set forth herein; and
WHEREAS, Ultimate Parent is willing to guarantee all of the
obligations of Borrowers to Agent and Lenders under the Loan Documents (the
"Ultimate Parent Guaranty"); and
WHEREAS, the Guarantors are each willing to guarantee all of the
Obligations of Credit Parties to Agent and Lenders under the Loan Documents to
the extent permitted by applicable law (collectively, the "Subsidiary
Guaranties"); and
WHEREAS, Tropsport Acquisitions Inc., a Canada corporation
("Tropsport"), is willing to guarantee all of the obligations of Ultimate Parent
under the Ultimate Parent Guarantee (the "Tropsport Guaranty"); and
WHEREAS, Credit Parties desire to secure all of their Obligations
under the Loan Documents by granting to Agent, for the benefit of Agent and
Lenders, and to Agent and Lenders, as applicable, a security interest in and
Lien upon all of their existing and after-acquired personal and real property,
subject to the terms of the Intercreditor Agreement; and
WHEREAS, capitalized terms used in this Agreement shall have the
meanings given to them in Annex A. All Annexes, Disclosure Schedules, Exhibits
and other attachments (collectively, "Appendices") hereto, or expressly
identified to this Agreement, are incorporated herein by reference, and taken
together, shall constitute a single agreement. These Recitals shall be construed
as part of the Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the parties hereto agree as follows:
SECTION 1. AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available from time to time until the Commitment
Termination Date its Pro Rata Share of revolving credit advances (each, a
"Revolving Credit Advance"). The Pro Rata Share of the Revolving Loan of any
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder shall be several
and not joint. The aggregate amount of Revolving Credit Advances outstanding
shall not exceed at any time the lesser of (A) the Maximum Amount and (B) the
Aggregate Borrowing Base, in each case less the sum of the Letter of Credit
Obligations and the Swing Line Loan outstanding at such time ("Borrowing
Availability"). Moreover, the sum of the Revolving Loan and Swing Line Loan
outstanding to either Borrower shall not exceed at any time that Borrower's
separate Borrowing Base. Until the Commitment Termination Date, Borrowers may
from time to time borrow, repay and reborrow under this Section 1.1(a). Each
Revolving Credit Advance shall be made on notice by Borrower Representative on
behalf of the applicable Borrower to the representative of Agent identified on
Schedule 1.1 at the address specified thereon. Those notices must be given no
later than (1) 11:00 a.m. (New York time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m.
(New York time) on the date which is three (3) Business Days prior to the
proposed Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice
(a "Notice of Revolving Credit Advance") must be given in writing (by telecopy
or overnight courier) substantially in the form of Exhibit 1.1(a)(i), and shall
include the information required in such Exhibit, as such may be amended,
modified, supplemented or restated by Agent from time to time in its sole
discretion, acting reasonably. If either Borrower desires to have a Revolving
Credit Advance bear interest by reference to a LIBOR Rate, Borrower
Representative must comply with Section 1.5(e).
(ii) Each Borrower shall execute and deliver to each Revolving
Lender a promissory note to evidence the Revolving Loan Commitment of that
Revolving Lender. Each note shall be in the principal amount of the Revolving
Loan Commitment of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(ii) (each a "Revolving Note" and,
collectively, the "Revolving Notes"). Each Revolving Note shall represent the
obligation of each Borrower to pay the amount of each Revolving Lender's
Revolving Loan Commitment or, if less, the applicable Revolving Lender's Pro
Rata Share of the aggregate unpaid
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<PAGE>
principal amount of all Revolving Credit Advances to such Borrower together with
interest thereon as prescribed in Section 1.5. The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall be
immediately due and payable in full on the Commitment Termination Date.
(b) Swing Line Facility.
(i) Swing Line Advances. Agent shall notify the Swing Line
Lender upon Agent's receipt of any Notice of Revolving Credit Advance. Subject
to the terms and conditions hereof, the Swing Line Lender may, in its
discretion, make available from time to time until the Commitment Termination
Date advances (each, a "Swing Line Advance") in accordance with any such notice.
The aggregate amount of Swing Line Advances outstanding shall not exceed the
lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum Amount
and the Aggregate Borrowing Base, in each case, less the outstanding balance of
the Revolving Loan at such time ("Swing Line Availability"). Moreover, the Swing
Line Loan outstanding to any Borrower shall not exceed at any time that
Borrower's separate Borrowing Base less the Revolving Loan outstanding to such
Borrower. Until the Commitment Termination Date, Borrowers may from time to time
borrow, repay and reborrow under this Section 1.1(b). Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit Advance delivered to
Agent by Borrower Representative on behalf of the applicable Borrower in
accordance with Section 1.1(a). Those notices must be given no later than 11:00
a.m. (New York time) on the Business Day of the proposed Swing Line Advance.
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan. Borrowers
shall repay the aggregate outstanding principal amount of the Swing Line Loan
upon demand therefor by Agent.
(ii) Swing Line Notes. Each Borrower shall execute and deliver
to the Swing Line Lender a promissory note to evidence the Swing Line
Commitment. Each note shall be in the principal amount of the Swing Line
Commitment of the Swing Line Lender, dated the Closing Date and substantially in
the form of Exhibit 1.1(b)(ii) (each a "Swing Line Note" and, collectively, the
"Swing Line Notes"). Each Swing Line Note shall represent the joint and several
obligation of each Borrower to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances made
to such Borrower together with interest thereon as prescribed in Section 1.5.
The entire unpaid balance of the Swing Line Loan and all other non-contingent
Obligations shall be immediately due and payable in full on the Commitment
Termination Date if not sooner paid in full.
(iii) Refunding of Swing Line Loans. The Swing Line Lender, at
any time and from time to time in its sole and absolute discretion, but no less
frequently than once weekly, shall on behalf of either Borrower (and each
Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its
behalf) request each Revolving Lender (including the Swing Line Lender) to make
a Revolving Credit
3
<PAGE>
Advance to such Borrower (which shall be an Index Rate Loan) in an amount equal
to such Revolving Lender's Pro Rata Share of the principal amount of such
Borrower's Swing Line Loan (the "Refunded Swing Line Loan") outstanding on the
date such notice is given. Unless any of the events described in Sections 8.1(h)
or 8.1(i) shall have occurred (in which event the procedures of Section
1.1(b)(iv) shall apply) and regardless of whether the conditions precedent set
forth in this Agreement to the making of a Revolving Credit Advance are then
satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata
Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to
3:00 p.m. (New York time), on the Business Day next succeeding the date such
notice is given. The proceeds of such Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan of the applicable Borrower.
(iv) Participation in Swing Line Loans. If, prior to refunding
a Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(b)(iii), one of the events described in Sections 8.1(h) or 8.1(i) shall have
occurred, then, subject to the provisions of Section 1.1(b)(v) below, each
Revolving Lender will, on the date such Revolving Credit Advance was to have
been made for the benefit of the applicable Borrower, purchase from the Swing
Line Lender an undivided participation interest in the Swing Line Loan to such
Borrower in an amount equal to its Pro Rata Share of such Swing Line Loan. Upon
request, each Revolving Lender will promptly transfer to the Swing Line Lender
the amount of its participation.
(v) Revolving Lenders' Obligations Unconditional. Each
Revolving Lender's obligation to make Revolving Credit Advances in accordance
with Section 1.1(b)(iii) and to purchase participating interests in accordance
with Section 1.1(b)(iv) shall be absolute and unconditional and shall not be
affected by any circumstance, including (A) any right of set-off, counterclaim,
recoupment, defense or other right which such Revolving Lender may have against
the Swing Line Lender, any Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of any Borrower to satisfy the conditions precedent
to borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Section 1.1(b)(iii) or
1.1(b)(iv), as the case may be, the Swing Line Lender shall be entitled to
recover such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.
(c) Reliance on Notices; Appointment of Borrower Representative.
Agent shall be entitled to rely upon, and shall be fully protected in relying
upon, any Notice of Revolving Credit Advance, Notice of Conversion/Continuation
or similar notice believed by Agent to be genuine. Agent may assume that each
Person executing and delivering
4
<PAGE>
such a notice was duly authorized, unless the responsible individual acting
thereon for Agent has actual knowledge to the contrary. Each Borrower hereby
designates Borrower Representative as its representative and agent on its behalf
for the purposes of issuing Notices of Revolving Credit Advance and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement of
the proceeds of the Loans, selecting interest rate options, requesting Letters
of Credit, giving and receiving all other notices and consents hereunder or
under any of the other Loan Documents and taking all other actions (including in
respect of compliance with covenants) on behalf of either Borrower or Borrowers
under the Loan Documents. Borrower Representative hereby accepts such
appointment. Agent and each Lender may regard any notice or other communication
pursuant to any Loan Document from Borrower Representative as a notice or
communication from both Borrowers, and may give any notice or communication
required or permitted to be given to either Borrower or Borrowers hereunder to
Borrower Representative on behalf of such Borrower or Borrowers. Each Borrower
agrees that each notice, election, representation and warranty, covenant,
agreement and undertaking made on its behalf by Borrower Representative shall be
deemed for all purposes to have been made by such Borrower and shall be binding
upon and enforceable against such Borrower to the same extent as if the same had
been made directly by such Borrower.
1.2 Letters of Credit.
Subject to and in accordance with the terms and conditions contained
herein and in Annex B, Borrower Representative, on behalf of the applicable
Borrower, shall have the right to request, and Revolving Lenders agree to incur,
or purchase participations in, Letter of Credit Obligations in respect of either
Borrower.
1.3 Prepayments.
(a) Voluntary Prepayments.
Borrowers may at any time on at least five (5) Business Days' prior
written notice by Borrower Representative to Agent terminate the Revolving Loan
Commitment; provided that upon such termination, all Loans and other Obligations
shall be immediately due and payable in full. Any such voluntary prepayment and
any such termination of the Revolving Loan Commitment prior to the first
anniversary of the Closing Date must be accompanied by the payment of the fee
required by Section 1.9(c), if any, plus the payment of any LIBOR funding
breakage costs in accordance with Section 1.13(b). Upon any such prepayment and
termination of the Revolving Loan Commitment, each Borrower's right to request
Revolving Credit Advances, or request that Letter of Credit Obligations be
incurred on its behalf, or request Swing Line Advances, shall simultaneously be
terminated.
(b) Mandatory Prepayments.
(i) If the outstanding balance of the Revolving Loan of either
Borrower exceeds such Borrower's separate Borrowing Base at any time less the
outstanding balance of the Swing Line Loan of such Borrower at such time, the
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Borrowers shall immediately repay its Revolving Credit Advances to the extent
required to eliminate such excess (and, if necessary, shall provide cash
collateral for Letter of Credit Obligations as described in Annex B hereto).
(ii) Immediately upon receipt by any Credit Party of cash
proceeds of any asset disposition (including condemnation proceeds, but
excluding proceeds of asset dispositions permitted by Section 6.8 (a)) or any
sale of Stock of any Subsidiary of any Credit Party, Borrowers shall, subject to
the Intercreditor Agreement, prepay the Loans (in the case of proceeds
pertaining to any Credit Party other than Borrowers, to be applied ratably to
all of the Loans owing by each Borrower) in an amount equal to all such cash
proceeds, net of (A) commissions and other reasonable and customary transaction
costs, fees, discounts and expenses properly attributable to such transaction
and payable by a Credit Party in connection therewith (in each case, paid to
non-Affiliates) including, without limitation, reasonable and customary fees
payable to legal counsel, accountants and other professionals, (B) transfer
taxes, (C) amounts payable to holders of senior Liens with respect to any assets
subject to such disposition (to the extent such Liens constitute Permitted
Encumbrances; except that, with respect to any amount payable to the Caisse
Secured Parties, such amount may only be paid to the Caisse Secured Parties if
the Caisse Secured Parties have given the requisite notice pursuant to the
Intercreditor Agreement), if any, (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith, and (E) such other reserves as
Agent may permit from time to time, acting reasonably, including, for
indemnification obligations or amounts held in escrow. If Ultimate Parent shall
receive any such proceeds, Borrower shall prepay the Loans in an amount equal to
the net amount, as calculated above multiplied by a fraction equal to the sum of
the aggregate amount of the Loans plus the revolving loans, swing line loans and
letter of credit obligations divided by the aggregate outstanding amount of the
loan under the Canadian Facility. Any such prepayment shall be applied in
accordance with clause (c) below.
(iii) If Ultimate Parent issues Stock, no later than the
Business Day following the date of receipt of the proceeds thereof, Borrowers
shall prepay the Loans, to be applied ratably to all of the Loans owing by each
Borrower in an amount equal to all such proceeds, net of underwriting discounts
and commissions and other reasonable costs paid to non-Affiliates in connection
therewith, multiplied by a fraction equal to the aggregate outstanding amount of
the Loans divided by the sum of the aggregate outstanding amount of the Loans
plus the revolving loans, swing line loans and letter of credit obligations
under the Canadian Facility. Any such prepayment shall be applied in accordance
with clause (c) below.
(iv) In the case of receipt by any Credit Party (other than
Borrowers and any Credit Party not organized in the United States) of proceeds
as described in clauses (ii) and (iii) above, such Credit Party shall distribute
or contribute such proceeds to Borrowers to fund the prepayment required under
clause (ii) or (iii), as applicable.
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(c) Application of Certain Mandatory Prepayments.
Any prepayments made by either Borrower pursuant to clauses (b)(ii),
(b)(iii), or (b)(iv) above shall be applied as follows: first, to Fees and
reimbursable expenses of Agent then due and payable pursuant to any of the Loan
Documents; second, to interest then due and payable on such Borrower's Swing
Line Loan; third, to the principal balance of such Borrower's Swing Line Loan,
until the same shall have been repaid in full; fourth, to interest then due and
payable on such Borrower's Revolving Credit Advances; fifth, to the principal
balance of the Revolving Credit Advances outstanding to such Borrower until the
same shall have been repaid in full; sixth, to provide cash collateral for any
Letter of Credit Obligations of such Borrower in the manner set forth in Annex
B, until all such Letter of Credit Obligations have been fully cash
collateralized in the manner set forth in Annex B; seventh, to interest then due
and payable on the Swing Line Loan of the other Borrower, pro rata; eighth, to
the principal balance of the Swing Line Loan outstanding to the other Borrower,
pro rata, until the same shall have been repaid in full; ninth, to interest then
due and payable on the Revolving Credit Advances outstanding to the other
Borrower, pro rata; tenth, to the principal balance of the Revolving Credit
Advances made to the other Borrower, pro rata, until the same shall have been
paid in full, and last to provide cash collateral for any Letter of Credit
Obligations of the other Borrower, pro rata, to provide cash collateral therefor
in the manner set forth in Annex B, until all such Letter of Credit Obligations
have been fully cash collateralized. Neither the Revolving Loan Commitment nor
the Swing Line Commitment shall be permanently reduced by the amount of any such
prepayments.
(d) Application of Prepayments from Insurance Proceeds.
Prepayments from insurance proceeds in accordance with Section
5.4(c) shall be applied subject to the terms of the Intercreditor Agreement as
follows: first, to the Swing Line Loans and, second, to the Revolving Credit
Advances of the Borrowers in such order as determined by Agent. Neither the
Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments.
(e) No Consent Construed.
Nothing in this Section 1.3 shall be construed to constitute Agent's
or any Lender's consent to any transaction referred to in clauses (b)(ii) and
(b)(iii) above which is not permitted by other provisions of this Agreement or
the other Loan Documents.
1.4 Use of Proceeds.
Borrowers shall utilize the proceeds of the Revolving Loan and the
Swing Line Loan made on the Closing Date solely for certain transaction costs
and expenses in connection with the Acquisition and the Refinancing and Loans
made after the Closing Date will be used for the financing of Borrowers'
ordinary working capital and general corporate needs (but excluding, in any
event, the making of any Restricted Payment not specifically permitted by
Section 6.14). Disclosure Schedule 1.4 contains a description of Borrowers'
sources and uses of funds as of the Closing Date, including Loans and Letter of
Credit Obligations to be made or
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incurred on that date, and a funds flow memorandum detailing how funds from each
source are to be transferred to particular uses.
1.5 Interest and Applicable Margins.
(a) Borrowers shall pay interest to Agent, for the ratable benefit
of Lenders in accordance with the various Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the following rates: (i)
with respect to Revolving Credit Advances, the Index Rate plus the Applicable
Index Margin per annum, or at the election of Borrower Representative, the
applicable LIBOR Rate plus the Applicable LIBOR Margin per annum, based on the
aggregate Revolving Credit Advances outstanding from time to time; and (ii) with
respect to the Swing Line Loan, the Index Rate plus the Applicable Index Margin
per annum.
The Applicable Index Margin and Applicable LIBOR Margin will be
0.50% and 2.00% per annum, respectively, as of the Closing Date. The Applicable
Margins will be adjusted (up or down) prospectively on a quarterly basis as
determined by Ultimate Parent's consolidated financial performance for the four
(4) most recently ended Fiscal Quarters as described below, commencing with the
date specified below upon delivery to Lenders and Agent of Ultimate Parent's
quarterly Financial Statements for the third Fiscal Quarter ending September 30,
1999. Adjustments in Applicable Margins will be determined by reference to the
following grids:
IF OPERATING CASH LEVEL OF
FLOW RATIO IS: APPLICABLE MARGINS:
-------------- -------------------
> 3.25 Level I
> 2.50, but </= 3.25 Level II
> 2.00, but </= 2.50 Level III
> 1.50, but </= 2.00 Level IV
</= 1.5 Level V
APPLICABLE MARGINS
------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------- -------- --------- -------- -------
Applicable Index Margin 0.25% 0.25% 0.50% 0.75% 1.00%
Applicable LIBOR Margin 1.50% 1.75% 2.00% 2.25% 2.50%
All such adjustments in the Applicable Margins after the third
Fiscal Quarter ending September 30, 1999 will be implemented quarterly on the
basis of Ultimate Parent's consolidated financial performance for the then most
recently ended four (4) Fiscal Quarters, as evidenced by the unaudited or annual
audited (as applicable) Financial Statements of Ultimate
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Parent evidencing the need for an adjustment. If such Financial Statements are
delivered to Lenders and Agent on or before the fifth Business Day following the
due date for delivery of such Financial Statements, such adjustment shall be
made (a) retroactively as of the first day of the month in which such statements
are delivered with respect to interest on Index Rate Loans (unless such
Statements are delivered on or after the fifth day preceding the last day of a
calendar month, in which case, clause (b) shall apply) and Agent shall
retroactively adjust such Loan Account balances accordingly, and (b)
prospectively, with respect to interest on LIBOR Loans, and with respect to
interest on Index Rate Loans in the circumstances in which clause (a) does not
apply, as of the fifth Business Day following delivery of such Financial
Statements. Concurrently with the delivery of those Financial Statements,
Borrower Representative shall deliver to Agent and Lenders a certificate, signed
by the Senior Vice-President, Finance of Ultimate Parent, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins. Failure to deliver such Financial Statements within five (5)
Business Days following the due date for delivery thereof shall, in addition to
any other remedy provided for in this Agreement, result in an increase in the
Applicable Margins to the highest level set forth in the foregoing grid, until
the first day of the first calendar month following the delivery of those
Financial Statements demonstrating that such an increase is not required. If a
Default or an Event of Default shall have occurred or be continuing at the time
any reduction in the Applicable Margins is to be implemented, that reduction
shall be deferred until the first day of the first calendar month following the
date on which such Default or Event of Default is waived or cured.
(b) If any payment on any Loan becomes due and payable on a day
other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a three hundred and sixty (360)
day year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. The Index Rate shall be determined
each day based upon the Index Rate as in effect each day. Each determination by
Agent of an interest rate and Fees hereunder shall be conclusive, absent
manifest error.
(d) So long as a Default shall have occurred and be continuing under
Section 8.1(a), (h) or (i) or so long as any Event of Default shall have
occurred and be continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the interest rates applicable to the Loans and the Letter of
Credit Fees shall be increased by two percent (2%) per annum above the rates of
interest or the rate of such Fees otherwise applicable hereunder ("Default
Rate"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.
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(e) So long as no Default or Event of Default shall have occurred
and be continuing, and subject to the additional conditions precedent set forth
in Section 2.2, Borrower Representative shall have the option to (i) request
that any Revolving Credit Advances be made as a LIBOR Loan, (ii) convert at any
time all or any part of outstanding Loans (other than the Swing Line Loan) from
Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an Index Rate
Loan, subject to payment of LIBOR breakage costs, if any, in accordance with
Section 1.13(b) if such conversion is made prior to the expiration of the LIBOR
Period applicable thereto, or (iv) continue all or any portion of any Loan
(other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the
applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan
shall commence on the last day of the LIBOR Period of the Loan to be continued.
Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in
a minimum amount of $1,000,000 and integral multiples of $250,000 in excess of
such amount. Any such election must be made by 11:00 a.m. (New York time) on the
third (3rd) Business Day prior to (1) the date of any proposed Revolving Credit
Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR
Period with respect to any LIBOR Loans to be continued as such, or (3) the date
on which Borrower Representative wishes to convert any Index Rate Loan to a
LIBOR Loan for a LIBOR Period designated by Borrower Representative in such
election. If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(New York time) on the third (3rd) Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default shall have
occurred and be continuing or if the additional conditions precedent set forth
in Section 2.2 shall not have been satisfied), that LIBOR Loan shall be
converted to an Index Rate Loan at the end of its LIBOR Period. Borrower
Representative must make such election by notice to Agent in writing, by
telecopy or overnight courier. In the case of any conversion or continuation,
such election must be made pursuant to a written notice (a "Notice of
Conversion/Continuation") in the form of Exhibit 1.5(e).
(f) Notwithstanding anything to the contrary set forth in this
Section 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest which would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest hereunder shall be paid at the
rate(s) of interest and in the manner provided in Sections 1.5(a) through (e)
above, unless and until the rate of interest again exceeds the Maximum Lawful
Rate, and at that time this paragraph shall again apply. In no event shall the
total interest received by any Lender pursuant to the terms hereof exceed the
amount which such Lender could lawfully have received had the
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interest due hereunder been calculated for the full term hereof at the Maximum
Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. If, notwithstanding the provisions of this Section 1.5(f),
a court of competent jurisdiction shall finally determine that a Lender has
received interest hereunder in excess of the Maximum Lawful Rate, Agent shall,
to the extent permitted by applicable law, promptly apply such excess in the
order specified in Section 1.11 and thereafter shall refund any excess to
Borrowers or as a court of competent jurisdiction may otherwise order.
1.6 Eligible Accounts.
Based on the most recent Borrowing Base Certificate delivered by
each Borrower to Agent and on other information available to Agent, Agent shall
in its reasonable credit judgment determine which Accounts of each Borrower
shall be "Eligible Accounts" for purposes of this Agreement. In determining
whether a particular Account of either Borrower constitutes an Eligible Account,
Agent shall not include any such Account to which any of the exclusionary
criteria set forth below applies. Agent reserves the right, at any time and from
time to time after the Closing Date, upon prior written notice (which, if given
by telecopier only, shall be sufficient notwithstanding Section 11.10) to
Borrower Representative (provided that such notice shall not in any way limit
Agent's discretion under this Section 1.6), to adjust any such criteria or
establish or to modify Reserves in its reasonable credit judgment, including,
without limitation, based on changes, following the Closing Date, in the
collectibility of Accounts, subject to the approval of Supermajority Revolving
Lenders in the case of adjustments or modifications of Reserves which have the
effect of making more credit available. Eligible Accounts shall not include any
Account of any Borrower:
(a) which does not arise from the sale of goods or the performance
of services by such Borrower in the ordinary course of its business;
(b) (i) upon which such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) as to which such Borrower is not able to bring suit or otherwise enforce
its remedies against the Account Debtor through judicial process or (iii) if the
Account represents a progress billing consisting of an invoice for goods sold or
used or services rendered pursuant to a contract under which the Account
Debtor's obligation to pay that invoice is subject to such Borrower's completion
of further performance under such contract or is subject to the equitable lien
of a surety bond issuer;
(c) in the event that any defense, counterclaim, set-off or dispute
is asserted as to such Account;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
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<PAGE>
(e) with respect to which an invoice or other statement of account,
acceptable to Agent in form and substance, acting reasonably, has not been sent
to the applicable Account Debtor;
(f) that (i) is not owned by such Borrower or (ii) is subject to any
right, claim, security interest or other interest of any other Person, other
than (A) Liens in favor of Agent, on behalf of itself and Lenders, as
appropriate, (B) the Term Loan Liens and (C) the Canadian Facility Liens;
(g) that arises from a sale or performance of services to any
director, officer, other employee or Affiliate of any Credit Party, or to any
entity which has any common officer or director with any Credit Party;
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and such Borrower, if
necessary or desirable, has complied with the Federal Assignment of Claims Act
of 1940, and any amendments thereto, with respect to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country unless payment thereof is assured by a letter of credit assigned and
delivered to Agent, satisfactory to Agent as to form, amount and issuer;
(j) to the extent such Borrower or any Subsidiary thereof is liable
for goods sold or services rendered by the applicable Account Debtor to such
Borrower or any Subsidiary thereof but only to the extent of the potential
offset;
(k) that arises with respect to goods which are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default; provided, that, without limiting the
generality of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(i) it is not paid within the earlier of: sixty (60) days
following its due date with respect to Accounts due within ninety (90) days from
the date of the original invoice or thirty (30) days following the due date with
respect to other Accounts with dating terms;
(ii) if any Account Debtor obligated upon such Account
suspends business, makes a general assignment for the benefit of creditors or
fails to pay its debts generally as they come due;
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(iii) if any petition is filed by or against any Account
Debtor obligated upon such Account under any bankruptcy law or any other
federal, state or foreign (including any provincial) receivership, insolvency
relief or other law or laws for the relief of debtors; or
(iv) if an Account is not due within 210 days of the date of
the most recent Borrowing Base Certificate which has been delivered to Agent;
(m) which is the obligation of an Account Debtor if fifty percent
(50%) or more of the dollar amount of all Accounts owing by that Account Debtor
are ineligible under the other criteria set forth in this Section 1.6;
(n) as to which Agent, on behalf of itself and Lenders, does not
have therein a first priority perfected Lien;
(o) as to which any of the representations or warranties pertaining
to Accounts set forth in any of the Loan Documents is untrue;
(p) to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;
(q) to the extent such Account exceeds any credit limit established
by Agent for the applicable Account Debtor, in its reasonable discretion,
following prior notice of such limit by Agent to Borrower Representative;
(r) to the extent that such Account, together with all other
Accounts owing by such Account Debtor and its Affiliates as of any date of
determination exceed ten percent (10%) of all Eligible Accounts except for
Accounts of the following debtors: Canadian Tire Corp. Limited, Marchand Unis
Inc., Sports Authority Inc., Wal-Mart Stores, Forzani Group Ltd., Sears Roebuck
Co., and Sports Distributor, or such other Account Debtors as may from time to
time be specified by Borrowers and approved by Agent, in its reasonable credit
judgment;
(s) which is payable in any currency other than Dollars; or
(t) which is unacceptable to Agent in its reasonable credit
judgment.
1.7 Eligible Inventory.
Based on the most recent Borrowing Base Certificate delivered by
each Borrower to Agent and on other information available to Agent, Agent shall
in its reasonable credit judgment determine which Inventory of either Borrower
shall be "Eligible Inventory" for purposes of this Agreement. In determining
whether any particular Inventory of any Borrower constitutes Eligible Inventory,
Agent shall not include any such Inventory to which any of the exclusionary
criteria set forth below applies. Agent reserves the right, at any time and from
time to time after the Closing Date, upon prior written notice (which if given
by telecopier shall be
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sufficient notwithstanding Section 11.10) to Borrower Representative (provided
that such notice shall not in any way limit Agent's discretion under Section
1.7), to adjust any such criteria or establish and to modify Reserves, in its
reasonable credit judgment, in accordance with this Agreement, including,
without limitation, based on its determination that any Inventory is excess
subject to the approval of Supermajority Revolving Lenders in the case of
adjustments or modification of Reserves which have the effect of making more
credit available. Eligible Inventory shall not include any Inventory of either
Borrower that:
(a) is not owned by such Borrower free and clear of all Liens and
rights of any other Person (including the rights of a purchaser that has made
progress payments and the rights of a surety that has issued a bond to assure
such Borrower's performance with respect to that Inventory), except (i) the
Liens in favor of Agent, on behalf of itself and Lenders, (ii) Permitted
Encumbrances in favor of landlords and bailees to the extent permitted in
Section 5.9 hereof (subject to Reserves established by Agent in accordance with
Section 5.9 hereof), (iii) the Term Loan Liens and (iv) the Canadian Facility
Liens;
(b) is (i) not located on premises owned or leased by such Borrower,
or (ii) stored with a bailee, warehouseman or similar Person, unless Agent has
given its prior consent thereto and unless (x) a satisfactory bailee letter or
landlord waiver has been delivered to Agent, or (y) Reserves satisfactory to
Agent, applying its reasonable credit judgment, have been established with
respect thereto, or (iii) located at any site if the aggregate book value of
Inventory at any such location is less than $100,000, or (iv) not located in
Ontario or Quebec;
(c) is placed on consignment or is in transit, unless, if in
transit, such Inventory is in transit between Borrowers' locations in Williston,
Georgia and South Burlington, Vermont;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except (a) the Liens in favor of Agent, on behalf of itself
and Lenders, or in favor of Agent and Lenders as appropriate, and (b) the Term
Loan Liens and the Canadian Facility Liens;
(e) in Agent's reasonable determination, is unsalable, shopworn,
seconds or damaged;
(f) consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement parts (other
than replacement parts held for sale in the ordinary course of business);
(g) consists of goods which have been returned by the buyer and are
not being held for resale;
(h) is not of a type held for sale in the ordinary course of
Borrowers' business;
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(i) as to which Agent, on behalf of itself and Lenders, does not
have therein a first priority perfected Lien;
(j) as to which any of the representations or warranties pertaining
to Inventory set forth in this Agreement or any other Loan Document is untrue;
(k) consists of any costs associated with "freight-in" charges;
(l) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance acceptable to Agent;
(n) is subject to a License from a Person (other than a Credit
Party) which could restrict Agent, Lenders and/or their agents from exercising
their rights and remedies in respect of such Inventory and Agent does not hold a
Consent and Acknowledgement Respecting Intellectual Property duly executed by
such Person substantially in the form of the Consents and Acknowledgements
Respecting Intellectual Property executed by the European Subsidiaries on or
before the Closing Date, and otherwise in form and substance satisfactory to
Agent;
(o) is Inventory that is associated with or related to Intellectual
Property in respect of which any Person claims that the use of that Intellectual
Property interferes with or infringes upon such Person's rights therein; or
(p) is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.8 Cash Management Systems.
On or prior to the Closing Date, Borrowers will establish and will
maintain until the Termination Date, the cash management systems described on
Annex C (the "Cash Management Systems").
1.9 Fees.
(a) Borrowers shall pay to GE Capital, individually, the Fees
specified in that certain fee letter, dated as of October 6, 1998, between
Ultimate Parent, Maska US, GE Capital and others as supplemented by the
supplemental fee letter, dated as of the Closing Date, between the Credit
Parties, GE Capital Canada and GE Capital (collectively, as amended, modified,
or restated from time to time, the "GE Capital Fee Letter"), at the times
specified for payment therein.
(b) As additional compensation for the Revolving Lenders, Borrowers
agree to pay to Agent, for the ratable benefit of such Revolving Lenders, in
arrears, on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a fee for Borrowers'
non-use of available funds in an
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amount equal to three-eighths of one percent (0.375%) per annum (calculated on
the basis of a 360 day year for actual days elapsed) of the difference between
(x) the Maximum Amount and (y) the average for the period of the daily closing
balances of the Revolving Loan and the Swing Line Loan outstanding during the
period for which such fee is due.
(c) If Borrowers prepay the Revolving Loan and terminate the
Revolving Loan Commitment before the first anniversary of the Closing Date,
whether voluntarily or involuntarily and whether before or after acceleration of
the Obligations, Borrowers shall pay to Agent, for the ratable benefit of
Lenders as liquidated damages and compensation for the costs of being prepared
to make funds available hereunder and not as a penalty, an amount equal to
$350,000. Notwithstanding the foregoing, for greater certainty, no prepayment
fee shall be payable by Borrowers upon a mandatory prepayment made pursuant to
Sections 1.3(b) or 1.16(c); provided that, in the case of prepayments made
pursuant to Section 1.3(b)(ii) or (b)(iii), the transaction giving rise to the
applicable prepayment is expressly permitted under Section 6.
1.10 Receipt of Payments.
Borrowers shall make each payment under this Agreement or any Loan
Document not later than 2:00 p.m. (New York time) on the day when due in Dollars
to the Collection Account. For purposes of computing interest and Fees and
determining Borrowing Availability or Net Borrowing Availability as of any date,
all payments shall be deemed received on the day of receipt thereof in the
appropriate Collection Account prior to 2:00 p.m. New York time. Payments
received after 2:00 p.m. New York time on any Business Day shall be deemed to
have been received on the following Business Day. If Agent receives any payment
from or on behalf of any Credit Party in a currency other than the currency in
which an Obligation due and payable is denominated, Agent may convert the
payment (including the monetary proceeds of realization upon any Collateral and
any funds then held in a cash collateral account) into the currency of the
relevant Obligation at the exchange rate that Agent would be prepared to sell
the currency in which the relevant Obligation is denominated against the
currency received in New York on the Business Day immediately preceding the date
of actual payment. The Obligations shall be satisfied only to the extent of the
amount actually received by Agent upon such conversion.
1.11 Application and Allocation of Payments.
(a) So long as no Default or Event of Default shall have occurred
and be continuing, (i) payments consisting of proceeds of Accounts received in
the ordinary course of business shall be applied to the Swing Line Loan and the
Revolving Loan; (ii) voluntary prepayments shall be applied as determined by
Borrower Representative, subject to the provisions of Section 1.3(a); and (iii)
mandatory prepayments (including payments received pursuant to Cash Management
Systems) shall be applied as set forth in Sections 1.3(c) and 1.3(d). All
payments and prepayments applied to a particular Loan shall be applied ratably
to the portion thereof held by each Lender as determined by its Pro Rata Share.
As to each other payment, and as to all payments made when a Default or Event of
Default shall have occurred and be continuing or following the Commitment
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Termination Date, each Borrower hereby irrevocably waives the right to direct
the application of any and all payments received from or on behalf of either
Borrower, and each Borrower hereby irrevocably agrees that Agent shall have the
continuing exclusive right to apply any and all such payments against the
Obligations of Borrowers as Agent may deem advisable notwithstanding any
previous entry by Agent in the Loan Account or any other books and records. In
the absence of a specific determination by Agent with respect thereto, payments
shall be applied to amounts then due and payable in the following order: (1) to
Fees and Agent's expenses reimbursable hereunder; (2) to interest on the Swing
Line Loan; (3) to principal payments on the Swing Line Loan; (4) to interest on
the Revolving Loan; (5) to principal payments on the Revolving Loan and to
provide cash collateral for Letter of Credit Obligations in the manner described
in Annex B, ratably to the aggregate, combined principal balance of the
Revolving Loan and outstanding Letter of Credit Obligations; and (6) to all
other Obligations including expenses of Lenders to the extent reimbursable under
Section 11.3.
(b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of each Borrower and cause to be paid all
Fees, expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(a)) and interest and principal, owing by Borrowers under this
Agreement or any of the other Loan Documents if and to the extent Borrowers fail
to pay any such amounts promptly as and when due, even if such charges would
cause the balance of the aggregate Revolving Loan to exceed Borrowing
Availability or would cause the balance of the Revolving Loan and the Swing Line
Loan of either Borrower to exceed such Borrower's separate Borrowing Base. At
Agent's option and to the extent permitted by law, any charges so made shall
constitute part of the Revolving Loan hereunder.
1.12 Loan Account and Accounting.
Agent shall maintain a loan account (the "Loan Account") on its
books to record: all Loans, all payments made by Borrowers, and all other debits
and credits as provided in this Agreement with respect to the Loans or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Agent's customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded on Agent's most recent printout or
other written statement, shall, absent manifest error, be presumptive evidence
of the amounts due and owing to Agent and Lenders by each Borrower; provided
that any failure to so record or any error in so recording shall not limit or
otherwise affect either Borrower's duty to pay the Obligations. Agent shall
render to Borrower Representative a monthly accounting of transactions with
respect to the Loans setting forth the balance of the Loan Account as to each
Borrower. Unless Borrower Representative notifies Agent in writing of any
objection to any such accounting (specifically describing the basis for such
objection), within thirty (30) days after the date thereof, each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
upon Borrowers in all respects as to all matters reflected therein. Only those
items expressly objected to in such notice shall be deemed to be disputed by
Borrowers. Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and
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may rely on the Loan Account as evidence of the amount of Obligations from time
to time owing to it.
1.13 Indemnity.
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), to the extent that such indemnification would not be prohibited or
restricted under applicable laws from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
credit having been extended, suspended or terminated under this Agreement and
the other Loan Documents in accordance with their respective terms, and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities
and legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Loan Documents
(collectively, "Indemnified Liabilities"); provided, that no such Credit Party
shall be liable for any indemnification to an Indemnified Person to the extent
that any such suit, action, proceeding, claim, damage, loss, liability or
expense results from that Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY
OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH
PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE
ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED
UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or is the
result of acceleration, by operation of law or otherwise); (ii) either Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) either Borrower shall default in making any borrowing of,
conversion into or continuation of LIBOR Loans after Borrower Representative has
given notice requesting the same in accordance herewith; or (iv) either Borrower
shall fail to make any prepayment of a LIBOR Loan after Borrower Representative
has given a notice thereof in accordance herewith, Borrowers shall jointly and
severally indemnify and hold harmless each Lender from and against all losses,
costs and expenses resulting from or arising from any of the foregoing.
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Such indemnification shall include any loss (including loss of margin) or
expense arising from the reemployment of funds obtained by it or from fees
payable to terminate deposits from which such funds were obtained. For the
purpose of calculating amounts payable to a Lender under this subsection, each
Lender shall be deemed to have actually funded its relevant LIBOR Loan through
the purchase of a deposit which bears interest at the LIBOR Rate in an amount
equal to the amount of that LIBOR Loan and having a maturity comparable to the
relevant LIBOR Period; provided, however, that each Lender may fund each of its
LIBOR Loans in any manner it sees fit, and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this subsection. This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder. As promptly as practicable under
the circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.13(b), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14 Access.
Each Credit Party which is a party hereto shall, during normal
business hours, from time to time upon one (1) Business Day's prior notice as
frequently as Agent determines to be appropriate, acting reasonably: (a) provide
Agent and any of its officers, employees and agents access to the properties,
facilities, officers and auditors of such Credit Party and to the Collateral,
(b) permit Agent, and any of its officers, employees and agents, to inspect,
audit and make extracts from such Credit Party's books and records, and (c)
permit Agent, and its officers, employees and agents, to inspect, review,
evaluate and make test verifications and counts of the Accounts, Inventory and
other Collateral of such Credit Party. If an Event of Default shall have
occurred and be continuing or if access is necessary to preserve or protect the
Collateral as determined by Agent, each such Credit Party shall provide such
access to Agent and to each Lender at all times and without advance notice.
Furthermore, so long as any Event of Default shall have occurred and be
continuing, Borrowers shall provide Agent and each Lender with access to their
suppliers and customers. Each Credit Party shall make available to Agent and its
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records which Agent may request. Each Credit Party shall
deliver any document or instrument necessary for Agent, as it may from time to
time request, to obtain records from any service bureau or other Person which
maintains records for such Credit Party, and shall maintain duplicate records or
supporting documentation on media, including computer tapes and discs owned by
such Credit Party. Agent will give Lenders at least ten (10) days' prior written
notice of regularly scheduled audits. Representatives of other Lenders may
accompany Agent's representatives on regularly scheduled audits at no charge to
Borrowers.
1.15 Taxes.
(a) Any and all payments by each Credit Party hereunder (including
any sum payable pursuant to Section 12) or under the other Loan Documents shall
be made,
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in accordance with this Section 1.15, free and clear of and without deduction
for any and all present or future Taxes. If any Credit Party shall be required
by law to deduct any Taxes from or in respect of any sum payable hereunder
(including any sum payable pursuant to Section 12) or under any other Loan
Document, (i) the sum payable shall be increased as much as shall be necessary
so that after making all required withholdings and deductions (including
withholdings and deductions applicable to additional sums payable under this
Section 1.15) Agent or Lenders, as applicable, receive an amount equal to the
sum they would have received had no such withholdings and deductions been made,
(ii) the applicable Credit Party shall make such deductions, and (iii) the
applicable Credit Party shall pay the full amount deducted to the relevant
taxing or other authority in accordance with applicable law. Within thirty (30)
days after the date of any payment of Taxes, Borrower Representative shall
furnish to Agent the original or a certified copy of a receipt evidencing
payment thereof.
(b) Each Credit Party shall jointly and severally indemnify and,
within ten (10) days of written demand therefor, pay Agent and each Lender for
the full amount of the Taxes referred to in this Section 1.15 (including any
Taxes imposed by any jurisdiction on amounts payable under this Section 1.15)
paid by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.
(c) Each Lender organized under the laws of a jurisdiction outside
the United States (a "Non-U.S. Lender") as to which payments to be made under
this Agreement or under any other Loan Document is exempt from United States
withholding tax under an applicable statute or tax treaty or is subject to
United States withholding tax at a reduced rate under an applicable statute or
tax treaty, shall provide to Borrower Representative and Agent a properly
completed and executed IRS Form 4224 or Form 1001 or other applicable form,
certificate or document prescribed by the IRS or the United States certifying as
to such Non-U.S. Lender's entitlement to such exemption or reduced rate of
withholding (a "Certificate of Exemption"). Prior to becoming a Lender under
this Agreement and within fifteen (15) days after a reasonable written request
of Borrower Representative or Agent from time to time thereafter, each assignee
that becomes a Lender under this Agreement shall provide a Certificate of
Exemption to Borrower Representative and Agent. If a Lender fails to provide a
Certificate of Exemption, then (i) each Credit Party shall be entitled to deduct
or withhold on payments to the Agent or such Lender as a result of such failure,
as required by law, and (ii) no Credit Party shall be required to make payments
of additional amounts with respect to such withheld Taxes pursuant to Section
1.15(a) or indemnified pursuant to Section 1.15(b) to the extent that such
withholding or indemnification is required by reason of the failure of such
Lender to provide the necessary Certificate of Exemption (except, with respect
to an assignment made to a Non-U.S. Lender during the continuation of an Event
of Default, to the extent such Non-U.S. Lender is legally unable to provide a
Certificate of Exemption). The Credit Parties shall be entitled, to the extent
required to do so by law, to deduct or withhold income or similar Taxes imposed
by any Governmental Authority (or any political subdivision or taxing authority
thereof or therein) from
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interest, fees or other amounts payable by any of the Credit Parties for the
account of any Lender to the extent that such Lender has not provided a
Certificate of Exemption that establishes a complete exemption from such
deduction or withholding.
(d) If a Credit Party pays any additional amount under this Section
1.15 to a Lender and such Lender determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid, such Lender shall pay to
the Credit Party an amount that such Lender shall, in its sole discretion,
determine is equal to the net benefit, after tax, which was obtained by the
Lender in such year as a consequence of such refund, reduction or credit. Such
amount shall be paid as soon as practicable after receipt or realization by such
Lender of such refund, reduction or credit. Nothing in this Section 1.15(d)
shall interfere with the right of a Lender to arrange its tax affairs in
whatever manner it deems fit and, in particular, no Lender shall be under any
obligation to claim relief from its corporate profits or similar tax liability
in respect of any such deduction or withholding in priority to any other
reliefs, claims, credits or deductions available to it and nothing in this
Section 1.15(d) shall require any Lender to disclose or detail the basis of its
calculation of the amount of any refund or reduction of, or credit against, its
tax liabilities or any other information to any Credit Party or any other
Person. Any amount paid by a Lender to a Credit Party under this Section 1.15(d)
shall be conclusive evidence of the amount due to such Credit Party and shall be
accepted by such Credit Party in full and final settlement of its rights under
this Section 1.15(d).
(e) Each Lender shall use reasonable efforts (consistent with legal
and regulatory restrictions and subject to overall policy considerations of such
Lender and in respect of which each Credit Party will reimburse such Lender for
its related expenses on demand) to file any certificate or document or to
furnish any information as reasonably requested by a Credit Party pursuant to
any applicable treaty, law or regulation, if the making of such filing or the
furnishing of such information would avoid the need for or reduce the amount of
any amounts payable by a Credit Party under Section 1.15 and would not, in the
reasonable judgment of such Lender, be disadvantageous to such Lender.
(f) Without prejudice to the survival of any other agreement of any
Credit Party under this Agreement, the agreements and obligations of each Credit
Party contained in this Section 1.15 shall survive the Termination Date.
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the
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Closing Date, from any central bank or other Governmental Authority increases or
would have the effect of increasing the amount of capital, reserves or other
funds required to be maintained by such Lender and thereby reducing the rate of
return on such Lender's capital as a consequence of its obligations hereunder,
then Borrowers shall from time to time upon demand by such Lender (with a copy
of such demand to Agent) pay to Agent, for the account of such Lender,
additional amounts sufficient to compensate such Lender for such reduction. A
certificate as to the amount of that reduction and showing the basis of the
computation thereof submitted by such Lender to Borrower Representative and to
Agent shall, absent manifest error, be final, conclusive and binding for all
purposes.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrowers shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower
Representative and to Agent by such Lender, shall be conclusive and binding on
Borrowers for all purposes, absent manifest error. Each Lender agrees that, as
promptly as practicable after it becomes aware of any circumstances referred to
above which would result in any such increased cost, the affected Lender shall,
to the extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this Section 1.16(b).
(c) Notwithstanding anything to the contrary contained herein, if
the introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower Representative
through Agent, (i) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans shall terminate and (ii) each
Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by
such Borrower to such Lender, together with interest accrued thereon, unless
Borrower Representative on behalf of such Borrower, within five (5) Business
Days after the delivery of such notice and demand, converts all such Loans into
a Loan bearing interest based on the Index Rate.
(d) Replacement of Lender in Respect of Increased Costs. Within
fifteen (15) days after receipt by Borrower Representative of written notice and
demand from
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any Lender (an "Affected Lender") for payment of additional amounts or increased
costs as provided in Section 1.15(a), 1.16(a) or 1.16(b), Borrower
Representative may, at its option, notify Agent and such Affected Lender of its
intention to replace the Affected Lender. So long as no Default or Event of
Default shall have occurred and be continuing, Borrower Representative, with the
consent of Agent, not to be unreasonably withheld, may obtain, at Borrowers'
expense, a replacement Lender ("Replacement Lender") for the Affected Lender,
which Replacement Lender must be satisfactory to Agent, acting reasonably. If
Borrowers obtain a Replacement Lender within ninety (90) days following notice
of their intention to do so, the Affected Lender must sell and assign its Loans
and Commitments to such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all accrued interest and
Fees with respect thereto through the date of such sale, provided that Borrowers
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. Notwithstanding the foregoing, Borrowers shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within fifteen
(15) days following its receipt of Borrowers' notice of intention to replace
such Affected Lender. Furthermore, if Borrowers give a notice of intention to
replace and do not so replace such Affected Lender within ninety (90) days
thereafter, Borrowers' rights under this Section 1.16(d) shall terminate and
Borrowers shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) or 1.16(b).
1.17 Single Loan.
All Loans to each Borrower and all of the other Obligations of each
Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of that Borrower secured, until the
Termination Date, by all of its Collateral.
1.18 Obligations of Canadian Credit Parties.
Notwithstanding anything in this Agreement or any Loan Document to
the contrary, wherever in this Agreement or any Loan Document a representation
or warranty, indemnity, covenant or other obligation is expressed to be given or
made by or imposed upon Tropsport, such representation, warranty, indemnity,
covenant or obligation shall in each case be understood not to impose on such
Credit Party any obligation to give financial assistance by way of loan,
guarantee, the giving of security, the payment of money or otherwise within the
meaning of Section 44 of the Canada Business Corporations Act, to or for the
benefit of any Credit Party other than Ultimate Parent and, in the case of
Tropsport, Maska Canada.
SECTION 2. CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans.
No Lender shall be obligated to make any Loan or incur any Letter of
Credit Obligations on the Closing Date, or to take, fulfill, or perform any
other action hereunder, until
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the following conditions have been satisfied or provided for in a manner
satisfactory to Agent, or waived in writing by Agent and Lenders:
(a) Credit Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrowers, each
Credit Party signatory hereto, Agent and Lenders; and Agent shall have received
such documents, instruments, agreements and legal opinions as Agent shall
reasonably request in connection with the transactions contemplated by this
Agreement and the other Loan Documents, including all those listed in the
Closing Checklist attached hereto as Annex D, each in form and substance
satisfactory to Agent.
(b) Repayment of Prior Lender Obligations; Satisfaction of
Outstanding L/Cs. (i) Agent shall have received fully executed originals of a
pay-off letter from the HKBC Lenders and a payoff letter from the Chase Lenders,
each satisfactory to Agent and, together, confirming that all of the Prior
Lender Obligations will be repaid in full from the proceeds of the initial
Revolving Credit Advance and the initial advance under the Canadian Facility and
all Liens upon any of the property of Credit Parties or any of their
Subsidiaries in favor of Prior Lenders shall be terminated by Prior Lenders
immediately upon such payment; and (ii) all letters of credit issued or
guaranteed by Prior Lenders shall have been cash collateralized, supported by a
guarantee of Agent or supported by a Letter of Credit issued pursuant to Annex
B, as mutually agreed upon by Agent, Borrowers and Prior Lenders.
(c) Approvals. Agent shall have received (i) satisfactory evidence
that the Credit Parties have obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer's certificate in
form and substance satisfactory to Agent affirming that no such consents or
approvals are required.
(d) Opening Availability. The Eligible Accounts and Eligible
Inventory of each Borrower supporting the initial Revolving Credit Advances and
the initial Letter of Credit Obligations incurred and the amount of the Reserves
to be established on the Closing Date shall be sufficient in value, as
determined by Agent, to provide Borrowers, collectively, with Net Borrowing
Availability, after giving effect to the initial Revolving Credit Advance made
to each Borrower, the incurrence of any initial Letter of Credit Obligations
(except, with respect to the requirement in clauses (a) and (b) below, for any
such Letter of Credit Obligations incurred for the purposes of indemnifying any
lender to the European Subsidiaries) and the consummation of the Related
Transactions (on a pro forma basis, with trade payables being paid currently,
and expenses and liabilities being paid in the ordinary course of business and
without acceleration of sales) of at least (a) $5,000,000, if the Closing Date
occurs on or before November 30, 1998, or (b) $7,500,000, if the Closing Date
occurs after November 30, 1998.
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(e) Payment of Fees. Borrowers shall have paid the Fees required to
be paid on the Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of the
Closing Date.
(f) Capital Structure: Other Indebtedness; Due Diligence. The
capital structure and tax structure of each Credit Party and the terms and
conditions of all Indebtedness of each Credit Party shall be acceptable to Agent
in its sole discretion. Agent shall have completed all other business and legal
due diligence with results satisfactory to it, including, without limitation,
review of the tax effects of the Related Transactions.
(g) Consummation of Related Transactions. The aggregate purchase
price for Tropsport and US Acquired Co. shall not exceed $67,450,000 in cash
(subject to purchase price and other adjustments as are acceptable to Agent in
its sole discretion) and the Refinancing will not exceed $45,400,000. Aggregate
fees and closing costs in connection with the Acquisition and the Related
Transactions (including fees payable under this Agreement) shall not exceed
$7,500,000. Ultimate Parent shall have received cash proceeds from the Term Loan
in the principal amount of at least $81,250,000, and shall have received at
least $12,500,000 in cash from the issuance by Ultimate Parent in favor of
Preferred Stockholder of fully paid Preferred Shares. Agent shall have received
fully executed copies of the Related Transactions Documents, each of which shall
be in form and substance satisfactory to Agent and its counsel. The Related
Transactions shall have been consummated on terms that are satisfactory to Agent
and Lenders.
(h) Conditions Precedent under Canadian Facility Agreement. The
conditions precedent under the Canadian Facility Agreement to initial advance of
the Canadian Facility have been met or waived by Canadian Agent and Canadian
Lenders.
(i) Escrow Arrangement for Pre-filings of Certain Hypothecs. Agent
shall have received confirmation from the Escrow Agent (as defined under the
Escrow Agreement) that the Escrow Agent will release the Documents (as defined
under the Escrow Agreement) to Agent upon the completion of the funding of the
initial Revolving Credit Advances and the incurrence of the initial Letter of
Credit Obligations.
2.2 Further Conditions to Each Loan.
Except as otherwise expressly provided herein, no Lender on any date
shall be obligated to fund any Loan, convert or continue any Loan as a LIBOR
Loan or incur any Letter of Credit Obligation, if, as of the date thereof:
(a) Any representation or warranty by any Credit Party contained
herein or in any of the other Loan Documents shall be untrue or incorrect as of
such date, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted or
expressly contemplated by this Agreement; or
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(b) Any event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof as determined by the Requisite Lenders; or
(c) Any Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any Loan (or the incurrence of
any Letter of Credit Obligations), Agent or Requisite Lenders shall have
determined not to make, convert or continue any Loan or incur any Letter of
Credit Obligation so long as that Default or Event of Default is continuing; or
(d) After giving effect to any Revolving Credit Advance or Swing
Line Advance (or the incurrence of any Letter of Credit Obligations), (i) the
outstanding principal amount of the Revolving Loan would exceed the lesser of
the Aggregate Borrowing Base and the Maximum Amount, less, in each case, the
then outstanding principal amount of the Swing Line Loan, (ii) the aggregate
amount of all Letter of Credit Obligations would exceed the L/C Sublimit, or
(iii) the outstanding principal amount of the Revolving Loan of either Borrower
would exceed such Borrower's separate Borrowing Base less the outstanding
principal amount of the Swing Line Loan to that Borrower.
The request and acceptance by either Borrower of the proceeds of any
Loan, the incurrence of any Letter of Credit Obligations or the conversion or
continuation of any Loan into, or as, a LIBOR Loan, as the case may be, shall be
deemed to constitute, as of the date of such request or acceptance, (i) a
representation and warranty by Borrowers that the conditions in this Section 2.2
have been satisfied and (ii) a reaffirmation by Borrowers of the cross-guaranty
provisions set forth in Section 12 and of the granting to Agent for itself and
Lenders, and to Agent and Lenders, the Liens pursuant to the Collateral
Documents.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement make the following
representations and warranties to Agent and each Lender with respect to itself
and, to the extent not prohibited or restricted under applicable law, with
respect to all other Credit Parties, each and all of which shall survive the
execution and delivery of this Agreement.
3.1 Corporate Existence; Compliance with Law.
Each Credit Party (a) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (b) is duly qualified to conduct business and is in good standing
in each other jurisdiction where its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not result in exposure to losses, damages or liabilities
in excess of $50,000 and would not restrict the Credit Party from collecting
(including bringing any legal action to collect) any of its Accounts; (c) has
the requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease and to conduct its business as now, heretofore and
proposed to
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be conducted; (d) subject to specific representations regarding Environmental
Laws, has all licenses, permits, consents or approvals from or by, and has made
all filings with, and has given all notices to, all Governmental Authorities
having jurisdiction, where the failure to have such licenses, permits or
consents could, in any material respect, affect such ownership, operation and
conduct; (e) is in compliance with its charter and by-laws; and (f) subject to
specific representations set forth herein regarding ERISA, Environmental Laws,
tax and other laws, is in compliance with all applicable provisions of law,
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.2 Executive Offices; FEIN.
As of the Closing Date, the current location of each Credit Party's
chief executive office and principal place of business is set forth in
Disclosure Schedule 3.2, and none of such locations have changed within the
twelve (12) months preceding the Closing Date, except as set forth in Disclosure
Schedule 3.2. In addition, Disclosure Schedule 3.2 lists each jurisdiction in
which each Credit Party is duly qualified to conduct business and also the
federal employer identification number ("FEIN") of each Credit Party.
3.3 Corporate Power, Authorization, Enforceable Obligations.
The execution, delivery and performance by each Credit Party of the
Loan Documents to which it is a party and the creation of all Liens provided for
therein: (a) are within such Person's corporate power; (b) have been duly
authorized by all necessary or proper corporate and shareholder action; (c) do
not contravene any provision of such Person's charter or bylaws; (d) do not
violate any law or regulation, or any order or decree of any court or
Governmental Authority; (e) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (f) do not result in the
creation or imposition of any Lien upon any of the property of such Person other
than those in favor of Agent, on behalf of itself and Lenders, or Agent and
Lenders, as applicable, pursuant to the Loan Documents, the Term Loan Liens and
the Canadian Facility Liens; and (g) do not require the consent or approval of
any Governmental Authority or any other Person, except those referred to in
Section 2.1(c), all of which will have been duly obtained, made or complied with
prior to the Closing Date. On or prior to the Closing Date, each of the Loan
Documents shall have been duly executed and delivered by each Credit Party and
each other Subsidiary of Ultimate Parent which is a party thereto and each such
Loan Document shall then constitute a legal, valid and binding obligation of
such Credit Party and such Subsidiary of Ultimate Parent enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium laws or similar laws affecting creditors' rights generally and to the
fact that the availability of equitable remedies, such as specific performance
and injunctive relief, is in the discretion of a Court.
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3.4 Financial Statements and Projections and Other Reports.
Except for the Projections, all Financial Statements concerning
Ultimate Parent and its Subsidiaries and SHC and its Subsidiaries which are
referenced below have been prepared in accordance with GAAP consistently applied
throughout the periods covered (except as disclosed therein and except, with
respect to unaudited Financial Statements, for the absence of footnotes and
normal year-end audit adjustments) and present fairly in all material respects
the financial position of the Persons covered thereby as at the dates thereof
and the results of their operations and cash flows for the periods then ended.
(a) The following Financial Statements attached hereto as Disclosure
Schedule 3.4(A) have been delivered on the date hereof:
(i) The audited consolidated and unaudited consolidating
Balance Sheets of Ultimate Parent and its Subsidiaries and of SHC and its
Subsidiaries for the Fiscal Year ended December 31, 1997 and the audited
consolidated balance sheets of Ultimate Parent and its Subsidiaries and of SHC
and its Subsidiaries for the Fiscal Year ended December 31, 1996 and their
respective related statements of income and cash flows for the Fiscal Years then
ended, certified by Ernst & Young LLP.
(ii) The unaudited consolidated and consolidating balance
sheets of Ultimate Parent and its Subsidiaries and of SHC and its Subsidiaries,
at September 30, 1998 and their respective related statements of income and cash
flows for the three Fiscal Quarters then ended.
(b) Pro Forma. The Pro Forma delivered on the date hereof and
attached hereto as Disclosure Schedule 3.4(b) was prepared by Ultimate Parent
giving pro forma effect to the Related Transactions, was based on the unaudited
consolidated and consolidating balance sheets of Ultimate Parent and its
Subsidiaries and SHC and its Subsidiaries dated September 30, 1998 and was
prepared in a manner generally consistent with Ultimate Parent's past practices
in preparing unaudited financial statements.
(c) Projections. The Projections delivered on the date hereof and
attached hereto as Disclosure Schedule 3.4(c) have been prepared by Ultimate
Parent in light of the past operations of the businesses, but including future
payments of known contingent liabilities (disclosed therein), and reflect
projections for the period from October 1, 1998 to December 31, 1998 on a month
by month basis and for the four (4) year period beginning on December 31, 1998
on a month by month basis for the first year and on a year by year basis
thereafter. The Projections and the Year 2000 survey delivered to Agent on or
before the Closing Date and the operating plans from time to time delivered, as
required under Annex E, are based upon estimates and assumptions stated therein,
all of which Credit Parties believe to be reasonable and fair in light of
current conditions and current facts known to Credit Parties, as of the Closing
Date (in the case of Projections and such Year 2000 survey), and as of the date
of delivery (in the case of such operating plan), and reflect Credit Parties'
good faith and reasonable estimates of the future
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financial performance of Credit Parties and of the other information projected
therein for the periods set forth therein, it being recognized by Lenders that
such Projections, Year 2000 survey and operating plan, as they relate to future
events, are not to be viewed as facts or an assurance of performance and that
actual results during the period or periods covered by such Projections, Year
2000 survey and operating plans may differ from the forecasted or projected
results set forth therein.
3.5 Material Adverse Effect.
Between December 31, 1997 and the Closing Date, (a) no Credit Party
has incurred any obligations, contingent or non-contingent liabilities,
liabilities for Charges, long-term leases or unusual forward or long-term
commitments which are not reflected in the Pro Forma and which, alone or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, (b)
no contract, lease or other agreement or instrument has been entered into by any
Credit Party or has become binding upon any Credit Party's assets and no law or
regulation applicable to any Credit Party has been adopted which has had or
could reasonably be expected to have a Material Adverse Effect, and (c) no
Credit Party is in default and to the best of each Credit Party's knowledge no
third party is in default under any material contract, lease or other agreement
or instrument, which alone or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Between December 31, 1997 and the Closing Date
no event has occurred, which alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.
3.6 Ownership of Property; Liens.
As of the Closing Date, the real estate ("Real Estate") listed on
Disclosure Schedule 3.6 constitutes all of the real property owned, leased,
subleased, or used by any Credit Party. Each Credit Party owns good and
marketable fee simple title to all of its owned Real Estate, and valid and
marketable leasehold interests in all of its leased Real Estate, all as
described on Disclosure Schedule 3.6 (which includes the municipal address of
each leasehold interest), except where failure to have such title or interest
could not reasonably be expected to have a Material Adverse Effect, and copies
of all such leases or a summary of all material terms thereof satisfactory to
Agent have been delivered to Agent. With respect to all leased Real Estate,
Disclosure Schedule 3.6 further describes any Real Estate with respect to which
any Credit Party is a lessor, sublessor or assignor as of the Closing Date. Each
Credit Party also has good and marketable title to, or valid leasehold interests
in, all of its personal properties and assets, except where failure to have such
title or interest could not reasonably be expected to have a Material Adverse
Effect. As of the Closing Date, none of the properties and assets of any Credit
Party, and none of the Intellectual Property in respect of which any Credit
Party holds a License from a European Subsidiary, are subject to any Liens other
than Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any Credit Party that may result in any Liens (including Liens arising
under Environmental Laws) other than Permitted Encumbrances. Except as set forth
on Disclosure Schedule 3.6, each Credit Party has received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and
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other actions necessary to establish, protect and perfect such Credit Party's
right, title and interest in and to all such Real Estate and other properties
and assets. Disclosure Schedule 3.6 also describes any purchase options, rights
of first refusal or other similar contractual rights pertaining to any Real
Estate. As of the Closing Date, no portion of any Credit Party's Real Estate has
suffered any material damage by fire or other casualty loss which has not
heretofore been repaired and restored in all material respects to its original
condition or otherwise remedied. As of the Closing Date, all material permits
required to have been issued or appropriate to enable the Real Estate to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force and effect,
except where failure to have such permits could not reasonably be expected to
have a Material Adverse Effect.
3.7 Labor Matters.
As of the Closing Date (a) no strikes or other material labor
disputes against any Credit Party are pending or, to any Credit Party's
knowledge, threatened; (b) hours worked by and payment made to employees of each
Credit Party comply in all material respects with the Fair Labor Standards Act
and each other federal, state, local or foreign law applicable to such matter;
(c) all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Credit
Party; (d) except as set forth in Disclosure Schedule 3.7, no Credit Party is a
party to or bound by any collective bargaining agreement, management agreement,
consulting agreement or any employment agreement with any senior officer thereof
(and true and complete copies of any agreements, or summaries thereof in the
case of employment agreements, described on Disclosure Schedule 3.7 have been
delivered to Agent); (e) there is no organizing activity involving any Credit
Party pending or, to any Credit Party's knowledge, threatened by any labor union
or group of employees; (f) there are no certification applications or
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in Disclosure Schedule 3.7, there are
no complaints or charges against any Credit Party pending or, to the knowledge
of any Credit Party, threatened to be filed with any Governmental Authority or
arbitrator based on, arising out of, in connection with, or otherwise relating
to the employment or termination of employment by any Credit Party of any
individual.
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.
Except as set forth in Disclosure Schedule 3.8, as of the Closing
Date, no Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. As of
the Closing Date, all of the issued and outstanding Stock of each Credit Party
is owned by each of the stockholders and in the amounts set forth on Disclosure
Schedule 3.8. Except as set forth on Disclosure Schedule 3.8 in regard to
Ultimate Parent, there are no outstanding rights to purchase, options, warrants
or similar rights or agreements pursuant to which any Credit Party may be
required to issue, sell, repurchase or redeem any of its Stock or other equity
securities or any Stock or other equity securities of its Subsidiaries. All
outstanding Indebtedness of each Credit Party as of the Closing Date is
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described in Section 6.3 (including Disclosure Schedule 6.3). None of Ultimate
Parent, SHC, WAP, SLM Trademark US, CCM and SLM Trademark Canada has any assets
(except Stock of their Subsidiaries; in the case of SLM Trademark US, CCM and
SLM Trademark Canada, Intellectual Property; in the case of SLM Trademark
Canada, Stock of CCM; and, in the case of Ultimate Parent and SHC, as
applicable, the Account owing by SHC resulting from the transaction described in
Section 6.3(a)(vi) and the Accounts owing to Ultimate Parent or SHC from Maska
Canada, Maska US or Tropsport resulting from loans made on the Closing Date
described under "Intercompany Loans" in Disclosure Schedule 1.4) or any
Indebtedness or Guaranteed Indebtedness (except the Obligations, the obligations
under the Canadian Facility, the Term Loans and obligations to the extent
permitted under Sections 6.3(a)(vi), (vii) and (ix)). None of the Inactive
Subsidiaries has any assets (other than tax credits and a nominal amount of cash
to pay contingent tax liabilities), Indebtedness or Guaranteed Indebtedness and
none of them carries on any business.
3.9 Government Regulation.
No Credit Party is an "investment company" or otherwise subject to
regulation under the Investment Company Act of 1940 as amended. No Credit Party
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, or any other federal or state statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Borrowers, the incurrence of
the Letter of Credit Obligations on behalf of Borrowers, the application of the
proceeds thereof and repayment thereof and the consummation of the Related
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10 Margin Regulations.
No Credit Party is engaged, nor will it engage, principally or as
one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin security" as such terms are
defined in Regulation U of the Federal Reserve Board as now and from time to
time hereafter in effect (such securities being referred to herein as "Margin
Stock"). No Credit Party owns any Margin Stock, and none of the proceeds of the
Loans or other extensions of credit under this Agreement will be used, directly
or indirectly, for the purpose of purchasing or carrying any Margin Stock, for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any Margin Stock or for any other purpose which
might cause any of the Loans or other extensions of credit under this Agreement
to be considered a "purpose credit" within the meaning of Regulation T, U or X
of the Federal Reserve Board. No Credit Party will take or permit to be taken
any action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
3.11 Taxes.
All tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Credit Party
have been filed with the appropriate Governmental Authority and all Charges have
been paid prior to the date on which any fine,
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penalty, interest or late charge may be added thereto for nonpayment thereof (or
any such fine, penalty, interest, late charge or loss has been paid), excluding
Charges or other amounts being contested in accordance with Section 5.2(b).
Proper and accurate amounts have been withheld by each Credit Party from its
respective employees for all periods in full and complete compliance with all
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities. Disclosure Schedule 3.11
sets forth as of the Closing Date those taxable years for which any Credit
Party's tax returns are currently being audited by the IRS or any other
applicable Governmental Authority and any assessments or threatened assessments
in connection with such audit, or otherwise currently outstanding. Except as
described on Disclosure Schedule 3.11, no Credit Party has executed or filed
with the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. None of the Credit Parties and their respective
predecessors are liable for any Charges under any agreement (including any tax
sharing agreements) or, to each Credit Party's knowledge, as a transferee. As of
the Closing Date, no Credit Party has agreed or been requested to make any
adjustment under IRC Section 481(a), by reason of a change in accounting method
or otherwise, which would have a Material Adverse Effect.
3.12 ERISA.
(a) Disclosure Schedule 3.12 lists and separately identifies all
Title IV Plans, Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies of
all such listed Plans, together with a copy of the latest form 5500 for each
such Plan, have been delivered to Agent. Except with respect to Multiemployer
Plans, each Qualified Plan has been determined by the IRS to qualify under
Section 401 of the IRC, and the trusts created thereunder have been determined
to be exempt from tax under the provisions of Section 501 of the IRC, and
nothing has occurred which would cause the loss of such qualification or
tax-exempt status. Each Plan is in compliance in all material respects with the
applicable provisions of ERISA and the IRC, including the filing of reports
required under the IRC or ERISA. All contributions and any amounts due under
either Section 412 of the IRC or Section 302 of ERISA or the terms of any such
Plan and any Title IV Plan have been made. No Credit Party or ERISA Affiliate
has engaged in a prohibited transaction, as defined in Section 4975 of the IRC,
in connection with any Plan, which would subject any Credit Party to a material
tax on prohibited transactions imposed by Section 4975 of the IRC.
(b) Except as set forth in Disclosure Schedule 3.12: (i) no Title IV
Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur that has resulted or could reasonably be expected
to result in a material liability; (iii) there are no pending, or to the
knowledge of any Credit Party, threatened claims (other than claims for benefits
in the normal course), sanctions, actions or lawsuits, asserted or instituted
against any Plan or any Person as fiduciary or sponsor of any Plan that could
reasonably be expected to result in a material liability; (iv) no Credit Party
or ERISA Affiliate has incurred or reasonably expects to incur any material
liability
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as a result of a complete or partial withdrawal from a Multiemployer Plan; (v)
within the last five years no Title IV Plan with Unfunded Pension Liabilities
has been transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; and (vi)
no liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that was not rated AAA by the Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency at the time such purchase was made.
3.13 No Litigation.
No action, claim, lawsuit, demand, investigation or proceeding is
now pending or, to the knowledge of any Credit Party, threatened against any
Credit Party, before any Governmental Authority or before any arbitrator or
panel of arbitrators (collectively, "Litigation"), (a) which challenges any
Credit Party's right or power to enter into or perform any of its obligations
under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (b)
which, as of the Closing Date, has a reasonable risk of being determined
adversely to any Credit Party and which, if so determined, could have a Material
Adverse Effect. Except as set forth on Disclosure Schedule 3.13, as of the
Closing Date there is no Litigation pending or threatened which seeks damages in
excess of $500,000 or injunctive relief or alleges criminal misconduct of any
Credit Party.
3.14 Brokers.
No broker or finder acting on behalf of any Credit Party brought
about the obtaining, making or closing of the Loans or the Related Transactions,
and no Credit Party has any obligation to any Person in respect of any finder's
or brokerage fees in connection therewith.
3.15 Intellectual Property.
As of the Closing Date, each Credit Party owns or has rights to use
all Intellectual Property necessary to continue to conduct its business as now
conducted by it and each application or registration for any Patent, Design,
Trademark, Copyright, Software and License, which is material in any respect to
the conduct of the business of such Credit Party (excluding any commercially
available software used in such Credit Party's business of which a Credit Party
has permitted Agent with reasonable details), is listed, together with
application or registration numbers and the properties covered by and material
obligation, under each License, as applicable, in Disclosure Schedule 3.15
hereto. No Intellectual Property (other than readily available commercial
software) necessary to conduct the business of any Credit Party as now or
heretofore conducted by it or proposed to be conducted by it is owned by any
Person other than Credit Parties and those Persons who have granted Licenses to
such Credit Party. With respect to all Intellectual Property that is licensed to
any Credit Party and is material in any respect to the conduct of its business
(except readily available commercial software), all such licensors (other than
any Credit Party) have, in respect of such Intellectual Property, executed and
delivered to Agent and Lenders the Consents and Acknowledgments Respecting
Intellectual Property as listed under Section H of Annex D hereto. Except as set
out on Disclosure Schedule 3.15, to the
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best of each Credit Party's knowledge, each such Credit Party conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person which infringement or interference is
reasonably likely to have a Material Adverse Effect.
3.16 Full Disclosure.
No information contained in this Agreement, any of the other Loan
Documents, any Projections, Financial Statements or Collateral Reports or other
reports from time to time delivered hereunder or any written statement furnished
by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms
of this Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Liens granted to Agent, on behalf
of itself and Lenders, pursuant to the Collateral Documents are (subject to
filing of the UCC-1 financing statements for filing in the applicable States of
the United States, that have been duly executed and delivered to Agent and
Lenders on the Closing Date and filing of certain of the Collateral Documents in
the applicable intellectual property offices in Washington, D.C.) fully
perfected first priority Liens in and to the Collateral described therein,
subject, as to priority, only to Permitted Encumbrances.
3.17 Environmental Matters.
(a) Except as set forth in Disclosure Schedule 3.17, as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material; (ii) no Credit Party has caused or suffered to occur any Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate; (iii) the Credit Parties are and have been in compliance with all
Environmental Laws; (iv) the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, and all such Environmental Permits are valid, uncontested and
in good standing; (v) no Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of such
Credit Party, and no Credit Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations; (vi) there is no
Litigation arising under or related to any Environmental Laws, Environmental
Permits or Hazardous Material, or which alleges criminal misconduct by any
Credit Party; (vii) no notice has been received by any Credit Party identifying
it as a "potentially responsible party" or requesting information under CERCLA
or analogous state statutes, and to the knowledge of the Credit Parties, there
are no facts, circumstances or conditions that may result in any Credit Party
being identified as a "potentially responsible party" under CERCLA or analogous
state statutes; and (viii) the Credit Parties have provided to Agent copies of
all existing environmental reports, reviews and audits and all material written
information pertaining to any actual or potential Environmental Liabilities, in
each case relating to any Credit Party; except, in the case of clauses (i),
(ii), (iii), (iv), (v) and (vi), to the extent that such contamination, Release,
non-compliance, failure to be valid, uncontested and in good standing, or
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operations, factors, circumstances or conditions, or Litigation, could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) Each Credit Party hereby acknowledges and agrees that Agent (i)
is not now, and has not ever been, in control of any of the Real Estate or any
Credit Party's affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
3.18 Insurance.
Disclosure Schedule 3.18 lists all insurance policies of any nature
maintained, as of the Closing Date, for current occurrences by each Credit
Party, as well as a summary of the terms of each such policy.
3.19 Deposit and Disbursement Accounts.
Disclosure Schedule 3.19 lists, as of the Closing Date, all banks
and other financial institutions at which either Borrower maintains deposits
and/or other accounts and/or Lockboxes as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies, as of the Closing
Date, the name, address and telephone number of each depository, the complete
account number of each account maintained by either Borrower at each depository,
the name in which the account is held, a description of the purpose of the
account, and the complete lockbox number and particulars of all Lockboxes
maintained by either Borrower.
3.20 Government Contracts.
Except as set forth in Disclosure Schedule 3.20, as of the Closing
Date, no Credit Party is a party to any contract or agreement with any
Governmental Authority and no Credit Party's Accounts are subject to the Federal
Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727) or any
similar state or local law.
3.21 Customer and Trade Relations.
As of the Closing Date, there exists no actual or, to the knowledge
of any Credit Party, threatened termination or cancellation of, or any material
adverse modification or change in: the business relationship of any Credit Party
with any customer or group of customers whose purchases during the preceding
twelve (12) months caused them to be ranked among the ten largest customers of
such Credit Party; or the business relationship of any Credit Party with any
supplier material to its operations.
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3.22 Agreements and Other Documents.
As of the Closing Date, each Credit Party has provided to Agent or
its counsel, on behalf of Lenders, accurate and complete copies (or summaries)
of all of the following agreements or documents to which any it is subject and
each of which are listed on Disclosure Schedule 3.22: supply agreements and
purchase agreements not terminable by such Credit Party within sixty (60) days
following written notice issued by such Credit Party and involving transactions
in excess of $1,000,000 per annum; any lease of Equipment having a remaining
term of one year or longer and requiring aggregate rental and other payments in
excess of $500,000 per annum; licenses and permits held by the Credit Parties,
the absence of which could be reasonably likely to have a Material Adverse
Effect; instruments or documents evidencing Indebtedness of such Credit Party
and any security interest granted by such Credit Party with respect thereto; and
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party,
including the Phoenix Investment Agreement, but excluding such instruments and
agreements with respect to employee stock options and other warrants of Ultimate
Parent entitling the holder thereof to acquire Stock of Ultimate Parent.
3.23 Solvency.
Both before and after giving effect to (a) the Loans and Letter of
Credit Obligations to be made or extended on the Closing Date or such other date
as Loans and Letter of Credit Obligations requested hereunder are made or
extended, (b) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative, (c) the Acquisition, the Refinancing
and the consummation of the other Related Transactions and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Borrower
and each Canadian Borrower, individually, and Ultimate Parent and its
Subsidiaries taken as a whole, is Solvent.
3.24 Reorganization Agreement.
As of the Closing Date, Borrowers have delivered to Agent a complete
and correct copy of the Reorganization Agreement (including all schedules,
exhibits, amendments, supplements, modifications, assignments and all other
documents delivered pursuant thereto or in connection therewith). No Credit
Party and no other Person party thereto is in default in the performance or
compliance with any provisions thereof. The Reorganization Agreement complies
with, and the Reorganization has been consummated in accordance with, all
applicable laws. The Reorganization Agreement is in full force and effect as of
the Closing Date, has not been terminated, rescinded or withdrawn. All requisite
approvals by Governmental Authorities having jurisdiction over any Credit Party
and other Persons referenced therein, with respect to the transactions
contemplated by the Reorganization Agreement, have been obtained, and no such
approvals impose any conditions to the consummation of the transactions
contemplated by the Reorganization Agreement or to the conduct by any Credit
Party of its business thereafter. Each of the representations and warranties
given by each applicable Credit Party in the Reorganization Agreement is true
and correct in all material respects or, if made as of a specified
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earlier date, is true and correct as of such earlier date. Notwithstanding
anything contained in the Reorganization Agreement to the contrary, such
representations and warranties of the Credit Parties are incorporated into this
Agreement by this Section 3.25 and shall, solely for purposes of this Agreement
and the benefit of Agent and Lenders, survive the consummation of the
Reorganization.
3.25 Status of Ultimate Parent; SHC; WAP; and CCM.
Prior to the Closing Date, Ultimate Parent, SHC, WAP and CCM will
not have engaged in any business or incurred any Indebtedness or any other
liabilities (except in connection with corporate formation, the Related
Transactions Documents or the Prior Lender Obligations which have been
irrevocably paid in full on or before the Closing Date, this Agreement, the
Canadian Facility Agreement and in the case of CCM, except in connection with
owning and licensing (as licensor under Licenses) Intellectual Property).
3.26 Senior Debt.
As of the Closing Date, Ultimate Parent, SHC and Borrowers have
delivered to Agent a complete and correct copy of the Term Loan Agreement and
the Canadian Facility Agreement and all agreements in respect of the Prior
Lender Obligations, all as in effect on the Closing Date (including all
schedules, exhibits, amendments, supplements, modifications, assignments and all
other documents delivered pursuant thereto or in connection therewith).
3.27 Leased Premises.
As of the Closing Date, no Collateral, except office furniture, is
held or stored at 6531-6559 Mississauga Road, Mississauga, Ontario, and no
Collateral is held or stored at 110 Lauder St., Cowansville, Quebec. Disclosure
Schedule 3.27 sets forth, as of the Closing Date, (a) the annual rent payments
due under each lease for each leased location in the Province of Quebec in
respect of which a Credit Party has granted to the landlord of such location or
hypothec on such Credit Party's moveable property, and for the premises leased
by Maska US at 139 Harvest Lane, Williston, Vermont, for the five (5) calendar
years from and including 1998 to and including 2003, (b) additional rent
payments, on an annual basis, for each such leased location for 1997 and to
approximately the Closing Date for 1998, and, to the extent reasonably
estimable, for the periods set forth in clause (a) above, and (c) the amount of
the rent security deposits (if any) held by the landlord with respect to each
such leased location. As of the Closing Date, the rental payments in respect of
each such leased location are payable monthly in advance.
3.28 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices.
Disclosure Schedule 3.28 sets forth, as of the Closing Date, for
each Credit Party: (a) all owned manufacturing facilities, (b) all leased
manufacturing facilities, (c) all owned distribution and/or warehouse
facilities, (d) all leased distribution and/or warehouse facilities, (e) all
owned manufacturing facilities with distribution and/or warehouse facilities
located thereon,
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(f) all owned Offices, (g) all Offices located at manufacturing facilities, (h)
all other Offices, and (i) all other facilities or premises, whether leased or
owned.
SECTION 4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices.
(a) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent and/or Lenders, as required, the Financial Statements, notices,
Projections and other information at the times, to the Persons and in the manner
set forth in Annex E.
(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent and/or Lenders, as required, the various Collateral Reports (including
Borrowing Base Certificates in the form of Exhibit 4.1(b)) at the times, to the
Persons and in the manner set forth in Annex F.
4.2 Communication with Accountants.
Each Credit Party executing this Agreement authorizes Agent and, so
long as a Default or Event of Default shall have occurred and be continuing,
each Lender, to communicate directly with its independent chartered or certified
public accountants including Ernst & Young LLP, and authorizes and shall
instruct those accountants and advisors to disclose and make available to Agent
and each Lender any and all Financial Statements and other supporting financial
documents, schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business, financial
condition and other affairs of any Credit Party.
SECTION 5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Credit Agreement jointly and
severally agrees as to all Credit Parties that from and after the date hereof
and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business.
Each Credit Party shall: (a) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and its rights and franchises, except as expressly permitted under Section 6.1;
(b) continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder; (c) at all times maintain, preserve and protect
all of its assets and properties used or useful in the conduct of its business,
where failure to so maintain, preserve and protect would, in any material
respect, affect the conduct or carrying on of its business and keep the same in
good repair, working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made, all necessary or appropriate repairs, replacements and
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improvements thereto consistent with industry practices; and (d) transact
business only in such corporate and trade names as are set forth in Disclosure
Schedule 5.1.
5.2 Payment of Obligations.
(a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, and (ii)
lawful claims for labor, materials, supplies and services or otherwise, before
any thereof under clauses (i) or (ii) above shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP, (ii) no Lien shall be imposed to secure payment of such Charges that is
superior to any of the Liens securing payment of the Obligations unless such
contest is maintained and prosecuted continuously and with diligence and
operates to suspend collection or enforcement of such Charges, (iii) none of the
Collateral becomes subject to forfeiture or loss as a result of such contest,
(iv) such Credit Party shall promptly pay or discharge such contested Charges or
claims and all additional charges, interest, penalties and expenses, if any, and
shall deliver to Agent evidence acceptable to Agent of such compliance, payment
or discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no longer
met, (v) at the time of commencement and during the term of any such contest no
Default or Event of Default shall have occurred and be continuing, (vi) Agent
has not advised Borrowers in writing that Agent reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material Adverse
Effect, and (vii) if non-payment of the Charge could result in any Lien against
either Borrower's personal or real property, Borrowers have notified Agent of
the maximum amount of such Charges and, without duplication, such amount has
been deducted from the Aggregate Borrowing Base as a Reserve.
5.3 Books and Records.
Each Credit Party shall keep adequate books and records with respect
to its business activities in which proper entries, reflecting all financial
transactions, are made in accordance with GAAP and on a basis consistent with
the Financial Statements attached as Disclosure Schedule 3.4(A). In the event
that any Credit Party keeps any books and records with respect to its Inventory
and Accounts in Quebec, such Credit Party shall keep on computer disks or tapes
a duplicate set of such books and records at a location outside of Quebec in a
jurisdiction in which Agent has confirmed that it has perfected security in
books and records, if requested by Agent in its discretion, acting reasonably.
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5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on Disclosure Schedule 3.18 as in
effect on the date hereof, or comparable policies having similar coverage and
terms and otherwise in form and amounts and with insurers acceptable to Agent,
in each case, to the extent available on commercially reasonable terms. If any
Credit Party at any time or times hereafter shall fail to obtain or maintain any
of the policies of insurance required above or to pay all premiums relating
thereto, Agent may at any time or times thereafter obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto which Agent reasonably deems advisable. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default or
Event of Default arising from any Credit Party's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including legal
fees, court costs and other charges related thereto, shall be payable on demand
by Borrowers to Agent and shall be additional Obligations hereunder secured by
the Collateral.
(b) Agent reserves the right at any time upon any change in any
Credit Party's risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such Credit
Party) to require additional forms and limits of insurance, except with respect
to Accounts, to ensure that each Credit Party is protected by insurance in
amounts and with coverage customary for its industry. If reasonably requested by
Agent, each Credit Party shall deliver to Agent from time to time a report of a
reputable insurance broker, satisfactory to Agent, with respect to its insurance
policies.
(c) Each Credit Party shall deliver to Agent, in form and substance
reasonably satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and Lenders,
as loss payee, and (ii) all general liability and other liability policies
naming Agent, on behalf of itself and Lenders, as additional insured. Each
Credit Party irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as any Default or
Event of Default shall have occurred and be continuing or the anticipated
insurance proceeds exceed $1,500,000, as such Credit Party's true and lawful
agent and attorney-in-fact for the purpose of making, settling and adjusting
claims under such "All Risk" policies of insurance, endorsing the name of such
Credit Party on any check or other item of payment for the proceeds of such "All
Risk" policies of insurance and for making all determinations and decisions with
respect to such "All Risk" policies of insurance. Agent shall have no duty to
exercise any rights or powers granted to it pursuant to the foregoing
power-of-attorney. Borrower Representative shall promptly notify Agent of any
loss, damage, or destruction to the Collateral in the amount of $250,000 or
more, whether or not covered by insurance. After deducting from such proceeds
the expenses, if any, incurred by Agent in the collection or handling thereof,
Agent may, at its option, subject to the provisions of the Intercreditor
Agreement, apply
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such proceeds to the reduction of the Obligations in accordance with Section
1.3(d); provided that in the case of insurance proceeds pertaining to any Credit
Party that is not a Borrower, such insurance proceeds shall be applied ratably
to all of the Loans owing by each Borrower, or permit or require the applicable
Credit Party to use such money, or any part thereof, to replace, repair, restore
or rebuild the Collateral in a diligent and expeditious manner with materials
and workmanship of substantially the same quality as existed before the loss,
damage or destruction. Notwithstanding the foregoing, if the casualty giving
rise to such insurance proceeds would not reasonably be expected to have a
Material Adverse Effect and such insurance proceeds do not exceed, per
occurrence or in the aggregate for all incurrences, for one or more Credit
Parties at any time, (i) $1,500,000 in the case of any such proceeds relating to
Inventory, and (ii) $3,000,000 in the case of any such proceeds relating to
Equipment, Fixtures or Real Estate, and provided, that in the case of clause
(ii), the business interruption insurance proceeds receivable by the applicable
Credit Party would reasonably be expected to be sufficient to cover the period
required to complete such replacement, rebuilding, restoration, or repair, and
Agent shall have received a certificate of the Senior Vice-President, Finance of
such Credit Party certifying that to the best of his knowledge, the foregoing
condition is true, then Agent shall permit the applicable Credit Party to
replace, restore, repair or rebuild the property; provided that if such Credit
Party shall not have completed or entered into binding agreements to complete
such replacement, restoration, repair or rebuilding within 180 days of such
casualty, Agent may, subject to the provisions of the Intercreditor Agreement
and Section 5.4(d), apply such insurance proceeds to the Obligations in
accordance with Section 1.3(d); provided further that in the case of insurance
proceeds pertaining to any Credit Party other than a Borrower, such insurance
proceeds shall be applied ratably to all of the Loans owing by each Borrower.
All insurance proceeds which are to be made available to any Borrower to
replace, repair, restore or rebuild the Collateral shall be applied by Agent to
reduce the outstanding principal balance of the Revolving Loan of such Borrower
(which application shall not result in a permanent reduction of the Revolving
Loan Commitment) and upon such application, Agent shall establish a Reserve
against the separate Borrowing Base of Borrower in an amount equal to the amount
of such proceeds so applied. All insurance proceeds made available to any Credit
Party that is not a Borrower to replace, repair, restore or rebuild the
Collateral, in accordance with this Section 5.4, subject to the terms of the
Intercreditor Agreement and Section 5.4(d), shall be deposited in a cash
collateral account. Thereafter, such funds shall be made available to that
Borrower or Credit Party, as applicable, to provide funds to replace, repair,
restore or rebuild the Collateral as follows: (i) Borrower Representative shall
request a Revolving Credit Advance or a release from the cash collateral account
be made to such Borrower or Credit Party in the amount requested to be released;
(ii) so long as the conditions set forth in Section 2.2 have been met, Revolving
Lenders shall make such Revolving Credit Advance or Agent shall release funds
from the cash collateral account, as applicable; and (iii) in the case of
insurance proceeds applied against the Revolving Loan, the Reserve established
with respect to such insurance proceeds shall be reduced by the amount of such
Revolving Credit Advance. To the extent not used to replace, repair, restore or
rebuild the Collateral, such
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insurance proceeds, subject to the terms of the Intercreditor Agreement and
Section 5.4(d), shall be applied to reduce the Obligations in accordance with
Section 1.3(d).
(d) Business Interruption Insurance. Before an Event of Default (as
defined in the Intercreditor Agreement), all proceeds of business interruption
insurance payable in respect of an occurrence shall be applied as follows:
(A) to the extent such occurrence affects either Borrower or the
Subsidiary Guarantors, such proceeds shall be applied in
accordance with Section 5.4(c);
(B) to the extent such occurrence affects either Canadian
Borrower, such proceeds shall be applied as provided under the
Canadian Facility Agreement, except that, if no obligations
are outstanding under the Canadian Facility and the
commitments of the Canadian Lenders have been terminated, then
such proceeds shall be applied in accordance with Section
5.4(c); and
(C) to the extent such occurrence affects Ultimate Parent, SLM
Trademark US, or WAP, such proceeds shall be applied as
provided under Section 5.4(c) in an amount equal to all such
proceeds multiplied by a fraction equal to the aggregate
outstanding amount of the Loans divided by the sum of the
aggregate outstanding amount of the Loans plus the Revolving
Loans, Swing Line Loans and Letter of Credit Obligations under
the Canadian Facility.
5.5 Compliance with Laws.
Each Credit Party shall comply with all federal, state, local and
foreign laws and regulations applicable to it, including those relating to
licensing, ERISA, employment and labor matters and Environmental Laws and
Environmental Permits, except to the extent that the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
5.6 Supplemental Disclosure.
From time to time as may be requested by Agent (which request will
not be made more frequently than once each year absent the occurrence and
continuance of a Default or an Event of Default), the Credit Parties shall
supplement each Disclosure Schedule hereto, or any representation herein or in
any other Loan Document, with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Disclosure Schedule or as an exception to such
representation or which is necessary to correct any information in such
Disclosure Schedule or representation which has been rendered inaccurate thereby
(and, in the case of any supplements to any Disclosure Schedule, such Disclosure
Schedule shall be appropriately marked to show the changes made therein);
provided that (a) no such supplement to any such Disclosure Schedule or
representation
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shall be or be deemed a waiver of any Default or Event of Default resulting from
the matters disclosed therein, except as consented to by Agent and Requisite
Lenders in writing or except if such Disclosure Schedule or representation is
accurately supplemented prior to or concurrently with such representation being
made or deemed to be made; and (b) no supplement shall be required as to
representations and warranties that relate solely to the Closing Date.
5.7 Intellectual Property.
Each Credit Party will conduct its business and affairs without (a)
infringement of or interference with material Intellectual Property and (b)
infringement of or interference with any Intellectual Property of any other
Person if Agent determines, acting reasonably, that the value of the Inventory
to which such Intellectual Property that is material to the conduct of a Credit
Party's business of any other Person, except to the extent such infringement or
interference could and reasonably be expected to have a Material Adverse Effect,
relates would be materially adversely affected or Agent's and Lenders' rights
and remedies (or the ability of Agent and Lenders to exercise such rights and
remedies) in respect of the Inventory to which such Intellectual Property
relates would be materially adversely affected. With respect to any new License
of Intellectual Property or any removal of, or amendment to, any License of
Intellectual Property, granted to a Credit Party by a Person that is not a
Credit Party, such new License and such renewal of or amendment to a License, as
the case may be, shall be on the same or similar terms or on terms consistent
with those of other licensees of such Person for similar products in similar
markets.
5.8 Environmental Matters.
Each Credit Party shall and shall cause each Person within its
control to: (a) conduct its operations and keep and maintain its Real Estate in
compliance with all Environmental Laws and Environmental Permits other than
noncompliance which could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions which are necessary to maintain the value and marketability of
the Real Estate (except Real Estate owned by Maska US in Pierson Industrial
Park, Bradford, Vermont) or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate except where
failure to implement such activities or so comply could not reasonably be
expected to have a Material Adverse Effect; (c) notify Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or about
any Real Estate which is reasonably likely to result in Environmental
Liabilities in excess of $500,000; and (d) promptly forward to Agent a copy of
any order, notice, request for information or any communication or report
received by such Credit Party in connection with any such violation or Release
or any other matter relating to any Environmental Laws or Environmental Permits
that could reasonably be expected to result in Environmental Liabilities in
excess of $500,000, in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action in
connection with any such violation, Release or other matter. If Agent at any
time
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has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, which, in
each case, could reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Agent's written request (i) cause the performance
of such environmental audits including subsurface sampling of soil and
groundwater, and preparation of such environmental reports, at Borrowers'
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall reimburse
Agent for the costs of such audits and tests and the same will constitute a part
of the Obligations secured hereunder.
5.9 Landlords' Agreements, Mortgagee Agreements and Bailee
Letters.
Each Credit Party shall obtain a landlord's agreement, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property or mortgagee of owned property or with respect to any warehouse,
processor or converter facility or other location where Collateral is located,
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Inventory or Collateral at that location, and shall otherwise be satisfactory in
form and substance to Agent, acting reasonably. With respect to such locations
or warehouse space leased or owned as of the Closing Date and thereafter, if
Agent has not received a landlord or mortgagee agreement or bailee letter as of
the Closing Date (or, if later, as of the date such location is acquired or
leased), in form and substance satisfactory to Agent; acting reasonably, either
Borrower's Eligible Inventory at that location shall, in Agent's discretion, be
excluded from the Borrowing Base or be subject to such Reserves as may be
established by Agent in its reasonable credit judgment. After the Closing Date,
no real property or warehouse space shall be leased or acquired by any Credit
Party and no Inventory shall be shipped to a processor or converter under
arrangements established after the Closing Date without the prior written
consent of Agent (which consent, in Agent's discretion, may be conditioned upon
the exclusion from the Borrowing Base of Eligible Inventory at that location or
the establishment of Reserves acceptable to Agent) or, unless and until a
satisfactory landlord or mortgagee agreement or bailee letter, as appropriate,
shall first have been obtained with respect to such location. Each Credit Party
shall timely and fully pay and perform its obligations under all leases and
other agreements with respect to each leased location or public warehouse where
any Collateral is or may be located. For the purposes of determining the
eligibility of Inventory under Section 1.7, establishing and modifying Reserves
and evaluating whether a landlord agreement, bailee letter or mortgage agreement
is in form and substance satisfactory to Agent, acting reasonably, landlord
agreements delivered on or before the Closing Date from Alexis Nihon (Baulieue)
Inc. and Investors Group Trust Co. Ltd., 293801 Canada Inc. and ZMD Sports
Investments Inc. and Taft Corners Associates shall not be considered
satisfactory to Agent.
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5.10 Further Assurances.
Each Credit Party executing this Agreement agrees that it shall and
shall cause each other Credit Party to, at such Credit Party's expense and upon
request of Agent, duly execute and deliver, or cause to be duly executed and
delivered, to Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of Agent to
carry out more effectively the provisions and purposes of this Agreement or any
other Loan Document. For greater certainty, each Credit Party agrees to take all
action necessary to ensure that the Liens granted to Agent, on behalf of itself
and Lenders, and to Agent and Lenders, as applicable, pursuant to the Collateral
Documents will at all times be fully perfected first priority Liens in and to
the Collateral described therein, subject, as to priority, only to Permitted
Encumbrances.
5.11 Year 2000 Problems.
On or prior to December 31, 1998, each Credit Party shall complete
and deliver to Agent a Year 2000 Assessment, and on or prior to April 30, 1999,
each Credit Party shall complete and deliver to Agent a Year 2000 Corrective
Plan. On or prior to June 30, 1999, each Credit Party shall implement Year 2000
Corrective Actions. On or before September 30, 1999, each Credit Party shall
complete Year 2000 Corrective Actions and Year 2000 Implementation Testing and
shall remediate all Year 2000 Problems, except where the failure to remediate
the same could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
SECTION 6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement agrees on its own behalf
and, to the extent not prohibited or restricted under applicable law, on behalf
of all other Credit Parties that, without the prior written consent of Agent and
the Requisite Lenders, from and after the date hereof until the Termination
Date:
6.1 Mergers, Subsidiaries, Etc.
No Credit Party shall directly or indirectly, by operation of law or
otherwise, (a) form or acquire any Subsidiary, or (b) amalgamate or merge with,
consolidate with, acquire all or substantially all of the assets or capital
stock of, or otherwise combine with or acquire, any Person, except that Maska
Canada may amalgamate with Tropsport, Borrowers may merge with each other and
the Subsidiary Guarantors, together with Ultimate Parent, may merge with each
other (in each case, a "Permitted Amalgamation"; the continuing corporation from
such Permitted Amalgamation of Maska Canada and Tropsport, the "Continuing
Canadian Borrower"; and the surviving corporation from a Permitted Amalgamation
of the other Credit Parties, the "Continuing Credit Party"); provided that:
(i) Agent shall receive at least thirty (30) days' prior
written notice of any such proposed Permitted Amalgamation, which notice shall
include a reasonably detailed description of such proposed Permitted
Amalgamation;
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(ii) in any Permitted Amalgamation of Maska Canada and
Tropsport, Continuing Canadian Borrower shall have been amalgamated under the
laws of New Brunswick; in any Permitted Amalgamation among the other Credit
Parties, Continuing Credit Party shall have been merged under the laws of a
State of the United States; Ultimate Parent shall be the survivor in any such
merger to which it is a party; after giving effect to such Permitted
Amalgamation of Maska Canada and Tropsport, Ultimate Parent shall hold direct
legal and beneficial title to all of the issued and outstanding capital Stock of
Continuing Canadian Borrower; and, after giving effect to any Permitted
Amalgamation, Ultimate Parent shall hold direct or indirect legal and beneficial
title to all of the issued and outstanding capital Stock of all Continuing
Credit Parties;
(iii) at the closing of, and upon giving effect to, any such
Permitted Amalgamation, (a) Continuing Canadian Borrower, if applicable, shall
have assumed all obligations of the amalgamating Canadian Borrowers under all
Loan Documents to which such Canadian Borrowers are parties and the other Credit
Parties shall have confirmed and acknowledged their continuing Guarantees and
all other obligations under the Loan Documents in form and substance
satisfactory to Agent, acting reasonably; (b) Continuing Canadian Borrower, if
applicable, shall grant to Canadian Agent, on behalf of Canadian Lenders, and to
Canadian Agent and Canadian Lenders, as appropriate, first priority perfected
Liens (subject to Permitted Encumbrances) in all assets of the Continuing
Canadian Borrower after giving effect to such Permitted Amalgamation; and
Ultimate Parent shall grant to Agent and Lenders a perfected security interest
in and hypothec on all issued and outstanding Stock of Continuing Borrower
together with a stock power executed in blank; and (c) Agent and Lenders shall
have received copies of such other documents, instruments, agreements, waivers,
consents, legal opinions, search results and certificates as Agent may
reasonably request in connection with such transactions, all in form and
substance reasonably satisfactory to it; and
(iv) at the time of such Permitted Amalgamation and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing.
6.2 Investments; Loans and Advances.
Except as otherwise expressly permitted by this Section 6, no Credit
Party shall make or permit to exist any investment in, or make, accrue or permit
to exist loans or advances of money to, any Person, through the direct or
indirect lending of money, holding of securities or otherwise, except that (a)
Borrowers may hold investments comprised of notes payable, or stock or other
securities issued by Account Debtors to any Borrower pursuant to negotiated
agreements with respect to settlement of such Account Debtor's Accounts in the
ordinary course of business, so long as the aggregate amount of such Accounts so
settled by Borrowers does not exceed at any time C$2,000,000 or the Equivalent
Amount thereof; provided, that such notes, Stock or other securities are
delivered promptly to Agent and Agent, for itself and Lenders, or Agent and
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Lenders, as appropriate, will have first priority perfected Liens in such
investments; (b) each Credit Party may maintain its existing investments in its
Subsidiaries and CCM as of the Closing Date; (c) Credit Parties may hold Cash
Equivalents subject to Control Letters in favor of Agent for the benefit of
itself and Lenders or otherwise subject to first priority perfected Liens in
favor of Agent for the benefit of itself and Lenders, or Agent and Lenders, as
appropriate; (d) Credit Parties may make loans and advances to their respective
officers and employees in the ordinary course of business and consistent with
past practices, not to exceed, in the aggregate amount outstanding at any time
for all Credit Parties, $1,000,000 or the Equivalent Amount thereof; (e) Credit
Parties may extend trade credit in the ordinary course of business; and (f)
Credit Parties may make advances to suppliers not to exceed, in the aggregate
amount outstanding at any time for all Credit Parties, $500,000 for the purposes
of prepaying the purchase price of goods or services.
6.3 Indebtedness.
(a) No Credit Party shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in Section
6.7(c), (ii) the loans and the other Obligations, (iii) unfunded pension fund
and other employee benefit plan obligations and liabilities to the extent they
are permitted to remain unfunded under applicable law, (iv) (x) existing
Indebtedness described in Disclosure Schedule 6.3, (y) with respect to the
Canadian Borrowers, Indebtedness under the Canadian Facility not to exceed
$35,000,000 and (z) with respect to Ultimate Parent, Indebtedness under the Term
Loan not to exceed the Equivalent Amount in Canadian Dollars of $47,500,000 and,
with respect to Maska Canada, Indebtedness under the Term Loan not to exceed the
Equivalent Amount in Canadian Dollars of $40,000,000 less, at any time, the
aggregate amount thereof prepaid, and, with respect to Indebtedness permitted
under each of the foregoing clauses (a)(i) and (a)(iv)(x), refinancings thereof
or amendments or modifications thereto which do not have the effect of
increasing the principal amount thereof or changing the amortization thereof
(other than to extend the same) and which are otherwise on terms and conditions
no less favorable to any Credit Party, Agent or any Lender, as determined by
Agent, acting reasonably, than the terms of the Indebtedness being refinanced,
amended or modified, (v) Indebtedness under interest rate and currency hedging
arrangements entered into in the ordinary course of a Credit Party's business,
consistent with past practices, (vi) Indebtedness of SHC to Ultimate Parent in
the amount of $49,054,012.08 payable on demand resulting from an intercompany
advance made by Ultimate Parent to US Acquisition Sub with the proceeds of the
Term Loan and the Phoenix Investment for the purpose of consummating the
transactions contemplated by the US Acquisition, (vii) Indebtedness in the form
of loans made by Maska Canada and Maska US to Ultimate Parent not to exceed,
individually or in the aggregate for all such loans, at any time $900,000 or the
Equivalent Amount thereof on a pro-rata basis (based on EBITDA of Borrowers (on
a combined basis) in the case of loans to be made by Maska US, and of Canadian
Borrowers (on a consolidated basis), in the case of loans to be made by Maska
Canada, for the Fiscal Quarter most recently ended before any such loan, for the
purposes of paying the necessary fees and expenses to maintain Ultimate
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Parent's corporate existence, the reasonable costs of its directors' and
officers' insurance and its legal and accounting fees to the extent such fees
relate to legal and accounting services provided directly to it by entities that
are not its Affiliates, and its other general, administrative and regulatory
fees, (viii) Indebtedness in the form of loans made by Maska Canada to Maska US
that are payable on demand and the proceeds of which are used for the purposes
of paying trade creditors of Maska US in an aggregate amount not to exceed, at
any time, C$1,000,000 or the Equivalent Amount thereof; (ix) Indebtedness in the
form of loans made by Maska US to Ultimate Parent to the extent required by
Ultimate Parent for the purpose of paying, to the extent otherwise permitted in
this Agreement, up to ninety percent (90%) of fifty-four percent (54%) of
regularly scheduled interest payments, and prepayments of principal of, the Term
Loan and regularly scheduled agency fees and other charges in respect of the
Term Loan; (x) indemnity obligations of Ultimate Parent or any of its
Subsidiaries (other than Borrowers or Canadian Borrowers) in favor of the
directors or officers of Ultimate Parent or any of its Subsidiaries in respect
of all costs, charges and expenses incurred by them by reason of any action
taken in their capacity as such; and (xi) Indebtedness in the form of loans made
by Tropsport to SHC Hockey for the purpose of paying trade creditors of SHC
Hockey, in an aggregate amount outstanding not to exceed, at any time C$75,000
or the Equivalent Amount thereof; and (xii) Indebtedness in the form of
intercompany loans made on the Closing Date described under "Intercompany Loans"
in Disclosure Schedule 1.4, subordinated as required in accordance with Section
6.3(b); provided that, in the case of clauses (vi), (vii), (viii), (ix), (x),
(xi) and (xii), (x) each Credit Party shall record all intercompany transactions
to which it is a party on its books and records in accordance with GAAP (y) at
the time any such intercompany loan is made by a Credit Party and after giving
effect thereto, each Credit Party party thereto shall be Solvent; (z) such
intercompany loan would not be prohibited by any applicable law (including
financial assistance and fraudulent conveyance provisions, if any, thereunder)
and (aa) no Default or Event of Default has occurred that is continuing or would
occur and be continuing after giving effect to any such proposed intercompany
loan; provided, further, that in the case of clause (ix), if any such
intercompany loan is made, in whole or in part, for the purpose of making a
prepayment of principal on the Term Loan under clause (ix), then (x) after
giving effect thereto, Net Borrowing Availability shall not be less than fifteen
percent (15%) of the lesser of the Maximum Amount and the Aggregate Borrowing
Base, and (y) the Fixed Charge Coverage Ratio, calculated on a pro forma basis,
after giving effect to the aggregate amount of such prepayment of principal and
based upon the financial results of Ultimate Parent for the four Fiscal Quarters
most recently ended, shall not be less than 1.25:1.00 and Ultimate Parent shall
have delivered to Agent and Lenders, prior to such payment being made, a
certificate of the Senior Vice-President, Finance, showing in reasonable detail
the calculation used in determining compliance with the foregoing financial test
and certifying that the other financial covenants set forth on Annex G shall be
met, on a pro forma basis, after giving effect to such prepayment.
(b) The payment of any of the obligations of Maska Canada, Maska US
or Tropsport under the intercompany loans made by Ultimate Parent or SHC, as
applicable, permitted in Section 6.3(a)(vii) above (the "Subordinated
Obligations") shall hereby be
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subordinated, to the extent and in the manner provided for herein, to the prior
payment in full of all Obligations. Upon any distribution of assets of Maska
Canada, Maska US or Tropsport in any dissolution, winding up, liquidation or
reorganization (whether in bankruptcy, insolvency or receivership proceedings or
upon an assignment for the benefit of creditors or otherwise):
(i) Agent and Lenders shall first be entitled to receive
payment in full in cash of the Obligations before Ultimate Parent or SHC, as
applicable, is entitled to receive any payment on account of the Subordinated
Obligations;
(ii) any payment or distribution of assets of Maska Canada,
Maska US or Tropsport of any kind or character, whether in cash, property or
securities, to which Ultimate Parent or SHC would be entitled except for the
provisions of this Section 6.3(b), shall be paid by the trustee or agent or
other Person making such payment or distribution directly to Agent in the manner
set forth in this Agreement, to the extent necessary to make payment in full of
all Obligations remaining unpaid after giving effect to any concurrent payment
or distribution or provisions therefor to Agent for itself and Lenders; and
(iii) in the event that notwithstanding the foregoing
provisions of this Section 6.3(b), any payment or distribution of assets of
Maska Canada, Maska US or Tropsport of any kind or character, whether in cash,
property or securities, shall be received by Ultimate Parent or SHC, as
applicable, on account of the Subordinated Obligations before all Obligations
are paid in full, such payment or distribution shall be received and held in
trust for and shall be paid over to Agent for itself and Lenders for application
to the payment of the Obligations until all of the Obligations shall have been
paid in full, after giving effect to any concurrent payment or distribution or
provision therefor to Agent for itself and Lenders.
No right of Agent or any Lender to enforce the subordination provisions herein
shall at any time in any way be prejudiced or impaired by an act or failure to
act on the part of a Credit Party or by any act or failure to act, in good
faith, by any Credit Party, or by any noncompliance by a Credit Party with the
terms of this Agreement, regardless of any knowledge thereof which any Credit
Party may have or be otherwise charged with.
(c) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations, (ii) the Canadian Facility Obligations, (iii) Indebtedness secured
by a Permitted Encumbrance if the asset securing such Indebtedness has been sold
or otherwise disposed of in accordance with Sections 6.8(b) or (c), (iv) other
Indebtedness (excluding the Term Loan) not in excess of $250,000, and (v)
Indebtedness under the Term Loan permitted to be prepaid under Section 6.14.
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6.4 Employee Loans and Affiliate Transactions.
(a) No Credit Party shall enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except (i) in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party's business, (ii) in compliance with applicable Financial Assistance
and fraudulent conveyance restrictions, if any, under Applicable Law and (iii)
upon fair and reasonable terms that are no less favorable to such Credit Party
than would be obtained in a comparable arm's length transaction with a Person
not an Affiliate of such Credit Party. If such transaction is between a Borrower
and another Credit Party that is not a Borrower, the requirements in the
immediately preceding sentence shall apply except that, with reference to clause
(iii), the transaction shall be upon fair and reasonable terms that are no less
favorable to the Borrower than would be obtained in a comparable arm's length
transaction with a Person that is not an Affiliate of that Borrower. In
addition, if any such transaction or series of related transactions involves
payments in excess of $250,000 in the aggregate, the terms of these transactions
must be disclosed in advance to Agent and Lenders. All such transactions
existing as of the date hereof are described on Disclosure Schedule 6.4(a).
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
employees and officers, as permitted under Section 6.2(d).
6.5 Capital Structure and Business.
No Credit Party shall (a) make any changes in any of its business
objectives, purposes or operations which could in any way materially adversely
affect (as determined by Agent, acting reasonably) the repayment of the Loans or
any of the other Obligations or could reasonably be expected to have or result
in a Material Adverse Effect, (b) make any change in its capital structure as
described on Disclosure Schedule 3.8, including the issuance of any shares of
Stock, warrants or other securities convertible into Stock or any revision of
the terms of its outstanding Stock, except that Ultimate Parent may make a
Public Offering of its common Stock or issue employee stock options or warrants
to purchase common Stock or issue Stock pursuant to the exercise of warrants or
as payments in kind in connection with the Phoenix Investment so long as (i) the
proceeds thereof are applied in prepayment of the Obligations as required by
Section 1.3(b)(iii), and (ii) no Change of Control occurs after giving effect
thereto, and (iii) any preferred Stock issued by Ultimate Parent, including in
connection with the Phoenix Investment, shall only contain rights to dividends
payable in kind and not in cash, (c) amend its certificate of incorporation or
bylaws in a manner which would adversely affect Agent or Lenders or such Credit
Party's duty or ability to repay the Obligations, or (d) take any action to
continue its corporate existence, or cause any other Credit Party to continue
its corporate existence, under the laws of another jurisdiction (except in
connection with or pursuant to a Permitted Amalgamation). No Credit Party shall
engage in any business other than the sporting goods and sporting apparels
business and the distribution of Merrell products worldwide and businesses and
activities reasonably related thereto. At all times prior to the termination of
this Agreement, Ultimate Parent shall not cease to hold directly legal and
beneficial title to all of the capital stock
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of each Borrower and Maska Canada, and Maska Canada shall not cease to hold
directly all legal and beneficial title to Tropsport (subject, in each case, to
the Permitted Amalgamation) and, immediately following the Permitted
Amalgamation becoming effective, Ultimate Parent shall hold directly, legal and
beneficial title to all of the capital Stock of Continuing Canadian Borrower.
6.6 Guaranteed Indebtedness.
No Credit Party shall create, incur, assume or permit to exist any
Guaranteed Indebtedness except (a) by endorsement of instruments or items of
payment for deposit to the general account of any Credit Party, and (b) for
Guaranteed Indebtedness incurred for the benefit of any other Credit Party if
the primary obligation is expressly permitted by this Agreement (including,
without limitation, the guarantee by a Borrower of trade indebtedness incurred
by the other Borrower on an unsecured basis in the ordinary course of business).
6.7 Liens.
No Credit Party shall create, incur, assume or permit to exist any
Lien on or with respect to its Accounts or any of its other properties or assets
(whether now owned or hereafter acquired) except for (a) Permitted Encumbrances;
(b) Liens in existence on the date hereof and summarized on Disclosure Schedule
6.7; (c) Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations
(for all Credit Parties) of not more than $7,000,000 or the Equivalent Amount
thereof in another currency outstanding at any one time for all such Liens
(provided that such Liens attach only to the assets subject to such purchase
money debt and such Indebtedness is incurred within thirty-five (35) days
following such purchase and does not exceed 100% of the purchase price of the
subject assets); (d) Liens of the Canadian Lenders and the Canadian Agent in the
Collateral securing Indebtedness and Guaranteed Indebtedness under the Canadian
Facility, to the extent such Indebtedness and Guaranteed Indebtedness is
permitted by Sections 6.3(a) and 6.6, as applicable (the "Canadian Facility
Liens"); and (e) Liens of the Caisse Secured Parties in the Collateral securing
Indebtedness and Guaranteed Indebtedness under the Term Loan to the extent such
Liens are subject to the Intercreditor Agreement and such Indebtedness and
Guaranteed Indebtedness is permitted by Sections 6.3(a) and 6.6, as applicable,
(the "Term Loan Liens"). No Credit Party shall create, incur, assume or permit
to exist, or permit to be created, incurred or assumed, any Lien on the
Intellectual Property of any European Subsidiary other than the Lien of the
Caisse Secured Parties. In addition, no Credit Party shall become a party to any
agreement, note, indenture or instrument, or take any other action, which would
prohibit the creation of a Lien on any of its properties or other assets in
favor of Agent, on behalf of itself and Lenders, or the Lenders, as applicable,
as additional collateral for the Obligations, except operating leases, Capital
Leases or Licenses, the Canadian Facility Agreement or the Term Loan Agreement
which prohibit additional Liens upon the assets that are subject thereto.
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6.8 Sale of Stock and Assets.
No Credit Party shall sell, transfer, convey, assign or otherwise
dispose of any of its properties or other assets, including its Stock or the
capital Stock of any of its Subsidiaries or CCM (whether in a public or a
private offering or otherwise) or any of their Accounts, other than (a) the sale
of Inventory in the ordinary course of business, (b) the sale, transfer,
conveyance or other disposition by a Credit Party of Equipment, Fixtures or Real
Estate that are obsolete or no longer used or useful in such Credit Party's
business, (c) other Equipment and Fixtures having a value not exceeding $250,000
in any single transaction or $750,000 in the aggregate in any Fiscal Year and
(d) any issuances of Stock permitted under Section 6.5. With respect to any
disposition of assets or other properties permitted pursuant to clause (b) and
clause (c) above, Agent and Lenders, if applicable, agree on reasonable prior
written notice to release their Liens on such assets or other properties in
order to permit the applicable Credit Party to effect such disposition and shall
execute and deliver to Borrowers, at Borrowers' expense, appropriate termination
statements and other releases as reasonably requested by Borrowers.
6.9 ERISA.
No Credit Party shall, or shall cause or permit any ERISA Affiliate
to, cause or permit to occur an event which could result in the imposition of a
Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or
permit to occur an ERISA Event to the extent such ERISA Event could reasonably
be expected to have a Material Adverse Effect.
6.10 Financial Covenants.
Borrowers shall not breach or fail to comply with any of the
Financial Covenants (the "Financial Covenants") set forth in Annex G.
6.11 Hazardous Materials.
No Credit Party shall cause or permit a Release of any Hazardous
Material on, at, in, under, above, to, from or about any of the Real Estate
where such Release would (a) violate in any respect, or form the basis for any
Environmental Liabilities under, any Environmental Laws or Environmental Permits
or (b) otherwise adversely impact the value or marketability of any of the Real
Estate or any of the Collateral, other than such violations or impacts which
could not reasonably be expected to have a Material Adverse Effect.
6.12 Sale-Leasebacks.
No Credit Party shall engage in any sale-leaseback, synthetic lease
or similar transaction involving any of its assets.
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6.13 Cancellation of Indebtedness.
No Credit Party shall cancel any claim or debt owing to it, except
for reasonable consideration negotiated on an arm's-length basis and in the
ordinary course of its business consistent with past practices.
6.14 Restricted Payments.
No Credit Party shall make any Restricted Payment, except (a)
dividends and distributions by Subsidiaries of either Borrower paid to such
Borrower, (b) employee loans permitted under Section 6.4(b) above, (c) payment
on the Closing Date of management fees by Ultimate Parent to Ultimate Parent
Stockholders in the aggregate amount of $1,000,000 in connection with services
provided in closing the Related Transactions, (d) dividend payments in kind
(that is, in the form of Stock and not, in any case, in cash), including,
without limitation, in respect of the Phoenix Investment, (e) Ultimate Parent
may issue common stock issuable upon the exercise of warrants or options, as
permitted under Section 6.5, (f) payments by Ultimate Parent and Maska Canada of
the Equivalent Amount in Canadian Dollars of $5,000,000 in respect of
outstanding principal on the Term Loan and prepayment fees with respect thereto
of the Equivalent Amount in Canadian Dollars of $825,000, such principal and
fees to be paid on or after the second anniversary of the Closing Date if the
maturity of the Term Loan is extended to a date at least one year from the
second anniversary of the Closing Date, (g) loans by Maska Canada and Maska US
to Ultimate Parent in the form, on the terms, and to the extent permitted under
Section 6.3(a)(vii) and loans by Maska US to Ultimate Parent in the form, on the
terms, and to the extent permitted under Section 6.3(a)(ix), (h) Ultimate Parent
and Maska Canada may prepay the principal of the Term Loan as permitted under
the Term Loan Agreement, provided, that (i) the amount of Ultimate Parent's
prepayment shall not exceed fifty-four percent (54%) of the amount being prepaid
and the amount of Maska Canada's prepayment shall not exceed forty-six percent
(46%) of the amount being prepaid, (ii) Requisite Lenders shall have given their
prior consent to each prepayment, exercising their reasonable credit judgment,
and (iii) after giving effect to each prepayment, Net Borrowing Availability
shall be at least fifteen percent (15%) of the lesser of the Maximum Amount and
the Aggregate Borrowing Base and (iv) the Fixed Charge Coverage Ratio,
calculated on a pro forma basis, after giving effect to the aggregate amount of
such prepayments of principal under the Term Loan and based on the financial
results of Ultimate Parent for the four Fiscal Quarters then most recently
ended, shall not be less than 1.25:1 and Ultimate Parent shall have delivered to
Agent and Lenders, prior to each payment being made, a certificate of the Senior
Vice-President, Finance showing in reasonable detail the calculation used in
determining compliance with the foregoing financial test and certifying that the
other financial covenants set forth on Annex G shall be met, on a pro forma
basis, after giving effect to such prepayment of principal, and (v) Ultimate
Parent and Maska Canada may pay (on a pro rata basis based on the amounts that
their respective portions of the Term Loan (as described in Section
6.3(a)(iv)(z) represent of the total Term Loan) regularly scheduled interest,
agency fees and other charges in respect of the Term Loan; provided, that, in
the cases of clauses (c),(f)(g,)(h) and (i), no Default or Event of Default
shall have occurred and be continuing or would result after giving effect to any
payment under such clauses; and provided further, that at
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least ten percent (10%) of Ultimate Parent's payments under clauses (h) and (i)
shall be obtained or contributed from Subsidiaries of Ultimate Parent other than
the Credit Parties.
6.15 Change of Corporate Name or Location; Change of Fiscal Year.
No Credit Party shall (a) change its corporate name, or (b) change
its chief executive office, principal place of business, corporate offices or
warehouses or locations at which Collateral is held or stored, or the location
of its records concerning the Collateral, in any case without at least thirty
(30) days' prior written notice to Agent and after Agent's written
acknowledgment (not to be unreasonably delayed) that any reasonable action
requested by Agent in connection therewith, including to continue the perfection
of any Liens in favor of Agent, on behalf of Agent and Lenders or in favor of
Agent and Lenders, as appropriate, in any Collateral, has been completed or
taken (provided that, in requesting any reasonable action be taken, Agent shall
acknowledge the limitation periods under applicable law for taking appropriate
actions in order to ensure the continuation of perfection of such Liens), and
provided that any such new location shall be in Canada or the United States of
America. So long as any Lien (other than the Liens specified in clauses (c), (d)
and (e) of Section 6.7 and the Liens of Agent and Lenders and the Canadian Agent
and the Canadian Lenders) is registered against any Credit Party in respect of
Collateral located at 110 Lauder St., Cowansville, Quebec, no Collateral shall
be held or stored at such location. No Collateral (except office furniture)
shall be stored or held at 6531-6559 Mississauga Road, Mississauga, Ontario
unless and until a landlord's agreement in form and substance satisfactory to
Agent, acting reasonably, has been delivered to Agent with respect to such
location. No Credit Party shall change its Fiscal Year without the prior written
consent of Agent, not to be unreasonably withheld.
6.16 No Impairment of Intercompany Transfers.
No Credit Party shall, directly or indirectly, enter into or become
bound by any agreement, instrument, indenture or other obligation (other than
this Agreement and the other Loan Documents, the Canadian Facility Agreement and
the Term Loan Agreement) which could directly or indirectly restrict, prohibit
or require the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by such Credit
Party to any Credit Party or between Credit Parties.
6.17 No Speculative Transactions.
No Credit Party shall engage in any transaction involving commodity
options, futures contracts or similar transactions, except solely to hedge
against fluctuations in the prices of commodities owned or purchased by it and
the values of foreign currencies receivable or payable by it and interest swaps,
caps or collars.
6.18 Changes Relating to Other Indebtedness.
No Credit Party shall change or amend the terms of the Term Loan (or
any indenture or agreement in connection therewith) if the effect of such
amendment is to: (1) increase the interest rate on such Indebtedness; (2) change
the dates upon which payments of
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principal or interest are due on such Indebtedness other than to extend such
dates; (3) change any default or event of default other than to delete or make
less restrictive any default provision therein, or add any covenant with respect
to such Indebtedness; (4) change the redemption or prepayment provisions of such
Indebtedness other than to extend the dates therefor or to reduce the premiums
payable in connection therewith; (5) grant any security or collateral to secure
payment of such Indebtedness other than the Liens granted as of the Closing Date
on the Collateral; or (6) change or amend any other term if such change or
amendment would increase the obligations of the obligor or confer additional
rights to the Term Lenders in a manner materially adverse to any Credit Party,
Agent or any Lender, as determined by Agent in its discretion, acting
reasonably.
6.19 Credit Parties Other Than Borrowers; Inactive Subsidiaries;
CCM.
No Credit Party, other than Borrowers or Canadian Borrowers, shall
engage in any trade or business, or own any assets (other than Stock of their
Subsidiaries; in the case of SLM Trademark US and SLM Trademark Canada,
Intellectual Property; in the case of SLM Trademark Canada, Stock of CCM; and,
in the case of Ultimate Parent and SHC, as applicable, the Account owing by SHC
resulting from the transaction described in Section 6.3(a)(vi) and the Accounts
owing to Ultimate Parent or SHC from Maska Canada, Maska US or Tropsport
resulting from loans made on the Closing Date described under "Intercompany
Loans" in Disclosure Schedule 1.4). No Credit Party shall permit CCM to engage
in any trade or business other than owning and licensing Intellectual Property.
No Credit Party shall permit any Inactive Subsidiary to engage in any trade or
business, own any assets (other than tax credits and a nominal amount of cash to
pay contingent tax liabilities) or have any Indebtedness or other liabilities.
On or before January 1, 2000, Ultimate Parent shall provide Agent with a
certificate of the Senior Vice-President, Finance of Ultimate Parent certifying
as to the date by which the Credit Parties propose to dissolve each Inactive
Subsidiary together with reasonable details of the business rationale for the
necessity of the period proposed prior to such dissolution, all in form and
substance satisfactory to Agent, acting reasonably. Credit Parties shall
dissolve each Inactive Subsidiary existing under the laws of Canada or the
United States of America or any political subdivision thereof on or before the
relevant date set out in such certificate; provided that, if the business
rationale for the period proposed prior to dissolution of an Inactive
Subsidiary, as provided in such certificate, is unsatisfactory to Agent, acting
reasonably, the Credit Parties shall dissolve such Inactive Subsidiary on such
earlier date as Agent may specify, acting reasonably.
6.20 Deposit and Disbursement Accounts.
Neither Borrower shall maintain any deposits and/or other accounts
and/or Lockboxes except as described in Disclosure Schedule 3.19, as amended
from time to time in accordance with Annex C. No Credit Party shall make any
transfer or deposit of funds to any account in contravention of this Agreement
or any applicable fraudulent conveyance or financial assistance provisions, if
any, under applicable laws.
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6.21 Intellectual Property Licences; CCM Shareholder's Agreement.
No Credit Party shall fail or omit to take all action necessary to
ensure that it and each of its Subsidiaries complies with and keeps in full
force and effect all provisions of each Licence of Intellectual Property granted
to it by CCM, NHL Enterprises Canada, L.P. and NHL Enterprises, L.P., and the
European Subsidiaries. With respect to each Licence of Intellectual Property
granted to a Credit Party by any Person other than CCM, NHL Enterprises Canada,
L.P., NHL Enterprises L.P. and the European Subsidiaries, no Credit Party shall
fail or omit to take all action necessary to ensure that it and each of its
Subsidiaries complies with and keeps in full force and effect all provisions of
each such Licence granted to it to the extent such Licence is material to the
conduct of its business. SLM Trademark Canada shall not fail or omit to take any
action necessary to ensure that it complies in all material respects with its
obligations under the CCM Shareholders Agreement and shall not amend, waive or
otherwise modify the terms of the CCM Shareholders Agreement existing as of the
Closing Date or vote, take any action or omit to fail to vote or take any action
under the CCM Shareholders Agreement, if such amendment, waiver, other
modification, vote, action, omission or failure would increase its obligations
or otherwise adversely affect its interests thereunder or the Agent's and
Lenders' interests under the Consent and Acknowledgement Respecting Intellectual
Property executed by CCM and acknowledged by Gestion Pro-Velo Inc.
6.22 Locations Leased from Designated Quebec Landlords and Taft
Corners Associates.
After the Closing Date, no Credit Party shall amend (if such
amendment would increase its obligations under such lease or confer any
additional rights on the landlord thereunder), renew or extend any existing
lease with respect to any leased location in Quebec existing as of the Closing
Date, as set out on Disclosure Schedule 3.27, or execute any new lease with
respect to any such leased location without the prior consent of Agent in
writing. Moreover, Agent shall be given thirty (30) days' prior written notice
of the entering into of such amendment, renewal, extension or lease and shall be
provided with details of all proposed rents, security deposits, term of renewal,
and all other additional material terms of such amendment, renewal, extension or
lease, as Agent may reasonably request. Borrowers shall notify Agent of each
reduction of any security deposit made by a Credit Party with a landlord prior
to the reduction being made and of any change in either Borrower's obligation to
pay rent monthly in advance no later than the first day of each month. If Credit
Parties propose to amend, renew or extend the lease with respect to 139 Harvest
Lane Williston, Vermont, Credit Parties shall, prior to agreeing to any such
amendment, renewal or extension, use all commercially reasonable efforts to
obtain a new landlord's agreement from the lessor of such property on such terms
as are, in form and substance, satisfactory to Agent, acting reasonably.
6.23 Inventory at Warehouse and Distribution Facilities.
No Credit Party shall keep or maintain:
(1) at any manufacturing facility (other than 375 Sligo Road,
Mount Forest, Ontario), any finished goods Inventory, having
an aggregate value, in
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respect of each such location, in excess of $2,000,000, or the
Equivalent thereof;
(2) at any warehouse or distribution facility which is owned by a
Credit Party or located at a manufacturing facility, any
finished goods Inventory having an aggregate value, in respect
of each such location, in excess of $15,000,000, or the
Equivalent Amount thereof; and
(3) at 77 Route 25, Bradford, Vermont, any finished goods
Inventory having an aggregate value in excess of $10,000,000,
or the Equivalent thereof.
6.24 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices.
On and after the first anniversary of the Closing Date, no Credit
Party shall maintain or keep any Offices (except the Offices of Maska Canada
located at 375 Sligo Road, Mount Forest, Ontario) at any location except
locations for which the Accounts Liquidation Period is a minimum of 180 days
under the Intercreditor Agreement. No Credit Party shall acquire, without the
prior consent of Agent, any of the following facilities:
(1) any manufacturing facility (by lease, purchase or otherwise),
(2) any warehouse or distribution facility, if such facility would
be owned by a Credit Party, or, otherwise, located at a
manufacturing facility, or
(3) any Offices, if such Offices would be owned by a Credit Party
or, otherwise, located at any manufacturing facility.
No Credit Party shall convert, change or otherwise modify any of its facilities
if as a result thereof the Liquidation Period applicable thereto under the
Intercreditor Agreement would be shorter than exists on the Closing Date.
SECTION 7. TERM
7.1 Termination.
The financing arrangements contemplated hereby shall be in effect
until the Commitment Termination Date, and the Loans and all other Obligations
shall be automatically due and payable in full on such date.
7.2 Survival of Obligations Upon Termination of Financing
Arrangements.
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction
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or event occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date. Except
as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Credit Parties, and all rights of Agent and each Lender, all as
contained in the Loan Documents, shall not terminate or expire, but rather shall
survive any such termination or cancellation and shall continue in full force
and effect until the Termination Date; provided however, that in all events the
provisions of Section 11, the payment obligations under Sections 1.15 and 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
SECTION 8. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 Events of Default.
The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "Event of Default"
hereunder:
(a) Either Borrower (i) fails to make any payment of principal of,
or interest on, or Fees owing in respect of, the Loans or any of the other
Obligations when due and payable, or (ii) fails to pay or reimburse Agent or
Lenders for any expense reimbursable hereunder or under any other Loan Document
within ten (10) days following Agent's demand for such reimbursement or payment
of expenses.
(b) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of Sections 1.4, 1.8, 5.4, 6 or clause 11(iii) of
Annex E, or any of the provisions set forth in Annexes C or G, respectively.
(c) Any Credit Party shall fail or neglect to perform, keep or
observe any of the provisions of Section 4 or any provisions set forth in
Annexes E or F, respectively, and (a) in the case of any provision set forth in
Annex E (except clauses 6 and 11(iii) thereof), the same shall remain unremedied
for five (5) Business Days or more, and (b) in all other cases (except clause
11(iii) of Annex E), the same shall remain unremedied for three (3) days or
more.
(d) Any Credit Party shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other clause
of this Section 8.1) and the same shall remain unremedied for twenty-five (25)
days or more.
(e) A default or breach shall occur under any other agreement,
document or instrument to which any Credit Party is a party which is not cured
within any applicable grace period, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness (other than
the Obligations) of any Credit Party individually, or of all Credit Parties,
considered together, in excess of $1,500,000 in the aggregate, or (ii) causes,
or permits any holder of such Indebtedness or a trustee to cause, Indebtedness
or a portion thereof in excess of $1,500,000 in the
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aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, regardless of whether such right is exercised, by
such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect (unless immaterial and inadvertent) in any respect, or any
representation or warranty herein or in any Loan Document or in any written
statement, report, financial statement or certificate (other than a Borrowing
Base Certificate) made or delivered to Agent or any Lender by any Credit Party
is untrue or incorrect in any material respect as of the date when made or
deemed made.
(g) Assets of any one Credit Party or more than one Credit Party
with a fair market value of $1,500,000 or more shall be attached, seized, levied
upon or subjected to a writ or distress warrant, or come within the possession
of any receiver, trustee, custodian or assignee for the benefit of creditors of
such Credit Party or Credit Parties and such process, possession or other
condition shall not, within thirty (30) days after the commencement thereof,
have been discharged, released or execution thereof stayed or bonded pending
appeal, or shall not have been discharged or released prior to the expiration of
any such stay.
(h) A case or proceeding shall have been commenced against any
Credit Party seeking a decree or order in respect of any Credit Party (i) under
Title 11 of the United States Code, as now constituted or hereafter amended or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) appointing a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or similar official) for any Credit Party or of any substantial
part of any such Person's assets, or (iii) ordering the winding-up or
liquidation of the affairs of any Credit Party, and such case or proceeding
shall remain undismissed or unstayed for sixty (60) days or more or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
(i) Any Credit Party (i) shall file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) shall fail to contest in a timely and appropriate manner or shall consent
to the institution of proceedings thereunder or to the filing of any such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any
Credit Party or of any substantial part of any such Person's assets, (iii) shall
make a general assignment for the benefit of creditors, (iv) shall take any
corporate action in furtherance of any of the foregoing; or (v) shall admit in
writing its inability to, or shall be generally unable to, pay its debts as such
debts become due.
(j) A final judgment or judgments for the payment of money in excess
of $1,500,000 in the aggregate at any time outstanding shall be rendered against
any one Credit Party or more than one Credit Party and the same shall not,
within thirty (30) days after the entry thereof, have been discharged or
execution thereof stayed or bonded pending appeal, or shall not have been
discharged prior to the expiration of any such stay.
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(k) Any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its terms (or any
Credit Party or European Subsidiary or other Person that is a party thereto
shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any security
interest created under any Loan Document shall cease to be a valid and perfected
first priority security interest or Lien (except as otherwise permitted herein
or therein) in any of the Collateral purported to be covered thereby.
(l) Any Change of Control shall occur.
(m) Any event shall occur, which is not fully insured (except to the
extent of the deductible amount) as a result of which revenue-producing
activities cease or are substantially curtailed at any facility of Borrowers
generating more than 30% of Borrowers' consolidated revenues for the Fiscal Year
preceding such event and such cessation or curtailment continues for more than
thirty (30) days.
8.2 Remedies.
(a) If any Event of Default shall have occurred and be continuing or
if a Default shall have occurred and be continuing and Agent or Requisite
Revolving Lenders shall have determined not to make any Revolving Credit
Advances or Swing Line Advances or incur any Letter of Credit Obligations so
long as that specific Default is continuing, Agent may (and at the written
request of the Requisite Revolving Lenders shall), without notice, suspend the
Revolving Loan facility with respect to further Revolving Credit Advances or
Swing Line Advances and/or the incurrence of further Letter of Credit
Obligations whereupon any further Revolving Credit Advances or Swing Line
Advances and Letter of Credit Obligations shall be made or extended in Agent's
sole discretion (or in the sole discretion of the Requisite Revolving Lenders,
if such suspension occurred at their direction) so long as such Default or Event
of Default is continuing. If any Event of Default shall have occurred and be
continuing, Agent may (and at the written request of Requisite Lenders shall),
without notice except as otherwise expressly provided herein, increase the rate
of interest applicable to the Loans and the Letter of Credit Fees to the Default
Rate.
(b) If any Event of Default shall have occurred and be continuing,
Agent may (and at the written request of the Requisite Lenders shall), without
notice, (i) terminate the Revolving Loan facility with respect to further
Revolving Credit Advances or Swing Line Advances or the incurrence of further
Letter of Credit Obligations; (ii) declare all or any portion of the
Obligations, including all or any portion of any Loan to be forthwith due and
payable, and require that the Letter of Credit Obligations be cash
collateralized as provided in Annex B, all without presentment, demand, protest
or further notice of any kind, all of which are expressly waived by Borrowers
and each other Credit Party; and (iii) exercise any rights and remedies
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provided to Agent under the Loan Documents and/or at law or equity, including
all remedies provided under the Code; provided, however, that upon the
occurrence of an Event of Default specified in Sections 8.1(g), (h) or (i), the
Revolving Loan facility shall be immediately terminated and all of the
Obligations, including the aggregate Revolving Loan, shall become immediately
due and payable without declaration, notice or demand by any Person.
8.3 Waivers by Credit Parties.
Except as otherwise provided for in this Agreement or by applicable
law, each Credit Party waives (including for purposes of Section 12): (a)
presentment, demand and protest and notice of presentment, dishonor, notice of
intent to accelerate, notice of acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Agent on which any Credit Party may in
any way be liable, and hereby ratifies and confirms whatever Agent may do in
this regard, (b) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevy, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior to
allowing Agent to exercise any of its remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.
SECTION 9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) The Credit Parties signatory hereto consent to any Lender's
assignment of, and/or sale of participations in, at any time or times, the Loan
Documents, Loans, Letter of Credit Obligations and any Revolving Loan Commitment
or of any portion thereof or interest therein, including any Lender's rights,
title, interests, remedies, powers or duties thereunder, whether evidenced by a
writing or not; provided, that any assignment by a Lender shall (i) require the
consent of Agent and, so long as no Event of Default has occurred and is
continuing, Borrower Representative (which consent shall only be in respect of
the identity of the prospective assignee and not in respect of the terms of the
assignment and shall not be unreasonably withheld or delayed) and the execution
of an assignment agreement (an "Assignment Agreement") substantially in the form
attached hereto as Exhibit 9.1(a) and otherwise in form and substance
satisfactory to, and acknowledged by, Agent; (ii) be conditioned on such
assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) not
be made to a Non-U.S. Lender unless such Non-U.S. Lender has provided the Agent
and the Borrower Representative with a Certificate of Exemption prior to such
assignment becoming effective hereunder (provided, that with respect to any
assignment to be made to a Non-U.S. Lender after an Event of Default has
occurred and is continuing, such Non-U.S. Lender shall be required to provide a
Certificate of Exemption only to the extent that it is legally able to do so);
(iv) if a partial
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assignment, be in an amount at least equal to $5,000,000 and, after giving
effect to any such partial assignment, the assigning Lender shall have retained
a Revolving Loan Commitment in an amount at least equal to $5,000,000; and (v)
include a payment to Agent of an assignment fee of $3,500. In the case of an
assignment by a Lender under this Section 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Revolving Loan Commitment or assigned
portion thereof from and after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "Lender". In all instances, each Lender's liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender's Pro Rata Share of the Revolving Loan Commitment. In the event Agent or
any Lender assigns or otherwise transfers all or any part of the Obligations,
Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon the
request of Agent or such Lender, execute new Notes in exchange for the Notes, if
any, being assigned. Notwithstanding the foregoing provisions of this Section
9.1(a), any Lender may at any time pledge the Obligations held by it and such
Lender's rights under this Agreement and the other Loan Documents to a Federal
Reserve Bank, and any Lender that is an investment fund may assign the
Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor; provided, however, that no such pledge to a Federal Reserve Bank shall
release such Lender from such Lender's obligations hereunder or under any other
Loan Document.
(b) Each Lender may sell participations, all or any part of its
Revolving Loan Commitment without the consent of any Credit Party; provided all
amounts payable by Borrowers hereunder shall be determined as if that Lender had
not sold such participation, and that the holder of any such participation shall
not be entitled to require such Lender to take or omit to take any action
hereunder except actions directly affecting (i) any reduction in the principal
amount of, or interest rate or Fees payable with respect to, any Loan in which
such holder participates, (ii) any extension of the scheduled amortization of
the principal amount of any Loan in which such holder participates or the final
maturity date thereof, and (iii) any release of all or substantially all of the
Collateral (other than in accordance with the terms of this Agreement, the
Collateral Documents or the other Loan Documents). Without limiting the
foregoing, solely for purposes of Sections 1.13, 1.15, 1.16 and 9.8, each Credit
Party acknowledges and agrees that a participation shall give rise to a direct
obligation of the Credit Parties to the participant in respect of the portion of
the Revolving Loan Commitment sold to such participant and the participant shall
be considered to be a "Lender". Except as set forth in the preceding sentence no
Borrower or Credit Party shall have any obligation or duty to any participant.
Neither Agent nor any Lender (other than the Lender selling a participation)
shall have any duty to any participant and may continue to deal solely with the
Lender selling a participation as if no such sale had occurred.
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(c) Except as expressly provided in this Section 9.1, no Lender
shall, as between Borrowers and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender permitted to sell assignments or participations under this Section 9.1 as
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and,
if reasonably requested by Agent, the preparation of informational materials
for, and the participation of management in meetings with, potential assignees
or participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their affairs contained in any selling materials provided by them and all
other information provided by them and included in such materials, except that
any Projections delivered by Borrowers shall only be certified by Borrowers as
having been prepared by Borrowers in compliance with the representations
contained in Section 3.4(c).
(e) A Lender may furnish any information concerning Credit Parties
in the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(f) So long as no Event of Default shall have occurred and be
continuing, no Lender shall assign or sell participations in any portion of its
Loans or Revolving Loan Commitment to a potential Lender or participant, if, as
of the date of the proposed assignment or sale, the assignee Lender or
participant would be subject to capital adequacy or similar requirements under
Section 1.16(a), increased costs under Section 1.16(b), an inability to fund
LIBOR Loans under Section 1.16(c), or withholding taxes in accordance with
Section 1.15(a).
9.2 Appointment of Agent.
GE Capital is hereby appointed to act on behalf of all Lenders as
Agent under this Agreement and the other Loan Documents. The provisions of this
Section 9.2 are solely for the benefit of Agent and Lenders and no Credit Party
nor any other Person shall have any rights as a third party beneficiary of any
of the provisions hereof. In performing its functions and duties under this
Agreement and the other Loan Documents, Agent shall act solely as an agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Credit
Party or any other Person. Agent shall have no duties or responsibilities except
for those expressly set forth in this Agreement and the other Loan Documents.
The duties of Agent shall be mechanical and administrative in nature and
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Agent shall not have, or be deemed to have, by reason of this Agreement, any
other Loan Document or otherwise a fiduciary relationship in respect of any
Lender. Neither Agent nor any of its Affiliates nor any of their respective
officers, directors, employees, agents or representatives shall be liable to any
Lender for any action taken or omitted to be taken by it hereunder or under any
other Loan Document, or in connection herewith or therewith, except for damages
solely caused by its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders with respect to any act
or action (including failure to act) in connection with this Agreement or any
other Loan Document, then Agent shall be entitled to refrain from such act or
taking such action unless and until Agent shall have received instructions from
Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders, as
the case may be, and Agent shall not incur liability to any Person by reason of
so refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (a) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders,
as applicable.
9.3 Agent's Reliance, Etc.
Neither Agent nor any of its Affiliates nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for damages solely caused by its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof
until Agent receives written notice of the assignment or transfer thereof signed
by such payee and in form satisfactory to Agent; (b) may consult with legal
counsel, independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (c)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (d) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or the other Loan
Documents on the part of any Credit Party or to inspect the Collateral
(including the books and records) of any Credit Party; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; and (f) shall incur no liability under or in respect of this Agreement
or the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or
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writing (which may be by telecopy, telegram, cable or telex) believed by it to
be genuine and signed or sent by the proper party or parties.
9.4 GE Capital and Affiliates.
With respect to its Revolving Loan Commitment hereunder, GE Capital
shall have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly
indicated, include GE Capital in its individual capacity. GE Capital and its
Affiliates may lend money to, invest in, and generally engage in any kind of
business with, any Credit Party, any of their Affiliates and any Person who may
do business with or own securities of any Credit Party or any such Affiliate,
all as if GE Capital were not Agent and without any duty to account therefor to
Lenders. GE Capital and its Affiliates may accept fees and other consideration
from any Credit Party for services in connection with this Agreement or
otherwise without having to account for the same to Lenders. GE Capital Canada,
an affiliate of GE Capital, is a Canadian Lender and Canadian Agent under the
Canadian Facility. Each Lender acknowledges the potential conflict of interest
between GE Capital as a Lender holding disproportionate interests in the Loans;
GE Capital Canada as Canadian Agent and Canadian Lender and GE Capital as Agent.
9.5 Lender Credit Decision.
Each Lender acknowledges that it has, independently and without
reliance upon Agent or any other Lender and based on the Financial Statements
referred to in Section 3.4(a) and such other documents and information as it has
deemed appropriate, made its own credit and financial analysis of the Credit
Parties and its own decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
9.6 Indemnification.
Lenders agree to indemnify Agent (to the extent not reimbursed by
Credit Parties and without limiting the obligations of Credit Parties
hereunder), ratably according to their respective Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in
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respect of rights or responsibilities under, this Agreement and each other Loan
Document, to the extent that Agent is not reimbursed for such expenses by Credit
Parties.
9.7 Successor Agent.
Agent may resign at any time by giving not less than thirty (30)
days' prior written notice thereof to Lenders and Borrower Representative. Upon
any such resignation, the Requisite Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent's giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank or
financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, by the 30th day after the
date such notice of resignation was given by the resigning Agent, such
resignation shall become effective and the Requisite Lenders shall thereafter
perform all the duties of Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor Agent as provided above. Any successor
Agent appointed by Requisite Lenders hereunder shall be subject to the approval
of Borrower Representative, such approval not to be unreasonably withheld or
delayed; provided that such approval shall not be required if an Event of
Default shall have occurred and be continuing. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent. Upon the earlier of the acceptance of any appointment as
Agent hereunder by a successor Agent or the effective date of the resigning
Agent's resignation, the resigning Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except that any
indemnity rights or other rights in favor of such resigning Agent shall
continue. After any resigning Agent's resignation hereunder, 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.
9.8 Setoff and Sharing of Payments.
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuance of any Event of Default, each Lender and each holder of
any Note is hereby authorized at any time or from time to time, without notice
to any Credit Party or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
balances held by it at any of its offices for the account of either Borrower or
any other Credit Party (regardless of whether such balances are then due to such
Borrower or other Credit Party) and any other properties or assets any time held
or owing by that Lender or that holder to or for the credit or for the account
of either Borrower or any other Credit Party against and on account of any of
the Obligations which are not paid when due; provided that any Lender exercising
a right to set off shall notify Borrower Representative of such exercise within
a reasonable time
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thereafter. Any Lender or holder of any Note exercising a right to set off or
otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or holders
shall sell) such participations in each such other Lender's or holder's Pro Rata
Share of the Obligations as would be necessary to cause such Lender to share the
amount so set off or otherwise received with each other Lender or holder in
accordance with their respective Pro Rata Shares. Each Lender's obligation under
this Section 9.8 shall be in addition to and not limitation of its obligations
to purchase a participation in an amount equal to its Pro Rata Share of the
Swing Line Loans under Section 1.1. Each Credit Party that is a Borrower or
Guarantor agrees, to the fullest extent permitted by law, that (a) any Lender or
holder may exercise its right to set off with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such amount
so set off to other Lenders and holders and (b) any Lender or holders so
purchasing a participation in the Loans made or other Obligations held by other
Lenders or holders may exercise all rights of set-off, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of the Loans and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the set-off amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of set-off,
the purchase of participations by that Lender shall be rescinded and the
purchase price restored without interest.
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions
in Concert.
(a) Advances; Payments.
(i) Revolving Lenders shall refund or participate in the Swing
Line Loan in accordance with clauses (iii) and (iv) of Section 1.1(c). If the
Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00
p.m. (New York time) on the date such Notice of Revolving Advance is received,
by telecopy, telephone or other similar form of transmission. Each Revolving
Lender shall make the amount of such Lender's Pro Rata Share of each Revolving
Credit Advance available to Agent in same day funds by wire transfer to Agent's
account as set forth in Annex H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan and not later than
11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in the Agent's sole discretion,
before receipt of such wire transfers), subject to the terms hereof, Agent shall
make the requested Revolving Credit Advance to the Borrower designated by
Borrower Representative in the Notice of Revolving Credit Advance. For greater
certainty, if Agent makes a Revolving Credit Advance available to a Borrower,
notwithstanding that either Borrower fails to satisfy the conditions precedent
set forth in Section 2.2, each Revolving Lender shall make the amount of its Pro
Rata Share of such Revolving Credit Advance available to Agent as set forth
above in this Section 9.9(a)(i). All payments by each Revolving Lender shall be
made without setoff, counterclaim or deduction of any kind.
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(ii) On the second (2nd) Business Day of each calendar week or
more frequently as aggregate cumulative payments in excess of $2,000,000 are
received with respect to the Loans (other than the Swing Line Loan) (each, a
"Settlement Date"), Agent will advise each Lender by telephone, or telecopy of
the amount of such Lender's Pro Rata Share of principal, interest and Fees paid
for the benefit of Lenders with respect to each applicable Loan. Provided that
such Lender has funded all payments or Revolving Credit Advances required to be
made by it and has purchased all participations required to be purchased by it
under this Agreement and the other Loan Documents as of such Settlement Date,
Agent will pay to each Lender such Lender's Pro Rata Share of principal,
interest and Fees paid by Borrowers since the previous Settlement Date for the
benefit of that Lender on the Loans held by it. To the extent that any Lender (a
"Non-Funding Lender") has failed to fund all such payments and Revolving Credit
Advances or failed to fund the purchase of all such participations, Agent shall
be entitled to set off the funding short-fall against that Non-Funding Lender's
Pro Rata Share of all payments received from Borrowers. Such payments shall be
made by wire transfer to such Lender's account (as specified by such Lender in
Annex H or the applicable Assignment Agreement) not later than 2:00 p.m. (New
York time) on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Notwithstanding that
either Borrower fails to satisfy the conditions precedent set forth in Section
2.2, Agent may assume that each Revolving Lender will make its Pro Rata Share of
each Revolving Credit Advance available to Agent on each funding date. If such
Pro Rata Share is not, in fact, paid to Agent by such Revolving Lender when due,
Agent will be entitled to recover such amount on demand from such Revolving
Lender without set-off, counterclaim or deduction of any kind. If any Revolving
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
demand, Agent shall promptly notify Borrower Representative and Borrowers shall
immediately repay such amount to Agent. Nothing in this Section 9.9(b) or
elsewhere in this Agreement or the other Loan Documents shall be deemed to
require Agent to advance funds on behalf of any Revolving Lender or to relieve
any Revolving Lender from its obligation to fulfill its Revolving Loan
Commitment hereunder or to prejudice any rights that Borrowers may have against
any Revolving Lender as a result of any default by such Revolving Lender
hereunder. Notwithstanding that either Borrower fails to satisfy the conditions
precedent set forth in Section 2.2, to the extent that Agent advances funds to
either Borrower on behalf of any Revolving Lender and is not reimbursed therefor
on the same Business Day as such Revolving Credit Advance is made, Agent shall
be entitled to retain for its account all interest accrued on such Revolving
Credit Advance until reimbursed by the applicable Revolving Lender.
(c) Return of Payments.
(i) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Agent from Borrowers and such related payment is not received by Agent, then
Agent will be
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entitled to recover such amount from such Lender on demand without set-off,
counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to either Borrower or paid to any
other Person pursuant to any insolvency law or otherwise, then, notwithstanding
any other term or condition of this Agreement or any other Loan Document, Agent
will not be required to distribute any portion thereof to any Lender. In
addition, each Lender will repay to Agent on demand any portion of such amount
that Agent has distributed to such Lender, together with interest at such rate,
if any, as Agent is required to pay to either Borrower or such other Person,
without set-off, counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to
make any Revolving Credit Advance or any payment required by it hereunder or to
purchase any participation in any Swing Line Loan to be made or purchased by it
on the date specified therefor shall not relieve any other Revolving Lender
(each such other Revolving Lender, an "Other Lender") of its obligations to make
such Revolving Credit Advance or purchase such participation on such date, but
neither any Other Lender nor Agent shall be responsible for the failure of any
Non-Funding Lender to make a Revolving Credit Advance or to purchase a
participation required hereunder. Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a "Lender" or a
"Revolving Lender" (or be included in the calculation of "Requisite Lenders", or
"Supermajority Revolving Lenders" hereunder) for any voting or consent rights
under or with respect to any Loan Document.
(e) Dissemination of Information. Agent will use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has actually become aware and with notice of any
action taken by Agent following any Event of Default; provided, however, that
Agent shall not be liable to any Lender for any failure to do so, except to the
extent that such failure is attributable to Agent's gross negligence or willful
misconduct. Lenders acknowledge that Borrowers are required to provide Financial
Statements and Collateral Reports to Lenders in accordance with Annexes E and F
hereto and agree that Agent shall have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
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SECTION 10. SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns.
This Agreement and the other Loan Documents shall be binding on and
shall inure to the benefit of each Credit Party, Agent, Lenders and their
respective successors and permitted assigns (including, in the case of any
Credit Party, a debtor-in-possession on behalf of such Credit Party), except as
otherwise provided herein or therein. No Credit Party may assign, transfer,
hypothecate or otherwise convey its rights, benefits, obligations or duties
hereunder or under any of the other Loan Documents without the prior express
written consent of Agent and Lenders. Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Lenders shall be void. The terms and provisions of
this Agreement are for the purpose of defining the relative rights and
obligations of each Credit Party, Agent and Lenders with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement or any of the
other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement.
The Loan Documents constitute the complete agreement between the
parties with respect to the subject matter thereof and may not be modified,
altered or amended except as set forth in Section 11.2 below. Any letter of
interest, commitment letter, fee letter (other than the GE Capital Fee Letter)
and/or confidentiality agreement between any Credit Party and Agent or any
Lender or any of their respective affiliates, predating this Agreement and
relating to a financing of substantially similar form, purpose or effect shall
be superseded by this Agreement.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any of the Notes, or any consent to any departure by any Credit
Party therefrom, shall in any event be effective unless the same shall be in
writing and signed by Agent and Borrowers, and by Requisite Lenders,
Supermajority Revolving Lenders or all affected Lenders, as applicable. Except
as set forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement which increases the percentage
advance rates set forth in the definition of the Borrowing Base, the Maska US
Borrowing Base or the SHC Hockey Borrowing Base, or which makes less restrictive
the nondiscretionary criteria for exclusion from Eligible Accounts and Eligible
Inventory set forth in Sections 1.6 and 1.7, shall be effective unless the same
shall be in writing and signed by Agent, Supermajority Revolving Lenders and
Borrowers. No amendment, modification,
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termination or waiver of or consent with respect to any provision of this
Agreement which waives compliance with the conditions precedent set forth in
Section 2.2 to the making of any Loan or the incurrence of any Letter of Credit
Obligations shall be effective unless the same shall be in writing and signed by
Agent, Requisite Lenders and Borrowers. Notwithstanding anything contained in
this Agreement to the contrary, no waiver or consent with respect to any Default
(if in connection therewith Agent or Requisite Lenders, as the case may be, have
exercised its or their right to suspend the making or incurrence of further
Advances or Letter of Credit Obligations pursuant to Section 8.2(a)) or any
Event of Default shall be effective for purposes of the conditions precedent to
the making of Loans or the incurrence of Letter of Credit Obligations set forth
in Section 2.2 unless the same shall be in writing and signed by Agent,
Requisite Lenders and Borrowers.
(c) No amendment, modification, termination or waiver shall, unless
in writing and signed by Agent and each Lender directly affected thereby, do any
of the following: (i) increase the principal amount of any Lender's Revolving
Loan Commitment (which action shall be deemed to directly affect all Lenders);
(ii) reduce the principal of, rate of interest on or Fees payable with respect
to any Loan or Letter of Credit Obligations of any affected Lender; (iii) extend
any scheduled payment date or final maturity date of the principal amount of any
Loan of any affected Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (v) release any Guaranty
or, except as otherwise permitted herein or in the other Loan Documents,
release, or permit any Credit Party to sell or otherwise dispose of, any
Collateral with a value exceeding $5,000,000 in the aggregate (which action
shall be deemed to directly affect all Lenders); (vi) change the percentage of
the Revolving Loan Commitments or of the aggregate unpaid principal amount of
the Loans which shall be required for Lenders or any of them to take any action
hereunder; and (vii) amend or waive this Section 11.2 or the definitions of the
terms "Requisite Lenders", or "Supermajority Revolving Lenders" insofar as such
definitions affect the substance of this Section 11.2. Furthermore, no
amendment, modification, termination or waiver affecting the rights or duties of
Agent under this Agreement or any other Loan Document shall be effective unless
in writing and signed by Agent, in addition to Lenders required hereinabove to
take such action. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Agent to take additional Collateral pursuant to any Loan Document.
No amendment, modification, termination or waiver of any provision of any Note
shall be effective without the written concurrence of the holder of that Note.
No notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances. Any amendment, modification, termination, waiver
or consent effected in accordance with this Section 11.2 shall be binding upon
each holder of the Notes at the time outstanding and each future holder of the
Notes.
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(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
(i) requiring the consent of all affected Lenders, the consent
of Requisite Lenders is obtained, but the consent of other Lenders whose consent
is required is not obtained (any such Lender whose consent is not obtained as
described this clause (i) and in clauses (ii), (iii) and (iv) below being
referred to as a "Non-Consenting Lender"), or
(ii) requiring the consent of Supermajority Revolving Lenders,
the consent of Requisite Lenders is obtained, but the consent of Supermajority
Revolving Lenders is not obtained, or
(iii) requiring the consent of Requisite Lenders, the consent
of Revolving Lenders holding 51% or more of the aggregate Revolving Loan
Commitments is obtained, but the consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative's request, Agent or a Person acceptable to Agent shall have the
right with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Revolving Loan Commitment of such
Non-Consenting Lender for an amount equal to the principal balance of all Loans
held by the Non-Consenting Lender and all accrued interest and Fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance of all
of the Obligations (other than indemnification Obligations under Section 1.13 or
any other substantially similar general indemnification obligations under any
other Loan Document), termination of the Revolving Loan Commitment and a release
of all claims against Agent and Lenders, and so long as no suits, actions,
proceedings, or claims are pending or threatened against any Indemnified Person
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agent (and, to the extent required, Lenders) shall deliver to Borrowers
termination statements, mortgage releases and other documents necessary or
appropriate to evidence the termination of the Liens securing payment of the
Obligations.
11.3 Fees and Expenses.
Borrowers shall reimburse Agent for all reasonable out-of-pocket
expenses incurred in connection with the preparation of the Loan Documents
(including the reasonable fees and expenses of all of its special loan counsel,
advisors, consultants and auditors retained in connection with the Loan
Documents and the Related Transactions and advice in connection therewith).
Borrowers shall reimburse Agent (and, with respect to clauses (c) and (d) below,
all Lenders) for all reasonable fees, costs and
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expenses, including the reasonable fees, costs and expenses of counsel or other
advisors (including environmental and management consultants and appraisers) for
advice, assistance, or other representation in connection with:
(a) the forwarding to Borrowers or any other Person on behalf of
Borrowers by Agent of the proceeds of the Loans;
(b) any amendment, modification or waiver of, or consent with
respect to, any of the Loan Documents or Related Transactions Documents or
advice in connection with the administration of the Loans made pursuant hereto
or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, either Borrower or any other Person)
in any way relating to the Collateral, any of the Loan Documents or any other
agreement to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against any or all of the Borrowers or
any other Person that may be obligated to Agent by virtue of the Loan Documents;
including any such litigation, contest, dispute, suit, proceeding or action
arising in connection with any work-out or restructuring of the Loans during the
pendency of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than Agent, such reimbursement shall
be limited to one counsel for all such Lenders;
(d) any attempt to enforce any remedies of Agent or any Lender
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents;
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(e) any work-out or restructuring of the Loans during the pendency
of one or more Events of Default;
(f) efforts to (i) monitor the Loans or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral;
including, as to each of clauses (a) through (f) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services, including those in connection with any appellate proceedings; and all
expenses, costs, charges and other fees incurred by such counsel and others in
any way or respect arising in connection with or relating to any of the events
or actions described in this Section 11.3 shall be payable, on demand, by
Borrowers to Agent. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees
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may include: fees, costs and expenses of accountants, environmental advisors,
appraisers, investment bankers, management and other consultants and paralegals;
court costs and expenses; photocopying and duplication expenses; court reporter
fees, costs and expenses; long distance telephone charges; air express charges;
telegram or telecopy charges; secretarial overtime charges; and expenses for
travel, lodging and food paid or incurred in connection with the performance of
such legal or other advisory services; and expenses, costs, charges and fees
payable by Agent and Lenders under or in connection with any landlord agreement,
bailee letter, mortgagee agreement, the Intercreditor Agreement or Consent and
Acknowledgment Respecting Intellectual Property, including, in connection with
enforcement of Agent's and Lenders' rights thereunder.
11.4 No Waiver.
Agent's or any Lender's failure, at any time or times, to require
strict performance by the Credit Parties of any provision of this Agreement and
any of the other Loan Documents shall not waive, affect or diminish any right of
Agent or such Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver of an Event of Default shall not suspend,
waive or affect any other Event of Default whether the same is prior or
subsequent thereto and whether the same or of a different type. Subject to the
provisions of Section 11.2, none of the undertakings, agreements, warranties,
covenants and representations of any Credit Party contained in this Agreement or
any of the other Loan Documents and no Default or Event of Default by any Credit
Party shall be deemed to have been suspended or waived by Agent or any Lender,
unless such waiver or suspension is by an instrument in writing signed by an
officer of or other authorized employee of Agent and the applicable required
Lenders, and directed to Borrowers specifying such suspension or waiver.
11.5 Remedies.
Agent's and Lenders' rights and remedies under this Agreement shall
be cumulative and nonexclusive of any other rights and remedies which Agent or
any Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required. No single or partial exercise by Agent or Lender of any right
or remedy precludes or otherwise affects the exercise of any other right to
remedy to which that Party may be entitled.
11.6 Severability.
Wherever possible, each provision of this Agreement and the other
Loan Documents shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
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11.7 Conflict of Terms.
Except as otherwise provided in this Agreement or any of the other
Loan Documents by specific reference to the applicable provisions of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.
11.8 Confidentiality.
Agent and each Lender agree to use commercially reasonable efforts
(equivalent to the efforts Agent or such Lender applies to maintaining the
confidentiality of its own confidential information) to maintain as confidential
all confidential information provided to them by the Credit Parties and
designated as confidential for a period of two (2) years following receipt
thereof, except that Agent and each Lender may disclose such information (a) to
Persons employed or engaged by Agent or such Lender in evaluating, approving,
structuring or administering the Loans and the Revolving Loan Commitments; (b)
to any bona fide assignee or participant or potential assignee or participant
that has agreed to comply with the covenant contained in this Section 11.8 (and
any such bona fide assignee or participant or potential assignee or participant
may disclose such information to Persons employed or engaged by them as
described in clause (a) above); (c) as required or requested by any Governmental
Authority or reasonably believed by Agent or such Lender to be compelled by any
court decree, subpoena or legal or administrative order or process; (d) as, on
the advice of Agent's or such Lender's counsel, required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Agent or such Lender is a party; or
(f) which ceases to be confidential through no fault of Agent or such Lender.
11.9 GOVERNING LAW.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS,
IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES
THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK COUNTY, CITY OF NEW YORK,
NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND LENDERS PERTAINING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT
AGENT, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK COUNTY, CITY
OF NEW YORK, NEW YORK AND, PROVIDED, FURTHER NOTHING IN THIS AGREEMENT SHALL BE
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DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CREDIT PARTY HEREBY WAIVES ANY OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR FIVE
(5) BUSINESS DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.10 Notices.
Except as otherwise provided herein, whenever it is provided herein
that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (a) upon the earlier of actual receipt and three (3) Business Days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid, (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 11.10), (c) one (1)
Business Day after deposit with a reputable overnight courier with all charges
prepaid or (d) when delivered, if hand-delivered by messenger, all of which
shall be addressed to the party to be notified and sent to the address or
facsimile number indicated on Annex I or to such other address (or facsimile
number) as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower Representative or Agent) designated on Annex I to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
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11.11 Section Titles.
The Section titles and Table of Contents contained in this Agreement
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
11.12 Counterparts.
This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one
agreement.
11.13 WAIVER OF JURY TRIAL.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED
WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.
11.14 Press Releases.
Each Credit Party executing this Agreement agrees that neither it
nor its Affiliates will in the future issue any press releases or other public
disclosure using the name of GE Capital or its affiliates or referring to this
Agreement, the other Loan Documents or the Related Transactions Documents
without at least two (2) Business Days' prior notice to GE Capital and without
the prior written consent of GE Capital unless (and only to the extent that)
such Credit Party or Affiliate is required to do so under law and then, in any
event, such Credit Party or Affiliate will consult with GE Capital before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Agent or any Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this
Agreement. Agent or such Lender shall provide a draft of any such tombstone or
similar advertising material to Borrower Representative for review and comment
prior to the publication thereof. Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements with Borrowers' consent which shall not be
unreasonably withheld or delayed.
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11.15 Reinstatement.
This Agreement shall remain in full force and effect and continue to
be effective should any petition be filed by or against any Credit Party for
liquidation or reorganization, should any Credit Party become insolvent or make
an assignment for the benefit of any creditor or creditors or should a receiver
or trustee be appointed for all or any significant part of any Credit Party's
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
11.16 Advice of Counsel.
Each of the parties represents to each other party hereto that it
has discussed this Agreement and, specifically, the provisions of Sections 11.9
and 11.13, with its counsel.
11.17 No Strict Construction.
The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed, to the extent
permitted by applicable laws, as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
SECTION 12. CROSS-GUARANTY
12.1 Cross-Guaranty.
Each Borrower hereby agrees that such Borrower is jointly and
severally liable for, and hereby irrevocably and unconditionally guarantees to
Agent and Lenders and their respective successors and assigns, the full and
prompt payment when due (whether at stated maturity, by acceleration or
otherwise) and at all times thereafter, and performance of all Obligations owed
or hereafter owing to Agent and Lenders by each other Borrower. Each Borrower
agrees that its guaranty obligation hereunder is a continuing guaranty of
payment and performance and not of collection, that its obligations under this
Section 12 shall not be discharged until payment and performance, in full, of
the Obligations has occurred and this Agreement has been terminated, and that
its obligations under this Section 12 shall be absolute and unconditional,
irrespective of, and unaffected by,
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which either Borrower is or may
become a party;
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(b) the absence of any action to enforce this Agreement (including
this Section 12) or any other Loan Document or the waiver or consent by Agent
and Lenders with respect to any of the provisions thereof;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any security for the Obligations or any action, or the absence of
any action, by Agent and Lenders in respect thereof (including the release of
any such security);
(d) the insolvency of any Credit Party (other than the guaranteeing
Borrowers); or
(e) any other action or circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Subject to Section 12.7(b), each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder.
12.2 Waivers by Borrowers.
Each Borrower expressly waives, to the extent permitted by
applicable law, all rights it may have now or in the future under any statute,
or at common law, or at law or in equity, or otherwise, to compel Agent or
Lenders to marshall assets or to proceed in respect of the Obligations
guaranteed hereunder against any other Credit Party, any other party or against
any security for the payment and performance of the Obligations before
proceeding against, or as a condition to proceeding against, such Borrower. It
is agreed among each Borrower, Agent and Lenders that the foregoing waivers are
of the essence of the transaction contemplated by this Agreement and the other
Loan Documents and that, but for the provisions of this Section 12 and such
waivers, Agent and Lenders would decline to enter into this Agreement.
12.3 Benefit of Guaranty.
Each Borrower agrees that the provisions of this Section 12 are for
the benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Agent or Lenders, the obligations of such other Borrower
under the Loan Documents.
12.4 Subordination of Subrogation, Etc.
Notwithstanding anything to the contrary in this Agreement or in any
other Loan Document, and except as set forth in Section 12.7, each Borrower
hereby expressly and irrevocably subordinates to payment of the Obligations any
and all rights at law or in equity to subrogation, reimbursement, exoneration,
contribution, indemnification or set off and any and all defenses available to a
surety, guarantor or accommodation co-obligor until the Obligations are
indefeasibly paid in full in cash and this Agreement has been terminated. Each
Borrower acknowledges and agrees that this subordination is intended to benefit
Agent and Lenders and shall not limit or otherwise affect such Borrower's
liability hereunder or the enforceability of this
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Section 12, and that Agent, Lenders and their respective successors and assigns
are intended third party beneficiaries of the waivers and agreements set forth
in this Section 12.4.
12.5 Election of Remedies.
If Agent or any Lender may, under applicable law, proceed to realize
its benefits under any of the Loan Documents giving Agent or such Lender a Lien
upon any Collateral, whether owned by any Borrower or by any other Person,
either by judicial foreclosure or by non-judicial sale or enforcement, Agent or
any Lender may, at its sole option, determine which of its remedies or rights it
may pursue without affecting any of its rights and remedies under this Section
12. If, in the exercise of any of its rights and remedies, Agent or any Lender
shall forfeit any of its rights or remedies, including its right to enter a
deficiency judgment against any Borrower or any other Person, whether because of
any applicable laws pertaining to "election of remedies" or the like, each
Borrower hereby consents to such action by Agent or such Lender and waives any
claim based upon such action, even if such action by Agent or such Lender shall
result in a full or partial loss of any rights of subrogation which each
Borrower might otherwise have had but for such action by Agent or such Lender.
Any election of remedies which results in the denial or impairment of the right
of Agent or any Lender to seek a deficiency judgment against any Borrower shall
not impair any other Borrower's obligation to pay the full amount of the
Obligations. In the event Agent or any Lender shall bid at any foreclosure or
trustee's sale or at any private sale permitted by law or the Loan Documents,
Agent or such Lender may bid all or less than the amount of the Obligations and
the amount of such bid need not be paid by Agent or such Lender but shall be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Agent, Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 12, notwithstanding that any present or future law or court
decision or ruling may have the effect of reducing the amount of any deficiency
claim to which Agent or any Lender might otherwise be entitled but for such
bidding at any such sale.
12.6 Limitation.
Notwithstanding any provision herein contained to the contrary, each
Borrower's liability under this Section 12 (which liability is in any event in
addition to amounts for which such Borrower is primarily liable under Section 1)
shall be limited to an amount not to exceed as of any date of determination the
greater of:
(a) the net amount of all Loans advanced to any other Borrower under
this Agreement and then re-loaned or otherwise transferred to, or for the
benefit of, such Borrower; and
(b) the amount which could be claimed by Agent and Lenders from such
Borrower under this Section 12 without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or
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common law after taking into account, among other things, such Borrower's right
of contribution and indemnification from each other Borrower under Section 12.7.
12.7 Contribution with Respect to Guaranty Obligations.
(a) To the extent that any Borrower shall make a payment under this
Section 12 of all or any of the Obligations (other than Loans made to that
Borrower for which it is primarily liable) (a "Guarantor Payment") which, taking
into account all other Guarantor Payments then previously or concurrently made
by any other Borrower, exceeds the amount which such Borrower would otherwise
have paid if each Borrower had paid the aggregate Obligations satisfied by such
Guarantor Payment in the same proportion that such Borrower's "Allocable Amount"
(as defined below) (as determined immediately prior to such Guarantor Payment)
bore to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for the
amount of such excess, pro rata based upon their respective Allocable Amounts in
effect immediately prior to such Guarantor Payment.
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this Section 12 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.
(c) This Section 12.7 is intended only to define the relative rights
of Borrowers and nothing set forth in this Section 12.7 is intended to or shall
impair the obligations of Borrowers, jointly and severally, to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement, including Section 12.1. Nothing contained in this Section
12.7 shall limit the liability of any Borrower to pay the Loans made directly or
indirectly to that Borrower and accrued interest, Fees and expenses with respect
thereto for which such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Borrower to which
such contribution and indemnification is owing.
(e) The rights of the indemnifying Borrowers against other Credit
Parties under this Section 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.
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12.8 Liability Cumulative.
The liability of Borrowers under this Section 12 is in addition to
and shall be cumulative with all liabilities of each Borrower to Agent and
Lenders under this Agreement and the other Loan Documents to which such Borrower
is a party or in respect of any Obligations or obligation of the other Borrower,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary.
[signature pages follow]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
MASKA U.S., INC.,
as Borrower
By:
----------------------------------------
Name:
Title:
SHC HOCKEY INC.,
as Borrower
By:
----------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
By:
----------------------------------------
Name:
Title:
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The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.
SLM INTERNATIONAL, INC.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SPORTS HOLDINGS CORP.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SLM TRADEMARK ACQUISITION CORP.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
WAP HOLDINGS INC.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SPORT MASKA INC.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
TROPSPORT ACQUISITIONS INC.
By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SLM TRADEMARK ACQUISITION CANADA
CORPORATION
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By:
----------------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
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ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all section references in the following definitions shall refer to
Sections of the Agreement:
"Account Debtor" shall mean any Person who may become obligated to
any Credit Party under, with respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party and, in any event,
including (a) all accounts receivable, other receivables, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
Code), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
"Accounts Liquidation Period" shall have the meaning given to it in
the Intercreditor Agreement.
"Acquisition" shall mean (a) the purchase by Maska Canada of all of
the issued and outstanding capital Stock of Tropsport, and (b) the transactions,
or series of transactions, whereby US Acquisition Sub is merged with and into US
Acquired Co. under the laws of Delaware forming SHC to continue as the surviving
corporation and as a wholly-owned Subsidiary of Ultimate Parent.
"Advance" shall mean any Revolving Credit Advance or Swing Line
Advance, as the context may require.
<PAGE>
"Affiliate" shall mean, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person, (c) each of such Person's officers, directors, joint venturers and
partners and (d) the immediate family members, spouses and lineal descendants of
individuals who are Affiliates of such Person. For the purposes of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "Affiliate" shall specifically
exclude Agent and each Lender.
"Agent" shall mean GE Capital or its successor appointed pursuant to
Section 9.7.
"Aggregate Borrowing Base" shall mean, as of any date of
determination, an amount equal to the sum of the Maska US Borrowing Base and the
SHC Hockey Borrowing Base.
"Agreement" shall mean the Credit Agreement by and among Borrowers,
the other Credit Parties named therein, GE Capital, as Agent and Lender and the
other Lenders signatory from time to time thereto.
"Appendices" shall have the meaning assigned to it in the recitals
to the Agreement.
"Applicable Margins" means collectively the Applicable Index Margin
and the Applicable LIBOR Margin.
"Applicable Index Margin" shall mean the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(a).
"Applicable LIBOR Margin" shall mean the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.5(a).
"Assignment Agreement" shall have the meaning assigned to it in
Section 9.1(a).
"Borrower Representative" shall mean Maska US in its capacity as
Borrower Representative pursuant to the provisions of Section 1.1(d).
"Borrowers" and "Borrower" shall have the respective meanings
assigned thereto in the recitals to the Agreement.
"Borrowing Availability" shall have the meaning assigned to it in
Section 1.1(a)(i).
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"Borrowing Base" shall mean, as the context may require, the Maska
US Borrowing Base and the SHC Hockey Borrowing Base, or any such Borrowing Base.
"Borrowing Base Certificate" shall mean a certificate to be executed
and delivered from time to time by each Borrower in the form attached to the
Agreement as Exhibit 4.1(b).
"Business Day" shall mean any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day.
"Caisse Secured Parties" shall mean Term Lenders and Montreal Trust
Company, as trustee for the Caisse de depot et placement du Quebec.
"Caisse Senior Collateral" shall mean all assets of the Credit
Parties and their Subsidiaries which are subject to the prior ranking Liens in
favor of the Caisse Secured Parties in accordance with the terms of the
Intercreditor Agreement.
"Canadian Acquisition" shall mean the purchase by Maska Canada of
all of the issued and outstanding capital stock of Tropsport.
"Canadian Agent" shall mean GE Capital Canada Inc.
"Canadian Borrowers" shall mean Tropsport and Maska Canada.
"Canadian Credit Parties" shall mean the "Credit Parties," as such
term is defined in the Canadian Facility Agreement, which are organized under
the laws of Canada or any province thereof.
"Canadian Dollars" and "C$" shall mean lawful currency of Canada.
"Canadian Facility" shall mean the revolving credit facility in the
amount of $35,000,000 (or its equivalent in Canadian dollars) made available to
the Canadian Borrowers by the Canadian Lenders.
"Canadian Facility Agreement" shall mean a credit agreement with
respect to the Canadian Facility entered into on or before the Closing Date
between Canadian Borrowers, as borrowers, the other credit parties thereto, the
Canadian Lenders and the Canadian Agent, as amended, supplemented, modified and
restated from time to time.
"Canadian Facility Obligations" shall mean the "Obligations" as such
term is defined in the Canadian Facility Agreement.
"Canadian Lenders" shall mean the lenders under the Canadian
Facility Agreement.
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"Canadian Subsidiary Guarantors" shall mean Maska Canada, Tropsport
and SLM Trademark Canada.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP less any
amount of property insurance proceeds received by Agent in respect of loss or
damage to property of a Borrower, to which no other Person has a claim which are
applied to reduce the Obligations in accordance with Section 1.3(d), and the
amount of which has been expended on expenditures that constitute Capital
Expenditures.
"Capital Lease" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"Carry Over Amount" shall have the meaning assigned to it in Annex
D.
"Cash Collateral Accounts" shall have the meaning assigned to it in
Annex B.
"Cash Equivalents" shall mean (a) marketable direct obligations
issued or unconditionally guaranteed by the United States of America, any agency
thereof, Canada or any agency thereof maturing within one year from the date of
acquisition thereof, (b) commercial paper maturing no more than one year from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.,
(c) certificates of deposit, maturing no more than one year from the date of
creation thereof, issued by commercial banks incorporated under the laws of the
United States of America or Canada, each having combined capital, surplus and
undivided profits of not less than $300,000,000 or the Equivalent Amount thereof
in Canadian Dollars and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency (an "A Rated Bank"), (d) time deposits,
maturing no more than 30 days from the date of creation thereof with A Rated
Banks, and (e) mutual funds that invest solely in one or more of the investments
described in clauses (a) through (d) above.
"Cash Management Systems" shall have the meaning assigned to it in
Section 1.8.
"CCM" shall mean CCM Ultimate Parent Inc., a Canadian corporation.
"CCM Shareholders Agreement" shall mean the shareholders agreement
with respect to CCM, dated April 8, 1983, between Gestion Pro-Velo Inc. and
Maska Canada (subject to an agreement of purchase and sale whereby SLM Trademark
Canada acquired all of Maska
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Canada's Stock of CCM and agreed to be bound by all Maska Canada's obligations
under such shareholders agreement).
"Certificate of Exemption" shall have the meaning given to it in
Section 1.15.
"Change of Control" shall mean any event, transaction or occurrence
as a result of which (a) Ultimate Parent Stockholders shall cease to own and
control a percentage of all of the issued and outstanding capital Stock of all
classes of Ultimate Parent on a fully diluted basis greater than the aggregate
percentage of such Stock held by any other Person and any Affiliates of such
other Person, or (b) (A) so long as the board of directors of Ultimate Parent
consists of five members, there shall cease to be two elected representatives of
Ultimate Parent Stockholders on the board of directors of Ultimate Parent or
Ultimate Parent Stockholders shall cease to have the right to nominate and
ensure the election of a third representative on the board of directors of
Ultimate Parent, or (B) if the number of directors on the board of Ultimate
Parent is more or less than five, Ultimate Parent Stockholders shall cease to
have, or be entitled to have, proportional representation on the board of
Ultimate Parent equivalent to the proportional representation set out in clause
(A) .
"Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.
"Chase Facility" shall mean, collectively, a credit facility in the
aggregate amount of up to $74,000,000 made available to Ultimate Parent, as
borrower, under an agreement dated April 1, 1997 between such borrower, the
Credit Parties named therein, the lenders named therein and The Chase Manhattan
Bank, as agent for the lenders, and a credit facility in the aggregate amount of
up to $35,000,000 made available to Maska Canada, as borrower, under an
agreement dated April 1, 1997, between such borrower and The Chase Manhattan
Bank of Canada, as Lender, each as amended, modified, supplemented or restated
from time to time.
"Chase Lenders" shall mean all the lenders under the Chase Facility.
"Chattel Paper" shall mean any "chattel paper," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.
"Closing Checklist" shall mean the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.
"Closing Date" shall mean the date of this Agreement first written
above.
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"Code" shall mean the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided,
however, in the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Agent's or any Lender's security
interest in any Collateral is governed by the Uniform Commercial Code as enacted
and in effect in a jurisdiction other than the State of New York, the term
"Code" shall mean the Uniform Commercial Code as enacted and in effect in such
other jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
"Collateral" shall mean the property covered by the Security
Agreement, and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations.
"Collateral Documents" shall mean the Security Agreement, the
Guaranties, the Patent Security Agreement, the Trademark Security Agreement, the
Intercreditor Agreement, the Consents and Acknowledgments Respecting
Intellectual Property, landlord agreements, bailee letters and mortgagee
non-disturbance agreements required under Section 5.9 and the blocked account
and lockbox agreements contemplated by Annex C, and all similar agreements
entered into guaranteeing payment of, or granting a Lien upon property as
security for payment of, the Obligations.
"Collateral Reports" shall mean the reports with respect to the
Collateral referred to in Annex F.
"Collection Account" shall mean that certain account of Agent,
account number 502-328-54 in the name of Agent at Bankers Trust Company in New
York, New York or such other account as Agent shall specify.
"Commitment Termination Date" shall mean the earliest of (a) the
third anniversary of the Closing Date, (b) (i) the date that is sixty (60) days
prior to the date of termination of the Term Loan, if the Term Loan terminates
on a date on or before the second anniversary of the Closing Date, or (ii) the
date that is one hundred twenty (120) days prior to the date of termination of
the Term Loan, if the Term Loan terminates on a date after the second
anniversary of the Closing Date, (c) the date of termination of Lenders'
obligations to make Loans and/or incur Letter of Credit Obligations or permit
existing Loans to remain outstanding pursuant to Section 8.2(b), and (d) the
date of indefeasible prepayment in full by Borrowers of the Loans and the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to Annex B,
and the permanent reduction of the Revolving Loan Commitment and the Swing Line
Commitment to zero dollars ($0).
"Commitments" shall mean (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment (including without duplication the Swing Line
Lender's Swing Line Commitment as a subset of its Revolving Loan Commitment) as
set forth on Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Lender and (b) as to
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all Lenders, the aggregate of all Lenders' Revolving Loan Commitments (including
without duplication the Swing Line Lender's Swing Line Commitment as a subset of
its Revolving Loan Commitment), which aggregate commitment shall be Thirty-Five
Million Dollars ($35,000,000) on the Closing Date, as to each of clauses (a) and
(b), as such Commitments may be reduced, amortized or adjusted from time to time
in accordance with the Agreement.
"Compliance Certificate" shall have the meaning assigned to it in
Annex E.
"Confidential Information" means the trade secrets, confidential
information and confidential know-how in which any Credit Party now or hereafter
has an interest. Confidential Information includes, without limitation,
information of the following types with respect to each Credit Party:
(a) all unpatented inventions,
(b) all customer and supplier lists for the business,
(c) all unpublished studies and data, prototypes, drawings, design
and construction specifications and production, operating and quality control
manuals used in the business,
(d) all marketing strategies and business plans,
(e) all current or proposed business opportunities, and
(f) all documents, materials and media embodying other items or
Confidential Information.
"Consents and Acknowledgements Respecting Intellectual Property"
shall mean the consents and acknowledgements or consent agreements, as
applicable, made in favor of Agent, on behalf of itself and Lenders, by each
licensor of Intellectual Property to Borrowers or any other Credit Party.
"Continuing Borrower" shall have the meaning assigned to it in
Section 6.1.
"Continuing Credit Party" shall have the meaning given to it in
Section 6.1.
"Contracts" shall mean all "contracts," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.
"Control Letter" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of any Credit Party, (ii) a securities intermediary with respect to
securities, whether certificated or uncertificated,
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securities entitlements and other financial assets held in a securities account
in the name of any Credit Party, (iii) a futures commission merchant or clearing
house with respect to commodity accounts and commodity contracts held by any
Credit Party, whereby, among other things, the issuer, securities intermediary
or futures commission merchant disclaims any security interest in the applicable
financial assets, acknowledges the Lien of Agent, on behalf of itself and
Lenders, and the Liens of Agent and Lenders, if appropriate, on such financial
assets, and agrees to follow the instructions or entitlement orders of Agent
without further consent by the affected Credit Party.
"Copyright License" shall mean any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright.
"Copyrights" shall mean all of the following now owned or used or
hereafter acquired or used by any Credit Party: (a) all copyrights and general
intangibles of like nature (whether registered or unregistered), all
registrations and recordings thereof, and all applications in connection
therewith, including all registrations, recordings and applications in the
United States Copyright Office or in any similar office or agency of the United
States, any state or territory thereof, or any other country or any political
subdivision thereof, and (b) all restorations, extensions or renewals thereof.
"Credit Parties" shall mean Ultimate Parent, each Borrower, and the
Subsidiary Guarantors (and includes, for greater certainty, each Continuing
Credit Party).
"Default" shall mean any event which, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.
"Default Rate" shall have the meaning assigned to it in Section
1.5(d).
"Design License" shall mean all rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right to use
any Design.
"Designs" shall mean all industrial designs, design patents and
other designs that any Credit Party now or hereafter owns or uses, including all
registrations and recordings thereof and all applications in connection
therewith including all registrations, recordings and applications that have
been or shall be made or filed in the Canadian Industrial Design Office or any
similar office in any country in the world and all records thereof and all
reissues, extensions or renewals thereof, and all common law and other rights in
the foregoing.
"Disbursement Accounts" shall have the meaning assigned to it on
Annex C.
"Disclosure Schedules" shall mean the Schedules prepared by
Borrowers and denominated as Disclosure Schedules 1.1 through 6.7 in the Index
to the Agreement.
"Documents" shall mean any "documents," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located.
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"Dollars" or "$" shall mean lawful currency of the United States
of America.
"EBITDA" shall mean, with respect to any Person for any fiscal
period, an amount equal to (a) consolidated net income of such Person for such
period, minus (b) the sum of (i) income and capital tax credits, (ii) interest
income, (iii) gain from extraordinary items for such period, (iv) any aggregate
net gain (but not any aggregate net loss) during such period arising from the
sale, exchange or other disposition of capital assets by such Person (including
any fixed assets, whether tangible or intangible, all inventory sold in
conjunction with the disposition of fixed assets and all securities), and (v)
any other non-cash gains which have been added in determining consolidated net
income, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication, plus (c) the sum of (i) any provision for income taxes and capital
taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such
period and non-recurring restructuring charges in connection with the
Reorganization not to exceed, in the aggregate (for Ultimate Parent and its
Subsidiaries), the following amounts for each Fiscal Year specified: (A)
$2,250,000 for Fiscal Year ending December 31, 1999, (B) $345,000 for the Fiscal
Year ending December 31, 2000, and (C) $173,000 for the Fiscal Year ending
December 31, 2001, (iv) the amount of non-cash charges (including depreciation
and amortization, including amortization of transaction costs in connection with
the Reorganization) for such period, (v) amortized debt discount for such
period, and (vi) the amount of any deduction to consolidated net income as the
result of any grant to any members of the management of such Person of any
Stock, in each case to the extent included in the calculation of consolidated
net income of such Person for such period in accordance with GAAP, but without
duplication. For purposes of this definition, the following items shall be
excluded in determining consolidated net income of a Person: (1) the income (or
deficit) of any other Person accrued prior to the date it became a Subsidiary
of, or was merged or consolidated into, such Person or any of such Person's
Subsidiaries; (2) the income (or deficit) of any other Person (other than a
Subsidiary) in which such Person has an ownership interest, except to the extent
any such income has actually been received by such Person in the form of cash
dividends or distributions; (3) the undistributed earnings of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any contractual obligation or requirement of law applicable to such
Subsidiary; (4) any write-up of any asset; (5) any net gain from the collection
of the proceeds of life insurance policies; (6) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (7) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets (except in
relation to SHC and its Subsidiaries with respect to the fourth Fiscal Quarter
of 1998), and (8) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
"Eligible Accounts" shall have the meaning assigned to it in
Section 1.6 of the Agreement.
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"Eligible Inventory" shall have the meaning assigned to it in
Section 1.7 of the Agreement.
"Environmental Laws" shall mean all applicable federal, state, local
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
ss.ss. 9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. ss.ss. 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss.ss. 136 et seq.); the
Solid Waste Disposal Act (42 U.S.C. ss.ss. 6901 et seq.); the Toxic Substance
Control Act (15 U.S.C. ss.ss. 2601 et seq.); the Clean Air Act (42 U.S.C. ss.ss.
7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. ss.ss. 1251 et
seq.); the Occupational Safety and Health Act (29 U.S.C. ss.ss. 651 et seq.);
and the Safe Drinking Water Act (42 U.S.C. ss.ss. 300(f) et seq.), each as from
time to time amended, and any and all regulations promulgated thereunder, and
all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.
"Environmental Liabilities" shall mean, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, administrative order, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws, Environmental
Permits, or in connection with any Release or threatened Release or presence of
a Hazardous Material whether on, at, in, under, from or about or in the vicinity
of any real or personal property.
"Environmental Permits" shall mean all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
"Equipment" shall mean all "equipment," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located
and, in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment with software and peripheral equipment (other than software
constituting part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature,
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trade fixtures and fixtures not forming a part of real property, all whether now
owned or hereafter acquired, and wherever situated, together with all additions
and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974 (or any successor legislation thereto), as amended from time to time, and
any regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Credit Party, any
trade or business (whether or not incorporated) which, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to any Credit Party or any
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit
Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.
"Escrow Agreement" shall mean the escrow agreement dated November 3,
1998 among Agent, Canadian Agent, Borrowers, SHC Hockey, Ultimate Parent, US
Acquisition Sub and the escrow agent named therein.
"ESOP" shall mean a Plan which is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.
"European Subsidiaries" shall mean the Subsidiaries of Ultimate
Parent formed or continued under the laws of any country other than Canada or
the United States, as shown on Disclosure Schedule 3.8.
"Event of Default" shall have the meaning assigned to it in Section
8.1.
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"Excess Threshold Amount" shall have the meaning assigned to it in
Section 1.3(b)(i).
"Federal Funds Rate" shall mean, for any day, a floating rate equal
to the weighted average of the rates on overnight federal funds transactions
among members of the Federal Reserve System, as determined by Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto.
"Fees" shall mean any and all fees payable to Agent or any Lender
pursuant to the Agreement or any of the other Loan Documents.
"Financial Covenants" shall have the meaning assigned to it in
Section 6.10.
"Financial Statements" shall mean the consolidated and consolidating
income statements, statements of cash flows and balance sheets of Ultimate
Parent and SHC delivered in accordance with Section 3.4 of the Agreement and the
consolidated and consolidating income statements, statements of cash flows and
balance sheets of Ultimate Parent delivered in accordance with Annex E to the
Agreement.
"Fiscal Month" shall mean each of twelve consecutive periods in each
Fiscal Year consisting of four or five consecutive weekly periods (each
commencing on a Sunday and ending on a Saturday) the exact number of such weekly
periods being established by Borrowers prior to the commencement of such Fiscal
Year.
"Fiscal Quarter" shall mean any of the four quarterly accounting
periods of Credit Parties in each Fiscal Year consisting of three consecutive
Fiscal Months; and where reference is made in this Agreement to a Fiscal Quarter
ending on a particular date, reference shall be deemed to be made to the Fiscal
Quarter ending on or about such date.
"Fiscal Year" shall mean any of the annual accounting periods of
Credit Parties consisting of twelve (12) Fiscal Months and ending on the
Saturday nearest to December 31; where reference is made in this Agreement to a
Fiscal Year ending December 31, reference shall be deemed to be made to the
Fiscal Year ending on or about such date.
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person
for any fiscal period, the ratio of EBITDA less Capital Expenditures (after
deducting from Capital Expenditures the amount of all proceeds from any
disposition of assets to which no other Person has a claim, which have been
applied to reduce the Obligations in accordance with Section 1.3(b)(ii) during
such fiscal period and the amount of which has been expended on Capital
Expenditures during such fiscal period) to Fixed Charges.
"Fixed Charges" shall mean, with respect to any Person for any
fiscal period, (a) the aggregate of all Interest Expense paid or accrued during
such period, plus (b) scheduled payments of principal with respect to
Indebtedness during such period and any prepayment of
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principal with respect to the Term Loan during such period, plus (c) cash
payments of Taxes during such period.
"Fixtures" shall mean all "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party.
"Funded Debt" shall mean, with respect to any Person, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and which by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at such Person's
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capital Lease Obligations, current
maturities of long-term debt, revolving credit and short-term debt extendible
beyond one year at the option of the debtor, and also including, in the case of
Credit Parties, the Obligations.
"GAAP" shall mean generally accepted accounting principles in the
United States of America consistently applied, as such term is further defined
in Annex G to the Agreement.
"GE Capital Canada" shall mean General Electric Capital Canada Inc.
"GE Capital Fee Letter" shall have the meaning given to it in
Section 1.9(a).
"General Assignments of Debts" shall mean each of the general
assignments of debts entered into by each Credit Party that is a signatory
thereto in favor of Agent for the benefit of Agent and Lenders.
"General Intangibles" shall mean any "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, and, in any event, including all right, title and interest which such
Credit Party may now or hereafter have in or under any Contract, all customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, confidential knowledge, know-how, Software,
data bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including the goodwill associated with any
Trademark or Trademark License), all rights and claims in or under insurance
policies (including insurance for fire, damage, loss and casualty, whether
covering personal property, real property, tangible rights or intangible rights,
all liability, life, key man and business interruption insurance, and all
unearned premiums), uncertificated securities, choses in action, deposit,
checking and other bank accounts, rights to receive tax refunds and other
payments, rights of indemnification, all books and records, correspondence,
credit files, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or under
the control of such Credit Party or any computer bureau or service company from
time to time acting for such Credit Party.
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"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner, including any obligation or arrangement of such Person
(a) to purchase or repurchase any such primary obligation, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) 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 (d) to indemnify the owner of such primary obligation against
loss in respect thereof. The amount of any Guaranteed Indebtedness at any time
shall be deemed to be an amount equal to the lesser at such time of (x) the
stated or determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is made and (y) the maximum amount for which such Person
may be liable pursuant to the terms of the instrument embodying such Guaranteed
Indebtedness; or, if not stated or determinable, the maximum reasonably
anticipated liability (assuming full performance) in respect thereof.
"Guaranties" shall mean, collectively, the cross-guarantees of each
Borrower contemplated in Section 12, the Ultimate Parent Guarantee, each
Subsidiary Guarantee and any other guarantee executed by any Guarantor in favor
of Agent and Lenders in respect of the Obligations.
"Guarantors" shall mean Ultimate Parent, SHC, WAP, SLM Trademark US,
the Canadian Subsidiary Guarantors, and each other Person, if any, which
executes a guarantee or other similar agreement in favor of Agent in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.
"Hazardous Material" shall mean any substance, material or waste
which is regulated by or forms the basis of liability now or hereafter under,
any Environmental Laws, including any material or substance which is (a) defined
as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"HKBC Facility" shall mean, collectively, credit facilities in the
aggregate amount of up to $37,450,000 made available to Tropsport as borrower,
under an agreement dated August 5, 1998 between such borrower, the lenders named
therein and Hongkong Bank of Canada, as agent for the lenders, as amended,
modified, supplemented or restated from time to time.
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"HKBC Lenders" shall mean the lenders under the HKBC Facility.
"Inactive Subsidiaries" shall mean 2867923 Canada Inc., a Canada
corporation, Karhu Canada Inc., a Canada corporation, J.W.
Verwaltungsgesellschaft Nr.5 mbH, a West German corporation, Solte mbH, a West
German corporation, Maska H.K. Limited, a Hong Kong corporation, Smedley (Hong
Kong) Ltd., a Hong Kong corporation, and Buddy L St. Thomas Inc., a U.S. Virgin
Islands corporation.
"Indebtedness" of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or 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 and the present value (discounted
at the Index Rate as in effect on the Closing Date) of future rental payments
under all synthetic leases, (f) all obligations of such Person under commodity
purchase or option agreements or other commodity price hedging arrangements, in
each case whether contingent or matured, (g) all obligations of such Person
under any foreign exchange contract, currency swap agreement, interest rate
swap, cap or collar agreement or other similar agreement or arrangement designed
to alter the risks of that Person arising from fluctuations in currency values
or interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, and (i) the Obligations.
"Indemnified Liabilities" shall have the meaning assigned to it in
Section 1.13.
"Indemnified Person" shall have the meaning assigned to it in
Section 1.13(a).
"Index Rate" shall mean, for any day, a floating rate equal to the
higher of (i) the rate publicly quoted from time to time by The Wall Street
Journal as the "base rate on corporate loans at large U.S. money center
commercial banks" (or, if The Wall Street Journal ceases quoting a base rate of
the type described, the highest per annum rate of interest published by the
Federal Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus fifty (50) basis points per annum. Each change
in any interest rate provided for in the Agreement based upon the Index Rate
shall take effect at the time of such change in the Index Rate.
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"Index Rate Loan" shall mean a Loan or portion thereof bearing
interest by reference to the Index Rate.
"Instruments" shall mean any "instrument," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all notes and other, without limitation, evidences
of indebtedness, other than instruments that constitute, or are a part of a
group of writings that constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Confidential
Information, Copyrights, Designs, Licenses, Patents, Software and Trademarks.
"Intellectual Property Consents and Acknowledgments" shall mean the
consents and acknowledgments made in favor of Agent, on behalf of itself and
Lenders, by each licensor of Intellectual Property to Borrowers or any other
Credit Party.
"Intercompany Notes" shall have the meaning assigned to it in
Section 6.3.
"Intercreditor Agreement" shall mean the intercreditor agreement
between the Agent, the Canadian Agent, the Term Lenders, the Credit Parties and
the Canadian Credit Parties, in form and substance satisfactory to Agent and
Lenders, under which, among other things, are set out the relative priorities of
the Liens of the Agent, the Lenders, the Canadian Agent, the Canadian Lenders
and the Term Lenders with respect to the Collateral, as amended, supplemented,
modified and restated from time to time.
"Interest Coverage Ratio" shall mean, with respect to any Person for
any period, the ratio of EBITDA to Interest Expense.
"Interest Expense" shall mean, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect to any Funded Debt of
such Person, but shall exclude the write-off of any unamortized financing costs
previously capitalized in accordance with GAAP.
"Interest Payment Date" means (a) as to any Index Rate Loan, the
first Business Day of each month to occur while such Loan is outstanding, (b) as
to any LIBOR Loan, the last day of the applicable LIBOR Period; provided that in
the case of any LIBOR Period greater than three months in duration, interest
shall be payable at three-month intervals and on the last day of such LIBOR
Period; and provided further that, in addition to the foregoing, each of (x) the
date upon which all of the Commitments have been terminated and the Loans have
been paid in full and (y) the Commitment Termination Date shall be deemed to be
an "Interest Payment Date" with respect to any interest which is then accrued
under the Agreement.
"Inventory" shall mean any "inventory," as such term is defined in
the Code, now or hereafter owned or acquired by any Credit Party, wherever
located, and in any event including inventory, merchandise, goods and other
personal property which are held by or on behalf of any
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Credit Party for sale or lease or are furnished or are to be furnished under a
contract of service, or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in such Credit Party's
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including other supplies.
"Investment Property" shall have the meaning ascribed thereto in
Section 9-115 of the Code in those jurisdictions in which such definition has
been adopted and shall include (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of any Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts held by any Credit
Party; (iv) all commodity contracts held by any Credit Party; and (v) all
commodity accounts held by any Credit Party.
"IRC" shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto.
"IRS" shall mean the Internal Revenue Service, or any successor
thereto.
"ITA" shall mean the Income Tax Act (Canada) as the same may, from
time to time, be in effect.
"L/C Issuer" shall have the meaning assigned to such term in Annex
B.
"L/C Sublimit" shall have the meaning given to such term in Annex B.
"Lenders" shall mean GE Capital, the other Lenders named on the
signature page of the Agreement, and, if any such Lender shall decide to assign
all or any portion of the Obligations, such term shall include such assignee.
"Letter of Credit Fee" has the meaning ascribed thereto in Annex B.
"Letter of Credit Obligations" shall mean all outstanding
obligations incurred by Agent and Lenders at the request of Borrower
Representative, whether direct or indirect, contingent or otherwise, due or not
due, in connection with the issuance of a reimbursement agreement or guaranty by
Agent or purchase of a participation as set forth in Annex B with respect to any
Letter of Credit. The amount of such Letter of Credit Obligations shall equal
the maximum amount which may be payable by Agent or Lenders thereupon or
pursuant thereto.
"Letters of Credit" shall mean commercial or standby letters of
credit issued for the account of any Borrower by any L/C Issuer, and bankers'
acceptances issued by any Borrower, for which Agent and Lenders have incurred
Letter of Credit Obligations.
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"LIBOR Business Day" shall mean a Business Day on which banks in the
city of London are generally open for interbank or foreign exchange
transactions.
"LIBOR Loan" shall mean a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.
"LIBOR Period" shall mean, with respect to any LIBOR Loan, each
period commencing on a LIBOR Business Day selected by Borrower Representative
pursuant to the Agreement and ending one, two or three months thereafter, as
selected by Borrower Representative's irrevocable notice to Agent as set forth
in Section 1.5(e); provided that the foregoing provision relating to LIBOR
Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a
LIBOR Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be
to carry such LIBOR Period into another calendar month in which event such
LIBOR Period shall end on the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
Commitment Termination Date shall end two (2) LIBOR Business Days prior to
such date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the
last LIBOR 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 LIBOR Period) shall end on the last LIBOR Business Day of a calendar
month;
(d) Borrower Representative shall select LIBOR Periods so as not to
require a payment or prepayment of any LIBOR Loan during a LIBOR Period
for such Loan; and
(e) Borrower Representative shall select LIBOR Periods so that there
shall be no more than three (3) separate LIBOR Loans in existence at any
one time.
"LIBOR Rate" shall mean for each LIBOR Period, a rate of interest
determined by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00
a.m., London time, on the second full LIBOR Business Day next preceding
the first day of each LIBOR Period (unless such date is not a Business
Day, in which event the next succeeding Business Day will be used);
divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect
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thereto, as now and from time to time in effect) for Eurocurrency funding
(currently referred to as "Eurocurrency liabilities" in Regulation D of such
Board which are required to be maintained by a member bank of the Federal
Reserve System.
If such interest rates shall cease to be available from Telerate
News Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Agent and
Borrower Representative.
"License" shall mean any Copyright License, Design License, Patent
License, Trademark License or other license of rights or interests now held or
hereafter acquired by any Credit Party, and any license wherein a Credit Party
has granted to a Person rights or an option to acquire rights to use any
Confidential Information, Copyright, Design, Patent, Software, Trademark or
other intellectual property owned by such Credit Party or licensed to such
Credit Party.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement of any kind or nature whatsoever (including any lease or title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement perfecting a security interest under the Code or comparable
law of any jurisdiction).
"Liquidation Period" shall have the meaning given to it in the
Intercreditor Agreement.
"Litigation" shall have the meaning assigned to it in Section 3.13.
"Loan Account" shall have the meaning assigned to it in Section
1.12.
"Loan Documents" shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent and/or Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party or any other Person, and delivered to Agent or
any Lender in connection with the Agreement or the transactions contemplated
hereby. Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to such Agreement as the same may be in effect at any and all times such
reference becomes operative.
"Loans" shall mean the Revolving Loan and the Swing Line Loan.
"Lockbox" shall have the meaning given to it in Annex C.
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"Margin Stock" shall have the meaning given to it in Section 3.10.
"Maska Canada" shall mean Sport Maska Inc., a New Brunswick
corporation.
"Maska US" means Maska U.S., Inc., a Vermont corporation.
"Maska US Borrowing Base" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the sum, at such
time of:
(a) eighty percent (80%) of the book value of Maska US's Eligible
Accounts, less any Reserves established by Agent at such time
in its reasonable credit judgment; and
(b) fifty-five percent (55%) of the book value of Maska US's
Eligible Inventory valued on a first-in, first-out basis (at
the lower of cost or market), less any Reserves established by
Agent at such time in its reasonable credit judgment.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of either Borrower and its Subsidiaries taken as a whole, or the other Credit
Parties considered as a whole, (b) either Borrower's ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and Lenders,
on the Collateral or the priority of such Liens, or (d) Agent's or any Lender's
rights and remedies under the Agreement and the other Loan Documents. Without
limiting the foregoing, any event or occurrence adverse to one or more Credit
Parties which results or could reasonably be expected to result in costs and/or
liabilities in excess of the lesser of $5,000,000 and 10% of Borrowing
Availability as of any date of determination shall be deemed to have had
Material Adverse Effect.
"Maximum Amount" shall mean, at any particular time, an amount equal
to the Revolving Loan Commitment of all Lenders.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is
making, is obligated to make, has made or been obligated to make, contributions
on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean as of any date of
determination (a) as to all Borrowers, the lesser of (i) the Maximum Amount and
(ii) the Aggregate Borrowing Base, in each case less the sum of the aggregate
Revolving Loan and Swing Line Loan then outstanding, or (b) as to an individual
Borrower, the lesser of (i) the Maximum Amount less the sum of the Revolving
Loan and Swing Line Loan outstanding to all other Borrowers and (ii) that
Borrower's separate Borrowing Base, less the sum of the Revolving Loan and Swing
Line Loan outstanding to that Borrower.
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"Non-Funding Lender" shall have the meaning assigned to it in
Section 9.9(a)(ii).
"Notes" shall mean the Revolving Notes and the Swing Line Notes.
"Notice of Conversion/Continuation" shall have the meaning assigned
to it in Section 1.5(e).
"Notice of Revolving Credit Advance" shall have the meaning assigned
to it in Section 1.1(a).
"Obligations" shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest which accrues after the commencement of any case or proceeding in
bankruptcy after the insolvency of, or for the reorganization of any Credit
Party, whether or not allowed in such proceeding), Fees, Charges, expenses,
attorneys' fees and any other sum chargeable to any Credit Party under the
Agreement or any of the other Loan Documents.
"Offices" shall have the meaning given to it in the Intercreditor
Agreement.
"Operating Cash Flow Ratio" shall mean, with respect to any Person
for any fiscal period, the ratio of EBITDA minus Capital Expenditures to
Interest Expense.
"Other Lender" shall have the meaning assigned to it in Section
9.9(d).
"Patent Security Agreements" shall mean the Patent Security
Agreements made in favor of Agent, on behalf of itself and Lenders, by each
applicable Credit Party.
"Patent License" shall mean rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right with respect
to any invention on which a Patent is in existence.
"Patents" shall mean all of the following which any Credit Party now
or hereafter uses, or in which any Credit Party now holds or hereafter acquires
any interest: (a) all letters patent of the United States or any other country,
all registrations and recordings thereof, and all applications for letters
patent of the United States or any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or Territory
thereof, or any other country, and (b) all reissues, continuations,
continuations-in-part, divisions or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
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"Permitted Encumbrances" shall mean the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or, otherwise, to the extent that non-payment is permitted by Section
5.2(b); (b) pledges or deposits of money securing statutory obligations under
workmen's compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c) pledges
or deposits of money securing bids, tenders, contracts (other than contracts for
the payment of money) or leases to which any Credit Party is a party as lessee
made in the ordinary course of business; (d) inchoate and unperfected workers',
mechanics' or similar liens arising in the ordinary course of business, so long
as such Liens attach only to Equipment, Fixtures and/or Real Estate; (e)
carriers', warehousemen's, suppliers' or other similar possessory liens arising
in the ordinary course of business, so long as such Liens attach only to
Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party; (g) any attachment or
judgment lien not constituting an Event of Default under Section 8.1(j); (h)
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (i) presently existing or hereinafter created
Liens in favor of Agent and Lenders; and (j) Liens expressly permitted under
clauses (b), (c), (d) and (e) of Section 6.7 of the Agreement.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
"Phoenix" shall mean Phoenix Home Life Mutual Insurance Company.
"Phoenix Investment" shall mean 12,500 shares of 13% paid-in-kind
preferred Stock of Ultimate Parent and warrants to purchase 159,127 shares of
common Stock of Ultimate Parent to be purchased by Phoenix pursuant to the
Phoenix Investment Agreement.
"Phoenix Investment Agreement" shall mean the agreement dated on or
before the Closing Date between Ultimate Parent and Phoenix providing for the
purchase by Phoenix of the Phoenix Investment.
"Plan" shall mean, at any time, an employee benefit plan, as defined
in Section 3(3) of ERISA, which any Credit Party maintains, contributes to or
has an obligation to contribute to on behalf of participants who are or were
employed by any Credit Party.
"Prior Claims" shall mean all Liens created by applicable law (in
contrast with Liens voluntarily granted) which rank or are capable of ranking
prior to or pari passu with Agent's and Lenders' security interests (or the
applicable equivalent thereof) against all or part of the Collateral, including
for amounts owing for wages, employee deductions, goods and services taxes,
sales taxes, employer health taxes, municipal taxes, workers' compensation,
pension fund obligations and overdue rents.
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"Prior Lender Obligations" shall mean all the obligations of each
Credit Party and each of its Subsidiaries, or any of their predecessors, under
the Chase Facility and the HKBC Facility.
"Prior Lenders" shall mean the HKBC Lenders and the Chase Lenders.
"Proceeds" shall mean "proceeds," as such term is defined in the
Code and, in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
"Pro Forma" means the unaudited consolidated and consolidating
balance sheet of Ultimate Parent and its Subsidiaries as of the Closing Date
after giving pro forma effect to the Related Transactions.
"Projections" means Ultimate Parent's forecasted consolidated: (a)
balance sheet; (b) profit and loss statement; and (c) cash flow statement, all
consistent with the historical Financial Statements of Ultimate Parent and SHC
with the exception of the profit and loss statement which is consolidating
through EBITDA, together with appropriate supporting details and a statement of
underlying assumptions.
"Pro Rata Share" shall mean with respect to all matters relating to
any Lender (a) with respect to the Revolving Loan (including the Swing Line Loan
as a subset of the Swing Line Lender's Revolving Loan), the percentage obtained
by dividing (i) the Revolving Loan Commitment (including the Swing Line
Commitment as a subset of the Swing Line Lender's Revolving Loan Commitment), by
(ii) the aggregate Revolving Loan Commitments, as such percentages may be
adjusted by assignments permitted pursuant to Section 9.1, and (b) with respect
to all Loans on and after the Commitment Termination Date, the percentage
obtained by dividing (i) the aggregate outstanding principal balance of the
Loans held by that Lender, by (ii) the outstanding principal balance of the
Loans held by all Lenders.
"Public Offering" shall mean a firm underwritten public offering of
common stock registered on form S-1, S-2 or S-3 under the Securities Act of
1933, as amended, by a nationally recognized investment banking firm and after
giving effect to which the issuer shall be qualified for listing on the NASDAQ
National Market, the American Stock Exchange or the New York Stock Exchange.
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"Qualified Plan" shall mean a Plan which is intended to be
tax-qualified under Section 401(a) of the IRC.
"Real Estate" shall have the meaning assigned to it in Section 3.6.
"Refinancing" shall mean the repayment in full by Credit Parties of
the Prior Lender Obligations on the Closing Date.
"Refunded Swing Line Loan" shall have the meaning assigned to it in
Section 1.1(b)(iii).
"Related Transactions" means each borrowing under the Revolving Loan
and the Canadian Facility on the Closing Date, the Term Loan, the Phoenix
Investment, the Reorganization, the Refinancing, the payment of all fees, costs
and expenses associated with all of the foregoing and the execution and delivery
of all of the Related Transaction Documents.
"Related Transaction Documents" shall mean the Loan Documents, the
Canadian Facility Agreement, the Reorganization Agreement, the Term Loan
Agreement and the Phoenix Investment Agreement.
"Release" shall mean any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.
"Reorganization" shall mean, collectively, the US Acquisition and
the Canadian Acquisition.
"Reorganization Agreement" shall mean the Agreement and Plan of
Reorganization dated October 6, 1998 between Ultimate Parent, Maska Canada, US
Acquisition Sub, and US Acquired Co.
"Replacement Lender" shall have the meaning assigned to it in
Section 1.16(d).
"Requisite Lenders" shall mean (a) Lenders having more than
fifty-one percent (51%) of the Commitments of all Lenders, or (b) if the
Commitments have been terminated, more than fifty-one percent (51%) of the
aggregate outstanding amount of all Loans.
"Reserves" shall mean, with respect to the Borrowing Base of any
Borrower (a) reserves established by Agent, exercising its reasonable credit
judgment, from time to time against Eligible Inventory pursuant to Section 5.9,
(b) reserves established pursuant to Section 5.4(b) or 5.4(c), and (c) such
other reserves against Eligible Accounts, Eligible Inventory or Borrowing
Availability of Borrowers which Agent may, in its reasonable credit judgment,
establish from time to time, including, without limitation, a dilution reserve
which, as of the Closing Date, Agent has established as 10% of Eligible
Accounts, to be adjusted up or down
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based on the performance of the Borrowers' Accounts, in the reasonable judgment
of the Agent. Without limiting the generality of the foregoing, Reserves
established to ensure the payment of accrued Interest Expense or Indebtedness
and on account of Agent's obligations under landlords' agreements, bailee
letters, the Intercreditor Agreement and Consents and Acknowledgements
Respecting Intellectual Property shall be deemed to be a reasonable exercise of
Agent's credit judgment.
"Restricted Payment" shall mean, with respect to any Person, (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Person's Stock
or any other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges (other than interest, closing fees and agency
fees payable before default under the Term Loan Agreement as in effect on the
Closing Date) on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, the Term Loan; (d) any payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any
Stockholder of such Person other than payment of compensation in the ordinary
course to stockholders who are employees of such Person and reimbursement of
reasonable out-of-pocket expenses of stockholders of such Person in regard to
their participation in the management, business and affairs of the Credit
Parties; and (g) any payment of management fees (or other fees of a similar
nature) by such Person to any Stockholder of such Person or their Affiliates.
"Retiree Welfare Plan" shall mean, at any time, a Plan that is a
"welfare plan" as defined in Section 3(2) of ERISA, that provides for continuing
coverage or benefits for any participant or any beneficiary of a participant
after such participant's termination of employment, other than continuation
coverage provided pursuant to Section 4980B of the IRC and at the sole expense
of the participant or the beneficiary of the participant.
"Revolving Credit Advance" shall have the meaning assigned to it in
Section 1.1(a)(i).
"Revolving Lenders" shall mean, as of any date of determination,
Lenders having a Revolving Loan Commitment.
"Revolving Loan" shall mean, at any time, the sum of (i) the
aggregate amount of Revolving Credit Advances outstanding to both Borrowers plus
(ii) the aggregate amount of Letter of Credit Obligations incurred on behalf of
both Borrowers (in each case, unless express reference is made to the Revolving
Loan outstanding to a particular Borrower). Unless the
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context otherwise requires, references to the outstanding principal balance of
the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
"Revolving Loan Commitment" shall mean (a) as to any Revolving
Lender, the aggregate commitment of such Revolving Lender to make Revolving
Credit Advances (including without duplication Swing Line Advances as a subset
of the Swing Line Lender's Revolving Loan Commitment) and/or incur Letter of
Credit Obligations as set forth on Annex J to the Agreement or in the most
recent Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Credit Advances (including without duplication Swing Line Advances as
a subset of the Swing Line Lender's Revolving Loan Commitment) and/or incur
Letter of Credit Obligations, which aggregate commitment shall be Thirty Five
Million Dollars ($35,000,000) on the Closing Date, for each of clauses (a) and
(b), as such amounts may be cancelled or adjusted, if at all, from time to time
in accordance with the Agreement.
"Revolving Note" shall have the meaning assigned to it in Section
1.1(a)(ii).
"Security Agreement" shall mean the Security Agreement of even date
herewith entered into between Agent, on behalf of itself and Lenders, and each
Credit Party that is a signatory thereto.
"Settlement Date" shall have the meaning assigned to it in Section
9.9(a)(ii).
"SHC" shall mean Sports Holdings Corp., a Delaware corporation and,
with reference to any time before the effective time of the Acquisition, shall
mean US Acquired Co.
"SHC Hockey" shall mean SHC Hockey Inc., a Vermont corporation.
"SHC Hockey Borrowing Base" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the sum, at such
time of:
(a) eighty percent (80%) of the book value of SHC Hockey's
Eligible Accounts, less any Reserves established by Agent at
such time in its reasonable credit judgment; and
(b) fifty-five percent (55%) of the book value of SHC Hockey's
Eligible Inventory valued on a first-in, first-out basis (at
the lower of cost or market), less any Reserves established by
Agent at such time in its reasonable credit judgment.
"SLM Trademark Canada" shall mean SLM Trademark Acquisition Canada
Corporation, a New Brunswick corporation.
"SLM Trademark US" shall mean SLM Trademark Acquisition Corp., a
Delaware corporation.
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"Software" means all computer programs and databases and portions
thereof now owned or used or hereafter acquired or used by any Credit Party in
whatever form and on whatever medium those programs or databases or portions
thereof are expressed, fixed, embodied or stored from time to time, and the
copyright therein including both the object code and source code versions of
each such program and portions thereof and all corrections, updates,
enhancements, translations, modifications, adaptations and new versions thereof
together with both the media upon or in which such software, databases and
portions thereof are expressed, fixed, embodied or stored (such as disks,
diskettes, tapes and semiconductor chips) and all flow charts, manuals,
instructions, documentation and other material relating thereto; provided that,
non-customized commercial software that is available for sale to the general
public shall not constitute "Software".
"Software License" shall mean all rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right to use,
have access to or obtain possession of, any software other than non-customized
commercial software that is available for sale to the general public.
"Solvent" shall mean, (a) with respect to any Person on a particular
date, that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (ii) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probably liability
of such Person on its debts as they become absolute and matured; (iii) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (iv) such Person is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities (such as litigation, guarantees and pension plan
liabilities) at any time shall be computed as the amount which, in light of all
the facts and circumstances existing at the time, represents the amount which
can be reasonably be expected to become an actual or matured liability, and (b)
with respect to any Person that is subject to the insolvency laws of Canada,
that on a particular date (i) the property of such Person is sufficient, if
disposed of at a fairly conducted sale under legal process, to enable payment of
all its obligations, due and accruing due, (ii) the property of such Person is,
at a fair valuation, greater than the total amount of liabilities, including
contingent liabilities, of such Person; (iii) such Person has not ceased paying
its current obligations in the ordinary course of business as they generally
become due; and (iv) such Person is not for any reason unable to meet its
obligations as they generally become due.
"Stock" shall mean all shares, options, warrants, general or limited
partnership or membership interests or other equivalents (regardless of how
designated) of or in a corporation, partnership, limited liability company or
equivalent entity whether voting or nonvoting, including common stock, preferred
stock or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended).
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"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding Stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) or of which any such Person is a general partner or may exercise
the powers of a general partner.
"Subsidiary Guaranty" shall mean each Subsidiary Guaranty of even
date herewith executed by each Guarantor in favor of Agent, on behalf of itself
and Lenders.
"Supermajority Revolving Lenders" shall mean (a) Lenders having
sixty-six and two-thirds percent (66-2/3%) or more of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have been
terminated, sixty-six and two-thirds percent (66-2/3%) or more of the aggregate
outstanding amount of the Revolving Loan.
"Swing Line Advance" has the meaning assigned to it in Section
1.1(c)(i).
"Swing Line Availability" has the meaning assigned to it in Section
1.1(c)(i).
"Swing Line Commitment" shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
"Swing Line Lender" shall mean GE Capital.
"Swing Line Loan" shall mean, at any time, the aggregate amount of
Swing Line Advances outstanding to both Borrowers (unless express reference is
made to the Swing Line Loan outstanding to a particular Borrower).
"Swing Line Note" has the meaning assigned to it in Section
1.1(c)(ii).
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the United States and
by the jurisdictions under the laws of which Agent and Lenders are organized or
any political subdivision thereof.
"Term Lenders" shall mean the agent and lenders party to the Term
Loan Agreement.
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"Term Loan" shall mean a loan in an amount not to exceed $40,000,000
made available to Maska Canada, as borrower, by the Term Lenders and a loan in
an amount not to exceed $47,500,000 made available to Ultimate Parent, as
borrower, by the Term Lenders.
"Term Loan Agreement" shall mean the loan agreement dated on or
before the Closing Date, between Ultimate Parent and Maska Canada, as borrowers,
Caisse de depot et placement du Quebec, as agent and lender and the other
lenders party thereto with respect to the Term Loan, as amended, modified,
supplemented or restated from time to time.
"Term Loan Liens" shall have the meaning assigned to it in
Section 6.7.
"Termination Date" shall mean the date on which the Loans have been
indefeasibly repaid in full and all other Obligations under the Agreement and
the other Loan Documents have been completely discharged and Letter of Credit
Obligations have been cash collateralized, canceled or backed by stand-by
letters of credit in accordance with Annex B, and none of Borrowers shall have
any further right to borrow any monies under the Agreement.
"Third Party Interactives" shall mean all Persons with whom any
Credit Party exchanges data electronically in the ordinary course of business,
including, without limitation, customers, suppliers, third-party vendors,
subcontractors, processors-converters, shippers and warehousemen.
"Title IV Plan" shall mean an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan), which is
covered by Title IV of ERISA, and which any Credit Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.
"Trademark Security Agreements" shall mean the Trademark Security
Agreements made in favor of Agent, on behalf of Lenders, by each applicable
Credit Party.
"Trademark License" shall mean rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right to use
any Trademark.
"Trademarks" shall mean all of the following now owned or used or
hereafter acquired by any Credit Party: (a) all trademarks, trade names,
corporate names, business names, trade styles, service marks, logos, other
source or business identifiers, prints and labels on which any of the foregoing
have appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all extensions or
renewals thereof; and (c) all goodwill associated with or symbolized by any of
the foregoing.
"Tropsport" means Tropsport Acquisitions Inc., a Canada corporation.
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"Tropsport Guaranty" shall mean the guaranty of even date herewith
executed by Tropsport in favor of Agent and Lenders.
"Ultimate Parent" shall have the meaning ascribed thereto in the
recitals to the Agreement.
"Ultimate Parent Guaranty" shall mean the guaranty of even date
herewith executed by Ultimate Parent in favor of Agent and Lenders.
"Ultimate Parent Stockholders" shall mean Wellspring Capital
Management LLC and its Affiliates.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
"US Acquired Co." shall mean Sports Holdings Corp., a Delaware
corporation, as it existed prior to the US Acquisition becoming effective.
"US Acquisition" shall mean the transactions, or series of
transactions, whereby US Acquisition Sub is merged with and into US Acquired Co.
under the laws of Delaware forming SHC to continue as the surviving corporation
and as a wholly-owned Subsidiary of Ultimate Parent.
"US Acquisition Sub" shall mean SLM Acquisition Corp., a Delaware
corporation created by Ultimate Parent and a wholly-owned Subsidiary of Ultimate
Parent formed for the sole purpose of giving effect to the US Acquisition on or
before the Closing Date.
"WAP" means WAP Holdings Inc., a Delaware corporation.
"Year 2000 Assessment" shall mean a comprehensive written assessment
of the nature and extent of each Credit Party's Year 2000 Problems and Year 2000
Date-Sensitive Systems/Components, including, without limitation, Year 2000
Problems regarding data exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to each Credit Party,
all actions necessary to remediate such Person's Year 2000 Problems, including,
without limitation, computer code enhancements and revisions, upgrades and
replacements of Year 2000 Date-Sensitive Systems/Components, and coordination of
such enhancements, revisions, upgrades and replacements with Third Party
Interactives.
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<PAGE>
"Year 2000 Corrective Plan" shall mean, with respect to each Credit
Party, a comprehensive plan to remediate all of its material Year 2000 Problems
on or before September 30, 1999, including, without limitation by (i) computer
code enhancements or revisions, (ii) upgrades or replacements of Year 2000
Date-Sensitive Systems/Components, (iii) test and validation procedures, (iv) an
implementation time line and budget and (v) designation of specific employees
who will be responsible for planning, coordinating and implementing each phase
or subpart of the Year 2000 Corrective Plan.
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
Person, any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" shall mean, as to each Credit
Party, (i) the performance of test and validation procedures regarding Year 2000
Corrective Actions on a unit basis and on a systemwide basis; (ii) the
performance of test and validation procedures regarding data exchanges among the
Credit Parties' Year 2000 Date-Sensitive Systems/Components and data exchanges
with Third Party Interactives, and (iii) the design and implementation of
additional Corrective Actions, the need for which has been demonstrated by test
and validation procedures.
"Year 2000 Problems" shall mean, with respect to each Credit Party,
limitations on the capacity or readiness of any such Credit Party's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Credit Parties and exchanges of information among the
Credit Parties and Year 2000 Date-Sensitive Systems/Components of Third Party
Interactives and functionality of Credit Parties' peripheral interfaces,
firmware and embedded microchips.
All other undefined terms contained in any of the Loan Documents
shall, unless the context indicates otherwise, have the meanings provided for by
the Code as in effect in the State of New York to the extent the same are used
or defined therein. Unless otherwise specified, references in the Agreement or
any of the Appendices to a Section, subsection or clause refer to such Section,
subsection or clause as contained in the Agreement. The words "herein," "hereof"
and "hereunder" and other words of similar import refer to the Agreement as a
whole, including all Annexes, Exhibits and Schedules, as the same may from time
to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in the Agreement or any such
Annex, Exhibit or Schedule.
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<PAGE>
Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations. Whenever
any provision in any Loan Document refers to the knowledge (or an analogous
phrase) of any Credit Party, such words are intended to signify that such Credit
Party has actual knowledge or awareness of a particular fact or circumstance or
that such Credit Party, if it had exercised reasonable diligence, would have
known or been aware of such fact or circumstance.
A-32
<PAGE>
ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) Issuance. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower Representative on
behalf of either Borrower and for such Borrower's account, Letter of Credit
Obligations by causing Letters of Credit to be issued (by a bank or other
legally authorized Person selected by or acceptable to Agent in its sole
discretion (each, an "L/C Issuer")) for such Borrower's account and guaranteed
by Agent; provided, however, that if the L/C Issuer is a Revolving Lender, then
the Letter of Credit issued by such Revolving Lender shall not be guaranteed by
Agent but rather each Revolving Lender shall, subject to the terms and
conditions hereinafter set forth, purchase (or be deemed to have purchased) risk
participations in all such Letters of Credit issued with the written consent of
Agent, as more fully described in paragraph (b)(ii) below. The aggregate amount
of all Letter of Credit Obligations shall not at any time exceed the lesser of
(i) Ten Million Dollars ($10,000,000) (the "L/C Sublimit"), and (ii) the Maximum
Amount less the aggregate outstanding principal balance of the Revolving Credit
Advances and the Swing Line Loan, and (iii) the Aggregate Borrowing Base less
the aggregate outstanding principal balance of the Revolving Credit Advances and
the Swing Line Loan. Furthermore, the aggregate amount of any Letter of Credit
Obligations incurred on behalf of either Borrower shall not at any time exceed
such Borrower's separate Borrowing Base less the aggregate principal balance of
the Revolving Credit Advances and the Swing Line Loan to such Borrower. No such
Letter of Credit shall have an expiry date which is more than one year following
the date of issuance thereof, and neither Agent nor Revolving Lenders shall be
under any obligation to incur Letter of Credit Obligations in respect of, or
purchase risk participations in, any Letter of Credit having an expiry date
which is later than the Commitment Termination Date.
(b)(i) Advances Automatic; Participations. In the event that Agent
or any Revolving Lender shall make any payment on or pursuant to any Letter of
Credit Obligation, such payment shall then be deemed automatically to constitute
a Revolving Credit Advance to the applicable Borrower under Section 1.1(a) of
the Agreement regardless of whether a Default or Event of Default shall have
occurred and be continuing and notwithstanding either Borrower's failure to
satisfy the conditions precedent set forth in Section 2, and each Revolving
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement. The failure of any Revolving Lender to make available to Agent
for Agent's own account its Pro Rata Share of any such Revolving Credit Advance
or payment by Agent under or in respect of a Letter of Credit shall not relieve
any other Revolving Lender of its obligation hereunder to make available to
Agent its Pro Rata Share thereof, but no Revolving Lender shall be responsible
for the failure of any other Revolving Lender to make available such other
Revolving Lender's Pro Rata Share of any such payment.
<PAGE>
(ii) If it shall be illegal or unlawful for either Borrower to
incur Revolving Credit Advances as contemplated by paragraph (b)(i) above
because of an Event of Default described in Section 8.1(h) or (i) or otherwise
or if it shall be illegal or unlawful for any Revolving Lender to be deemed to
have assumed a ratable share of the reimbursement obligations owed to an L/C
Issuer, or if the L/C Issuer is a Revolving Lender, then (i) immediately and
without further action whatsoever, each Revolving Lender shall be deemed to have
irrevocably and unconditionally purchased from Agent (or such L/C Issuer, as the
case may be) an undivided interest and participation equal to such Revolving
Lender's Pro Rata Share (based on the Revolving Loan Commitments) of the Letter
of Credit Obligations in respect of all Letters of Credit then outstanding and
(ii) thereafter, immediately upon issuance of any Letter of Credit, each
Revolving Lender shall be deemed to have irrevocably and unconditionally
purchased from Agent (or such L/C Issuer, as the case may be) an undivided
interest and participation in such Revolving Lender's Pro Rata Share (based on
the Revolving Loan Commitments) of the Letter of Credit Obligations with respect
to such Letter of Credit on the date of such issuance. Each Revolving Lender
shall fund its participation in all payments or disbursements made under the
Letters of Credit in the same manner as provided in the Agreement with respect
to Revolving Credit Advances.
(c) Cash Collateral. If Borrowers are required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, the Borrowers will pay to Agent for the
benefit of Revolving Lenders cash or Cash Equivalents acceptable to Agent in an
amount equal to 105% of the maximum amount then available to be drawn under each
applicable Letter of Credit outstanding for the benefit of either Borrower. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
(the "Cash Collateral Accounts") maintained at a bank or financial institution
acceptable to Agent. The Cash Collateral Accounts shall be in the name of the
applicable Borrower and shall be pledged to, and subject to the control of,
Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent.
Each Borrower hereby pledges and grants to Agent, on behalf of itself and
Lenders, a security interest in all such funds and Cash Equivalents held in the
Cash Collateral Accounts from time to time and all proceeds thereof, as security
for the payment of all amounts due in respect of the Letter of Credit
Obligations and other Obligations, whether or not then due. The Agreement,
including this Annex B, shall constitute a security agreement under applicable
law.
If any Letter of Credit Obligations, whether or not then due and
payable, shall for any reason be outstanding on the Commitment Termination Date,
Borrowers shall either (i) provide cash collateral therefor in the manner
described above, or (ii) cause all such Letters of Credit and guaranties thereof
to be canceled and returned, or (iii) deliver a stand-by letter (or letters) of
credit or guaranty of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty (30)
additional days) as, and in an amount equal to 105% of, the aggregate maximum
amount then available to be drawn under, the Letters of Credit to which such
outstanding Letter of Credit Obligations relate and shall be issued by a Person,
and shall be subject to such terms and conditions, as are satisfactory to Agent
in its sole discretion.
B-2
<PAGE>
From time to time after funds are deposited in the Cash Collateral
Accounts by either Borrower, whether before or after the Commitment Termination
Date, Agent may apply such funds or Cash Equivalents then held in the Cash
Collateral Accounts to the payment of any amounts, in such order as Agent may
elect, as shall be or shall become due and payable by such Borrower to Lenders
with respect to such Letter of Credit Obligations of such Borrower and, upon the
satisfaction in full of all Letter of Credit Obligations of such Borrower, to
any other Obligations of either Borrower then due and payable; provided, that,
where such funds are deposited in the Cash Collateral Accounts pursuant to the
first sentence of Section 1.3(b)(i) and such excess has been eliminated; then
only prior to the Commitment Termination Date and so long as no Default or Event
of Default has occurred or is continuing, Agent shall pay such funds to
Borrowers upon the written request of Borrower Representative.
No Borrower nor any Person claiming on behalf of or through either
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash Collateral Accounts, except that upon the termination of all
Letter of Credit Obligations and the payment of all amounts payable by Borrowers
to Lenders in respect thereof, any funds remaining in the Cash Collateral
Account shall be applied to other Obligations when due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid to
Borrowers or as otherwise required by law.
(d) Fees and Expenses. Borrowers agree to pay to Agent for the
benefit of Revolving Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder, (x) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (y) for
each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "Letter of Credit Fee") in an amount equal to one and
one half percent (1.5%) per annum multiplied by the maximum amount available
from time to time to be drawn under the applicable Letter of Credit. Such fee
shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on
the first day of each month and shall be calculated on the basis of the actual
number of days elapsed in the previous month on which the Letter of Credit
Obligations were outstanding and a year of 360 days. In addition, Borrowers
shall pay to any L/C Issuer, on demand, such fees (including all per annum
fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(e) Request for Incurrence of Letter of Credit Obligations. Borrower
Representative shall give Agent at least three (3) Business Days prior written
notice requesting the incurrence of any Letter of Credit Obligation, specifying
the date such Letter of Credit Obligation is to be incurred, identifying the
beneficiary and the Borrower to which such Letter of Credit Obligation relates
and describing the nature of the transactions proposed to be supported thereby.
The notice shall be accompanied by the form of the Letter of Credit (which shall
be acceptable to the L/C Issuer) to be guarantied and, to the extent not
previously delivered to Agent, copies of all agreements between either Borrower
and the L/C Issuer pertaining to the issuance of Letters of Credit.
Notwithstanding anything contained herein to the contrary, Letter of Credit
applications by Borrower Representative and approvals by Agent and the L/C
Issuer
B-3
<PAGE>
may be made and transmitted pursuant to electronic codes and security measures
mutually agreed upon and established by and among Borrower Representative, Agent
and the L/C Issuer.
(f) Obligation Absolute. The obligation of Borrowers to reimburse
Agent and Revolving Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrowers and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit
or the Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, set-off, defense or other right
which either Borrower or any of its Affiliates or any Lender may at any
time have against a beneficiary or any transferee of any Letter of Credit
(or any Persons or entities for whom any such transferee may be acting),
Agent, any Lender, or any other Person, whether in connection with the
Agreement, the Letter of Credit, the transactions contemplated herein or
therein or any unrelated transaction (including any underlying transaction
between either Borrower or any of its Affiliates and the beneficiary for
which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any 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;
(iv) payment by Agent (except as otherwise expressly provided in
paragraph (g)(ii)(C) below) or any L/C Issuer under any Letter of Credit
or guaranty thereof against presentation of a demand, draft or certificate
or other document which does not comply with the terms of such Letter of
Credit or such guaranty;
(v) any other circumstance or happening whatsoever, which is similar
to any of the foregoing; or
(vi) the fact that a Default or an Event of Default shall have
occurred and be continuing.
(g) Indemnification; Nature of Lenders' Duties. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrowers hereby agree
to pay and to protect, indemnify, and save harmless Agent and each Lender from
and against any and all claims, demands, liabilities, damages, losses,
out-of-pocket costs, charges and expenses (including legal fees) which Agent or
any Lender may incur or be subject to as a consequence, direct or indirect, of
(A) the issuance of any Letter of Credit or guaranty thereof, or (B) the failure
of Agent or any Lender seeking indemnification or of any L/C Issuer to honor a
demand for payment under any Letter of Credit or guaranty thereof as a result of
any act or omission, whether rightful or
B-4
<PAGE>
wrongful, of any present or future de jure or de facto government or
Governmental Authority, in each case other than to the extent solely as a result
of the gross negligence or willful misconduct of Agent or such Lender.
(ii) As between Agent and any Lender and Borrowers, Borrowers
assume all risks of the acts and omissions of, or misuse of any Letter of Credit
by beneficiaries of any Letter of Credit. In furtherance and not in limitation
of the foregoing, to the fullest extent permitted by law neither Agent nor any
Lender shall be responsible: (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document issued by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) for
failure of the beneficiary of any Letter of Credit to comply fully with
conditions required in order to demand payment under such Letter of Credit;
provided that, in the case of any payment by Agent or any L/C Issuer that is a
Revolving Lender under any Letter of Credit or guaranty thereof, Agent or such
L/C Issuer shall be severally and not jointly liable to the extent such payment
was made by such Person solely as a result of its gross negligence or willful
misconduct in determining that the demand for payment under such Letter of
Credit or guaranty thereof complies on its face with any applicable requirements
for a demand for payment under such Letter of Credit or guaranty thereof; (D)
for errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (E) for errors (other than gross negligence) in interpretation of
technical terms; (F) for any loss or delay (unless occasioned by gross
negligence) in the transmission or otherwise of any document required in order
to make a payment under any Letter of Credit or guaranty thereof or of the
proceeds thereof; (G) for the credit of the proceeds of any drawing under any
Letter of Credit or guaranty thereof; and (H) for any consequences arising from
causes beyond the control of Agent or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's or any Lender's rights
or powers hereunder or under the Agreement.
(iii) Nothing contained in this Agreement shall be deemed to
(A) limit or to expand any waivers, covenants or indemnities made by Borrowers
in favor of any L/C Issuer in any letter of credit application, reimbursement
agreement or similar document, instrument or agreement between or among
Borrowers and such L/C Issuer; or (B) limit in any respects any rights which
either Borrower may have against any L/C Issuer that is not a Revolving Lender.
B-5
<PAGE>
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
PART A: SHC HOCKEY INC.
SHC Hockey Inc. shall establish and maintain the Cash Management
Systems described below:
(1) On or before the Closing Date (or such later date as Agent shall
consent to in writing), SHC Hockey Inc. shall establish Account No.
03-361284 with Merchants Bank (the "Blocked Account").
(2) On or before the Closing Date (or such later date as Agent shall
consent to in writing), SHC Hockey Inc. shall have entered into a
tri-party blocked account agreement with Agent, for the benefit of
itself and Lenders, and Merchants Bank in form and substance
acceptable to Agent, which shall become operative on or prior to the
Closing Date. Such blocked account agreement shall provide, among
other things, that (i) all Receipts from time to time tendered by or
on behalf of SHC Hockey Inc. for deposit to the Blocked Account are
held by Merchants Bank as agent for Agent, on behalf of itself and
Lenders, (ii) Merchants Bank shall determine, on each business day,
the balance of all available funds on deposit in the Blocked Account
and automatically initiate a federal funds wire transfer of all such
funds to the Collection Account, Ref. SHC Hockey Inc. CFN 4141,
(iii) Merchants Bank has no rights of set-off or banker's lien
against the Blocked Account or any Receipts on deposit therein and
waives any such right or lien which it may have against any Receipts
deposited in the Blocked Account, except for the payment of its
usual and customary service charges, transfer fees and account
maintenance fees in connection with the Blocked Account and for any
Receipts deposited in the Blocked Account that are returned unpaid
or otherwise dishonored.
(3) SHC Hockey Inc. may terminate the Blocked Account Agreement only
upon delivery to Merchants Bank of a written notification thereof
jointly executed by SHC Hockey Inc. and Agent. Agent may terminate
the Agreement at any time upon its delivery of written notice
thereof to each of SHC Hockey Inc. and Merchants Bank. Merchants
Bank may terminate this Agreement at any time on not less than 30
days prior written notice to each of SHC Hockey Inc. and Agent. Upon
delivery or receipt of such notice of termination to or by Merchants
Bank, Merchants Bank will: (a) immediately transmit to the
Collection Account (i) all funds, if any, then on deposit in, or
otherwise to the credit of, the Blocked Account, and (ii) upon
receipt, all funds received after such notice for deposit in,
<PAGE>
or otherwise to the credit of, the Blocked Account; and (b) deliver
directly to Agent all Receipts consisting of checks, money orders,
drafts and other instruments or items of value, whether then in the
possession of Merchants Bank or received by Merchants Bank after
such notice, without depositing such Receipts in the Blocked Account
or any other account.
(4) On or before the Closing Date (or such later date as Agent shall
consent to in writing), SHC Hockey Inc. shall establish Account No.
370410-002 with Hongkong Bank of Canada (the "Blocked Account").
(5) On or before the Closing Date (or such later date as Agent shall
consent to in writing), SHC Hockey Inc. shall have entered into a
tri-party blocked account agreement with Agent, for the benefit of
itself and Lenders, and Hongkong Bank of Canada in form and
substance acceptable to Agent, which shall provide, among other
things, that (i) all Receipts from time to time tendered by or on
behalf of SHC Hockey Inc. for deposit to the Blocked Account are
held by Hongkong Bank of Canada as agent for Agent, on behalf of
itself and Lenders, (ii) Hongkong Bank of Canada shall determine, on
each business day, the balance of all available funds on deposit in
the Blocked Account and automatically initiate a federal funds wire
transfer of all such funds to the Collection Account, Ref. SHC
Hockey Inc. CFN 4141, (iii) Hongkong Bank of Canada has no rights of
set-off or banker's lien against the Blocked Account or any Receipts
on deposit therein and waives any such right or lien which it may
have against any Receipts deposited in the Blocked Account, except
for the payment of its usual and customary service charges, transfer
fees and account maintenance fees in connection with the Blocked
Account and for any Receipts deposited in the Blocked Account that
are returned unpaid or otherwise dishonored.
(6) SHC Hockey Inc. may terminate the Blocked Account Agreement only
upon delivery to Hongkong Bank of Canada of a written notification
thereof jointly executed by SHC Hockey Inc. and Agent. Agent may
terminate the Agreement at any time upon its delivery of written
notice thereof to each of SHC Hockey Inc. and Hongkong Bank of
Canada. Hongkong Bank of Canada may terminate this Agreement at any
time on not less than 30 days prior written notice to each of SHC
Hockey Inc. and Agent. Upon delivery or receipt of such notice of
termination to or by Hongkong Bank of Canada, Hongkong Bank of
Canada will: (a) immediately transmit to the alternative
relationship bank selected or deemed to be selected by SHC Hockey
Inc. (i) all funds, if any, then on deposit in, or otherwise to the
credit of the Blocked Account, and (ii) upon receipt, all funds
received after such notice for deposit in, or otherwise to the
credit of, the Blocked Account; and (b) deliver directly to Agent
all Receipts consisting of checks, money orders, drafts and other
instruments or items of value, whether then in the possession of
Hongkong Bank of Canada or received by Hongkong Bank of Canada after
such notice, without depositing such Receipts in the Blocked Account
or any other account.
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<PAGE>
PART B: MASKA U.S., INC.
Maska U.S., Inc. shall establish and maintain the Cash Management
Systems described below:
(1) On or before the Closing Date and until the Termination Date, Maska
U.S., Inc. shall establish a post office lockbox with The Chase
Manhattan Bank through which cash, checks, money orders and other
items of value of Maska U.S., Inc. are processed by The Chase
Manhattan Bank for deposit in Account No. 801-502004 established by
Maska U.S., Inc. with The Chase Manhattan Bank (the "Lockbox
Account").
(2) On or before the Closing Date (or such later date as Agent shall
consent to in writing), Maska U.S., Inc. shall have entered into a
lockbox account agreement with Agent, for the benefit of itself and
Lenders, and The Chase Manhattan Bank in form and substance
acceptable to Agent, which shall become operative on or prior to the
Closing Date. Such lockbox account agreement shall provide, among
other things, that (i) The Chase Manhattan Bank shall have exclusive
and unrestricted access to the Lockbox and shall have complete and
exclusive authority to receive, pickup and open all regular,
registered, certified or insured mail addressed to Maska U.S., Inc.
at the Lockbox, (ii) The Chase Manhattan Bank shall determine, on
each business day, the balance of all available funds on deposit in
the Lockbox Account and automatically initiate a federal funds wire
transfer of all such funds to the Collection Account, Ref. Maska
U.S., Inc. CAF 4142, (iii) The Chase Manhattan Bank has no rights of
set-off or banker's lien against the Lockbox Account or any Receipts
on deposit therein and hereby waives any such right or lien which it
may have against any Receipts deposited in the Lockbox Account,
except for the payment of its usual and customary service charges,
transfer fees and account maintenance fees in connection with the
Lockbox and Lockbox Account and for any Checks or other Receipts
deposited in the Lockbox Account that are returned unpaid or
otherwise dishonored.
(3) Maska U.S., Inc. may terminate the Lockbox Account Agreement only
upon delivery to The Chase Manhattan Bank of a written notification
thereof jointly executed by Maska U.S., Inc. and Agent. Agent may
terminate the Agreement at any time upon its delivery of written
notice thereof to each of Maska U.S., Inc. and The Chase Manhattan
Bank. The Chase Manhattan Bank may terminate the Agreement at any
time on not less than 30 days prior written notice to each of Maska
U.S., Inc. and Agent. Upon delivery or receipt of such notice of
termination to or by The Chase Manhattan Bank, The Chase Manhattan
Bank will: (a) immediately transmit to the Collection Account (i)
all funds, if any, then on deposit in, or otherwise to the credit
of, the Lockbox Account, and (ii) upon receipt, all Receipts (other
than Checks) received after such notice for deposit in, or otherwise
to the credit of, the Lockbox Account; and (b) deliver directly to
Agent all Checks, whether then in the possession of The Chase
Manhattan Bank
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or received by The Chase Manhattan Bank after such notice, without
depositing such Checks in the Lockbox Account or any other account.
PART C: SLM INTERNATIONAL INC.
(1) On or prior to the date which is thirty (30) days following the
Closing Date, SLM International, Inc. shall have closed each of (i)
the lockbox account (number 801-5020968) which it maintains in its
name at The Chase Manhattan Bank, (ii) the operating account (number
0155035308) which it maintains in its name at Fleet Credit Corp.,
(iii) the checking account (number 936-5207400) which it maintains
in its name at Fleet Credit Corp. and (iv) the U.S. payroll account
(number 936-5021718) which it maintains in its name at Fleet Credit
Corp. From and including the Closing Date until the date upon which
the accounts referred to in this paragraph (1) are closed (i) SLM
International, Inc. shall not make or permit to be made any deposit
into any such account and (ii) at no time shall the amount on
deposit in any such account exceed $5,000. On or prior to the date
which is thirty-one (31) days following the Closing Date, SLM
International, Inc. shall confirm in writing to Agent that each of
the accounts referred to in this paragraph (1) has been closed and,
if requested by Agent, provide evidence to Agent of such closure
reasonably satisfactory to Agent.
PART D: GENERAL PROVISIONS
The following provisions shall apply to all Blocked Accounts,
Lockbox Accounts and Disbursement Accounts included in the Cash Management
System:
(1) The Lockboxes, Blocked Accounts and Disbursement Accounts shall be
cash collateral accounts, with all cash, checks and other similar
items of payment in such accounts securing payment of the Loans and
all other Obligations, and in which each Borrower and each Credit
Party shall have granted a Lien to Agent, on behalf of itself and
Lenders, pursuant to the Security Agreement.
(2) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with Section 1.10 of the Agreement
and shall be applied (and allocated) by Agent in accordance with
Section 1.11 of the Agreement. In no event shall any amount be so
applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(3) Each Borrower may maintain, in its name, accounts (each a
"Disbursement Account" and collectively, the "Disbursement
Accounts") at a bank acceptable to Agent into which Agent shall,
from time to time, deposit proceeds of Revolving Credit Advances and
Swing Line Advances made to such Borrower pursuant to Section 1.1
for use by such Borrower solely in accordance with the provisions of
Section 1.4.
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(4) Each Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in
concert with such Borrower (each a "Related Person") to (i) hold in
trust for Agent, for the benefit of itself and Lenders, all checks,
cash and other items of payment received by such Borrower or any
such Related Person, and (ii) within one (1) Business Day after
receipt by such Borrower or any such Related Person of any checks,
cash or other items or payment, deposit the same into an account of
such Borrower. Each Borrower and each Related Person thereof
acknowledges and agrees that all cash, checks or items of payment
constituting proceeds of Collateral are the property of Agent and
Lenders. All proceeds of the sale or other disposition of any
Collateral, shall be deposited directly into the applicable
accounts.
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ANNEX D (SECTION 2.1(A))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be
received by Agent in form and substance satisfactory to Agent on or prior to the
Closing Date (each capitalized term used but not otherwise defined herein shall
have the meaning ascribed thereto in Annex A to the Agreement):
A. Appendices. All Appendices to the Agreement, in form and
substance satisfactory to Agent.
B. Revolving Notes and Swing Line Notes. Duly executed originals of
the Revolving Notes and Swing Line Notes for each applicable Lender, dated the
Closing Date.
C. Security Agreement. Duly executed originals of the Security
Agreement, dated the Closing Date, and all instruments, documents and agreements
executed pursuant thereto.
D. Insurance. Satisfactory evidence that the insurance policies
required by Section 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Agent, in favor of Agent, on behalf of Lenders.
E. Security Interests and Code Filings.
(a) Evidence satisfactory to Agent that Agent (for the benefit
of itself and Lenders) has a valid and perfected first priority security
interest in the Collateral, including (i) such documents duly executed by each
Credit Party (including financing statements under the Code and other applicable
documents under the laws of any jurisdiction with respect to the perfection of
Liens) as Agent may request in order to perfect its security interests in the
Collateral and (ii) copies of Code search reports listing all effective
financing statements that name any Credit Party as debtor, together with copies
of such financing statements, none of which shall cover the Collateral, except
for those relating to the Prior Lender Obligations (all of which shall be
terminated on the Closing Date).
(b) Evidence satisfactory to Agent, including copies, of all
UCC-1 and other financing statements filed in favor of any Credit Party with
respect to each location, if any, at which Inventory may be consigned.
(c) Control Letters from (i) all issuers of uncertificated
securities and financial assets held by each Borrower, (ii) all securities
intermediaries with respect to all
<PAGE>
securities accounts and securities entitlements of each Borrower, and (iii) all
futures commission agents and clearing houses with respect to all commodities
contracts and commodities accounts held by any Borrower.
F. Payoff Letter; Termination Statements. Copies of a duly executed
payoff letter, in form and substance satisfactory to Agent, by and between all
parties to the Prior Lender loan documents evidencing repayment in full of all
Prior Lender Obligations, together with (a) UCC-3 or other appropriate
termination statements, in form and substance satisfactory to Agent, manually
signed by the Prior Lender releasing all liens of Prior Lender upon any of the
personal property of each Credit Party, and (b) termination of all blocked
account agreements, bank agency agreements or other similar agreements or
arrangements or arrangements in favor of Prior Lender or relating to the Prior
Lender Obligations.
G. Intellectual Property Security Agreements. Duly executed
originals of Trademark Security Agreements, Copyright Security Agreements and
Patent Security Agreements, each dated the Closing Date and signed by each
Credit Party which owns Trademarks, Copyrights and/or Patents, as applicable,
all in form and substance satisfactory to Agent, together with all instruments,
documents and agreements executed pursuant thereto.
H. Consents and Acknowledgments Respecting Intellectual Property.
Duly executed originals of Consents and Acknowledgments Respecting Intellectual
Property, each dated on or before the Closing Date and signed by certain
licensors of Intellectual Property to Borrowers and each Credit Party as
follows: CCM, Gestion Pro-Velo Material, Inc., KFH Sports Oy, Jofa AB, Wolverine
Outdoors Inc., NHL Enterprises Canada, L.P. and NHL Enterprises L.P.
I. Ultimate Parent Guaranty. Duly executed originals of the Ultimate
Parent Guaranty, dated the Closing Date, and all documents, instruments and
agreements executed pursuant thereto.
J. Tropsport Guaranty. Duly executed originals of the Tropsport
Guaranty, dated the Closing Date, and all documents, instruments and agreements
executed pursuant thereto.
K. Subsidiary Guaranties. Guaranties executed by each Subsidiary
Guarantor in favor of Agent, for the benefit of Lenders, and all documents,
instruments and agreements executed pursuant thereto.
L. Initial Borrowing Base Certificate. Duly executed originals of an
initial Borrowing Base Certificate from each Borrower, dated the Closing Date,
reflecting information concerning Eligible Accounts and Eligible Inventory of
each Borrower as of a date not before November 7, 1998.
M. Initial Notice of Revolving Credit Advance. Duly executed
originals of a Notice of Revolving Credit Advance, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by Borrower
Representative on the Closing Date.
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<PAGE>
N. Letter of Direction. Duly executed originals of a letter of
direction from Borrower Representative addressed to Agent, on behalf of itself
and Lenders, with respect to the disbursement on the Closing Date of the
proceeds of the initial Revolving Credit Advance.
O. Cash Management System; Blocked Account Agreements. Evidence
satisfactory to Agent that, as of the Closing Date, Cash Management Systems
complying with Annex C to the Agreement have been established and are currently
being maintained in the manner set forth in such Annex C, together with copies
of duly executed tri-party blocked account and lockbox agreements, satisfactory
to Agent, with the banks as required by Annex C.
P. Charter and Good Standing. For each Credit Party, such Person's
(a) charter and all amendments thereto, (b) good standing certificates
(including verification of tax status) in its state of incorporation and (c)
good standing certificates (including verification of tax status) and
certificates of qualification to conduct business in each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, each dated a recent date prior to the Closing Date and certified
by the applicable Secretary of State or other authorized Governmental Authority.
Q. Bylaws and Resolutions. For each Credit Party, (a) such Person's
bylaws, together with all amendments thereto and (b) resolutions of such
Person's Board of Directors, approving and authorizing the execution, delivery
and performance of the Loan Documents to which such Person is a party and the
transactions to be consummated in connection therewith, each certified as of the
Closing Date by such Person's corporate secretary or an assistant secretary as
being in full force and effect without any modification or amendment.
R. Incumbency Certificates. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing any of the
Loan Documents, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
S. Opinions of Counsel. Duly executed originals of opinions of
Skadden, Arps, Slate, Meagher & Flom LLP, New York counsel for the Credit
Parties, together with any local counsel opinions requested by Agent, each in
form and substance satisfactory to Agent and its counsel, dated the Closing
Date, and addressed to Agent, on behalf of Agent and Lenders, including in each
such opinion an express statement to the effect that Agent and Lenders are
authorized to rely on such opinion.
T. Officer's Certificate. Agent shall have received duly executed
originals of a certificate of the Chief Executive Officer and/or the Senior
Vice-President, Finance of each Borrower, dated the Closing Date: (a) stating
that since December 31, 1997, (i) no event or condition has occurred or is
existing which could reasonably be expected to have a Material Adverse Effect;
(ii) there has been no material adverse change in the industry in which any
Borrower operates; (iii) no Litigation has been commenced which, if successful,
would have a Material Adverse Effect or could challenge any of the transactions
contemplated by the Agreement and the other Loan Documents; (iv) there have been
no Restricted Payments made by any Credit Party; and (v) there has been no
material increase in liabilities, liquidated or
D-3
<PAGE>
contingent (excluding the Term Loan and the Canadian Facility), and no material
decrease in assets of any Borrower or any of its Subsidiaries; and (b)
confirming compliance with the condition precedent set forth in Section 2.2(a)
of this Agreement.
U. Waivers. Agent, on behalf of Lenders, shall have received
landlord waivers and consents, bailee letters and mortgagee agreements in form
and substance satisfactory to Agent, in each case as required pursuant to
Section 5.9.
V. Intercreditor Agreement. Agent and Lenders shall have received
any and all subordination and/or intercreditor agreements, including the
Intercreditor Agreement, all in form and substance reasonably satisfactory to
Agent, in its sole discretion, as Agent shall have deemed necessary or
appropriate with respect to any Indebtedness of any Credit Party.
W. Environmental Reports. Agent shall have received such
environmental review and audit reports, including Phase II reports, with respect
to the Real Estate of any Credit Party as Agent shall have requested, and Agent
shall be satisfied, in its sole discretion, with the contents of all such
environmental reports. Agent shall have received letters executed by the
environmental firms preparing such environmental reports, in form and substance
satisfactory to Agent, authorizing Agent and Lenders to rely on such reports.
X. Appraisals. Agent shall have received copies of all appraisals
received by Term Lenders as to all Equipment and as to each of the Mortgaged
Properties, each of which shall be in form and substance satisfactory to Agent,
acting reasonably.
Y. Audited Financials; Financial Condition. Agent shall have
received Ultimate Parent's and SHC's final Financial Statements for their Fiscal
Years ended December 31, 1997 and December 31, 1996, audited by Ernst & Young
Inc. Each of Ultimate Parent and SHC shall have provided Agent with its current
operating statements, a consolidated and consolidating balance sheet and
statement of cash flows, the Pro Forma, each Projections, and a Borrowing Base
Certificate with respect to each Borrower certified by such Borrower's Senior
Vice-President, Finance, in each case in form and substance satisfactory to
Agent, and Agent shall be satisfied, in its sole discretion, with all of the
foregoing. Agent shall have further received a certificate of the Chief
Executive Officer and/or the Senior Vice-President, Finance of Ultimate Parent,
based on such Pro Forma and Projections, to the effect that (a) Ultimate Parent
and its Subsidiaries will be Solvent upon the consummation of the transactions
contemplated herein; (b) the Pro Forma fairly presents the financial condition
of Ultimate Parent and its Subsidiaries as of the date thereof after giving
effect to the transactions contemplated by the Loan Documents; and (c) the
Projections are based upon estimates and assumptions stated therein, all of
which Ultimate Parent believes to be reasonable and fair in light of current
conditions and current facts known to Ultimate Parent and, as of the Closing
Date, reflect Ultimate Parent's good faith and reasonable estimates of its
future financial performance and of the other information projected therein for
the period set forth therein, it being recognized by Lenders that such
Projections, as they relate to future events, are not to be viewed as facts or
an assurance of performance and that actual results during the period or periods
covered by such Projections may differ from the forecasted or projected results
set forth therein.
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<PAGE>
Z. Certified Copies of Related Transaction Documents. Agent shall
have received a certificate of officer of Ultimate Parent to which is attached
complete copies of the Reorganization Agreement, Certificate of Merger of
Ultimate Parent and any other documents delivered under the Reorganization
Agreement that Agent requests be attached thereto, and the Term Loan Agreement
and all security executed in connection therewith.
AA. Certificate as to Related Transactions. Certificate of Officer
of Ultimate Parent as to the completion of the Related Transactions, including
as to the matters described in Section 2.1(g) of this Agreement.
BB. Escrow Agreement. Duly executed originals of the Escrow
Agreement and all documents, instruments and agreements executed pursuant
thereto.
CC. Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Agent may, in its sole discretion,
request.
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<PAGE>
ANNEX E (SECTION 4.1(A))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS--REPORTING
Borrowers and Ultimate Parent, as applicable, shall deliver or cause
to be delivered to Agent or to Agent and Lenders, as indicated, the following:
(a) Monthly Financials. To Agent and Lenders, within thirty (30)
days after the end of each Fiscal Month (other than a Fiscal Month during which
a Fiscal Quarter ends), financial information regarding Ultimate Parent and its
Subsidiaries, certified by the Senior Vice-President, Finance of Ultimate
Parent, consisting of consolidated and consolidating (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of income
and cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Month; (ii) unaudited statements of income and cash flows for such Fiscal
Month, setting forth in comparative form the figures for the corresponding
period in the prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (iii) a summary of the outstanding balances of all
intercompany indebtedness of all Credit Parties. Such financial information
shall be accompanied by the certification of the Senior Vice-President, Finance
of Ultimate Parent that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position and results of operations of Ultimate Parent and its Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end of such month
and for the period then ended and (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default.
(b) Quarterly Financials. To Agent and Lenders, within forty-five
(45) days after the end of each Fiscal Quarter, financial information regarding
Ultimate Parent and its Subsidiaries, certified by the Senior Vice-President,
Finance of Ultimate Parent, including consolidated and consolidating (a)
unaudited balance sheets as of the close of such Fiscal Quarter and the related
statements of income and cash flow for that portion of the Fiscal Year ending as
of the close of such Fiscal Quarter and (b) unaudited statements of income and
cash flows for such Fiscal Quarter, in each case setting forth in comparative
form the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments). Such financial information
shall be accompanied by (A) a statement in reasonable detail (each, a
"Compliance Certificate") certified by the Senior Vice-President, Finance of
Ultimate Parent showing the calculations used in determining compliance with
each of the financial covenants set forth on Annex G which is tested on a
quarterly basis and showing, for each Fiscal Quarter ending on or after
September 30, 1999, the calculations used in determining the Applicable
<PAGE>
Margins set forth in Section 1.5 and (B) the certification of the Senior
Vice-President, Finance of Ultimate Parent that (i) such financial information
presents fairly in accordance with GAAP (subject to normal year-end adjustments)
the financial position, results of operations and statements of cash flows of
Ultimate Parent and its Subsidiaries, on both a consolidated and consolidating
basis, as at the end of such Fiscal Quarter and for the period then ended, (ii)
any other information presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default shall have occurred and be
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default. In addition, Ultimate Parent shall deliver to
Agent and Lenders, within forty-five (45) days after the end of each Fiscal
Quarter, a management discussion and analysis which includes a comparison to
budget for the Fiscal Quarter and a comparison of performance for that Fiscal
Quarter to the corresponding period in the prior year.
(c) Operating Plan. To Agent and Lenders, as soon as available, but
not later than thirty (30) days after the end of each Fiscal Year, an annual
operating plan for Ultimate Parent and its Subsidiaries, approved by the Board
of Directors of Ultimate Parent, for the following year, which will include a
statement of all of the material assumptions on which such plan is based, will
include monthly balance sheets and a monthly budget for the following year and
will integrate sales, gross profits, operating expenses, operating profit, cash
flow projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(d) Annual Audited Financials. To Agent and Lenders, within ninety
(90) days after the end of each Fiscal Year, audited Financial Statements for
Ultimate Parent and its Subsidiaries on a consolidated and (unaudited)
consolidating basis, consisting of balance sheets and statements of income and
retained earnings and cash flows, setting forth in comparative form in each case
the figures for the previous Fiscal Year, which Financial Statements shall be
prepared in accordance with GAAP, certified without qualification, by an
independent certified public accounting firm of national standing or otherwise
acceptable to Agent. Such Financial Statements shall be accompanied by (i) a
statement prepared in reasonable detail showing the calculations used in
determining compliance with each of the financial covenants set forth on Annex
G, (ii) a report from such accounting firm to the effect that, in connection
with their audit examination, nothing has come to their attention to cause them
to believe that a Default or Event of Default has occurred (or specifying those
Defaults and Events of Default that they became aware of), it being understood
that such audit examination extended only to accounting matters and that no
special investigation was made with respect to the existence of Defaults or
Events of Default, (iii) the annual letters to such accountants in connection
with their audit examination detailing contingent liabilities and material
litigation matters, and (iv) the certification of the Chief Executive Officer or
Senior Vice-President, Finance of Ultimate Parent that all such Financial
Statements present fairly in accordance with GAAP the financial position,
results of operations and statements of cash flows of Ultimate Parent and its
Subsidiaries on a consolidated and consolidating basis, as at the end of such
year and for the period then ended, and that there
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<PAGE>
was no Default or Event of Default in existence as of such time or, if a Default
or Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default;
(e) Management Letters. To Agent and Lenders, within five (5)
Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants;
(f) Default Notices. To Agent and Lenders, as soon as practicable,
and in any event within five (5) Business Days after an executive officer of any
Credit Party has actual knowledge of the existence of any Default, Event of
Default or other event which has had a Material Adverse Effect, telephonic or
telecopied notice specifying the nature of such Default or Event of Default or
other event, including the anticipated effect thereof, which notice, if given
telephonically, shall be promptly confirmed in writing on the next Business Day;
(g) SEC Filings and Press Releases. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental regulatory authority; and (iii) all press releases and other
statements made available by any Credit Party to the public concerning material
changes or developments in the business of any such Person;
(h) Supplemental Schedules. To Agent, supplemental disclosures, if
any, required by Section 5.6 of the Agreement;
(i) Litigation. To Agent in writing, promptly upon learning thereof,
notice of any Litigation commenced or threatened against any Credit Party that
(i) seeks damages in excess of $500,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Credit Party or ERISA Affiliate in connection with any Plan, except
to the extent that such Litigation could not reasonably be expected to have a
Material Adverse Effect, (iv) alleges criminal misconduct by any Credit Party,
(v) alleges the violation of any law regarding, or seeks remedies in connection
with, any Environmental Liabilities except to the extent that such alleged
violation or remedy sought could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or (vi) involves any
product recall;
(j) Insurance Notices. To Agent, disclosure of losses or casualties
required by Section 5.4 of the Agreement;
(k) Lease Default Notices. To Agent, copies of (i) on the date of
receipt by any Credit Party, any and all default notices received under or with
respect to any leased location or public warehouse where Collateral is located,
(ii) promptly, such other notices or documents as Agent may request in its
reasonable discretion, and (iii) three (3) Business Days before the
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<PAGE>
due date for each monthly rent payment, a certificate of the Senior
Vice-President, Finance or Controller or each Borrower, in form and substance
satisfactory to Agent, acting reasonably, certifying that all rent payable with
respect to such month, under any lease, for any location at which Inventory or
books and records (including hardware and software) relating to the Collateral
are located, has been paid;
(l) Lease Amendments. To Agent, copies of all amendments to leases
of Real Estate of which any Credit Party is a lessee and on or at which
Collateral is located if, as a result of such amendment, any terms and
conditions of such lease are less favorable to, or more onerous to, such Credit
Party;
(m) CCM Shareholders' Agreement. To Agent, copies of all amendments
to, and waivers or other modifications of, the CCM Shareholders' Agreement; and
(n) Other Documents. To Agent and Lenders, such other financial and
other information respecting any Credit Party's business or financial condition
as Agent or any Lender shall, from time to time, reasonably request.
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<PAGE>
ANNEX F (SECTION 4.1(B))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in no event less frequently than
twice monthly, on the third Business Day of the second week of each Fiscal Month
and to the third Business Day of the last week of each Fiscal Month, commencing
with the week of November 25, 1998 (together with a copy of all or a part of
such delivery requested by any Lender in writing after the Closing Date), a
Borrowing Base Certificate with respect to each Borrower, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
(b) To Agent, upon its request, and in no event less frequently than
the third Business Day of each week, a certificate executed by each Borrower
attaching an accounts receivable roll-forward report, in each case, accompanied
by supporting detail and documentation as may be requested by Agent in its
reasonable discretion;
(c) To Agent, upon its request, and in no event less frequently than
five (5) Business Days after the end of each Fiscal Quarter or more frequently,
if requested by Agent (together with a copy of all or any part of such delivery
requested by any Lender in writing after the Closing Date), each of the
following:
(i) with respect to each Borrower, a summary of Inventory by
location and type with a supporting perpetual Inventory report, in each
case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion; and
(ii) with respect to each Borrower, a monthly trial balance
showing Accounts outstanding aged from due date as follows: future date,
current, 1 to 30 days, 31 to 60 days, 61 to 90 days and 91 days or more,
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(d) To Agent, on a weekly basis or at such more frequent intervals
as Agent may request from time to time (together with a copy of all or any part
of such delivery requested by any Lender in writing after the Closing Date),
collateral reports with respect to each Borrower, including all additions and
reductions (cash and non-cash) with respect to Accounts and Inventory of such
Borrower, in each case accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion;
<PAGE>
(e) To Agent, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to Annex E, a reconciliation of the
Accounts trial balance and month-end Inventory reports of each Borrower to such
Borrower's general ledger and monthly Financial Statements delivered pursuant to
such Annex E, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;
(f) To Agent, at the time of delivery of each of the quarterly
Financial Statements delivered pursuant to Annex E, (i) a listing of government
contracts, if any, of each Borrower subject to the Federal Assignment of Claims
Act of 1940; and (ii) a list of any applications for the registration of any
Patent, Trademark or Copyright with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency which
any Credit Party thereof has filed in the prior Fiscal Quarter;
(g) Each Borrower, at its own expense, shall deliver to Agent a
summary, in form and substance satisfactory to Agent, acting reasonably, of the
results of each physical verification, if any, which such Borrower or any of its
Subsidiaries may in their discretion have made, or caused any other Person to
have made on their behalf, of all or any portion of their Inventory (and, if a
Default or an Event of Default shall have occurred and be continuing, each
Borrower shall, upon the request of Agent, conduct, and deliver the full results
of, such physical verifications as Agent may require); and
(h) Each Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time after the occurrence
and during the continuance of a Default or an Event of Default, such appraisals
to be conducted by an appraiser, and in form and substance, satisfactory to
Agent.
F-2
<PAGE>
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Ultimate Parent shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(a) Maximum Capital Expenditures. Ultimate Parent and its
Subsidiaries on a consolidated basis shall not make Capital Expenditures during
the following periods that exceed in the aggregate the amounts set forth
opposite each of such periods:
Maximum Capital
Period Expenditures per Period
- ------ -----------------------
Fiscal Year ending December 31, 1998........................ $7,000,000
Fiscal Year ending December 31, 1999........................ $6,000,000
Fiscal Year ending December 31, 2000; and................... $5,000,000
each Fiscal Year ending after December 31, 2000........... $5,000,000
; provided, however, that the amount of permitted Capital Expenditures
referenced above will be increased in any period by the positive amount equal to
the lesser of (a) 50% of the amount of permitted Capital Expenditures for the
immediately prior period, and (b) the amount (if any), equal to the difference
obtained by taking the Capital Expenditures limit specified above for the
immediately prior period minus the actual amount of any Capital Expenditures
expended during such prior period (the "Carry Over Amount"), and for purposes of
measuring compliance herewith, the Carry Over Amount shall be deemed to be the
last amount spent on Capital Expenditures in that succeeding year.
(b) Minimum Fixed Charge Coverage Ratio. Ultimate Parent and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below for the indicated period then ended, a Fixed Charge
Coverage Ratio of not less than the following:
1.0 to 1.0 for one (1) Fiscal Quarter ending December 31, 1998;
0.7 to 1.0 for two (2) consecutive Fiscal Quarters ending March 31,
1999;
1.0 to 1.0 for three (3) consecutive Fiscal Quarters ending June 30,
1999;
1.0 to 1.0 for four (4) consecutive Fiscal Quarters ending September
30, 1999;
and
each period of Four (4) consecutive Fiscal Quarters ending on the
last day of each Fiscal Quarter ending after September 30, 1999.
<PAGE>
(c) Minimum Interest Coverage Ratio. Ultimate Parent and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below for the indicated period then ended, an Interest
Coverage Ratio not less than the following:
1.75 to 1.0 for one (1) Fiscal Quarter ending December 31, 1998;
1.25 to 1.0 for the two (2) consecutive Fiscal Quarters ending March 31,
1999;
1.75 to 1.0 for the three (3) consecutive Fiscal Quarters ending June 30,
1999;
1.75 to 1.0 for the four (4) consecutive Fiscal Quarters ending September
30, 1999;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending December
31, 1999;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending March 31,
2000;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending June 30,
2000;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending September
30, 2000; and
2.25 to 1.0 for each period of four (4) consecutive Fiscal Quarters ending
on the last day of each Fiscal Quarter ending after September 30, 2000.
(d) Minimum Excess Availability. Notwithstanding anything to the
contrary in this Agreement, each Borrower shall at all times maintain Net
Borrowing Availability of at least $875,000, and the Canadian Borrowers shall at
all times maintain Net Borrowing Availability (as defined in the Canadian
Facility) under the Canadian Facility of at least $1,750,000.
Unless otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied; provided that, to the extent not required under
GAAP, for the purposes of financial reporting in connection with computation of
the Financial Covenants and the Applicable Margin calculation required under
Section 1.5(a) of this Agreement, amounts expressed in Canadian Dollars shall be
converted to the Equivalent Amount of Dollars, as determined on the date of
delivery of the relevant financial report. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any Accounting Changes (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrowers, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Ultimate Parent and its Subsidiaries' financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made;
provided, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"Accounting Changes" means (A) 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 successor thereto or any agency with similar functions); and (B)
changes in accounting principles concurred in by Borrowers' and Ultimate
Parent's independent chartered or certified public accountants. If Agent,
Borrowers and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been
G-2
<PAGE>
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change. If Agent, Borrowers and Requisite Lenders cannot agree upon
the required amendments within thirty (30) days following the date of
implementation of any Accounting Change, then all Financial Statements delivered
and all calculations of financial covenants and other standards and terms in
accordance with the Agreement and the other Loan Documents shall be prepared,
delivered and made without regard to the underlying Accounting Change.
G-3
<PAGE>
ANNEX H (SECTION 9.9(A))
TO
CREDIT AGREEMENT
WIRE TRANSFER INFORMATION
GE CAPITAL:
H-1
<PAGE>
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: SLM Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7512
with copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Ted S. Waksman, Esq.
Telecopier No.: (212) 310-8007
Telephone No.: (212) 310-8000
and
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7552
(B) If to either Borrower, to Borrower Representative, at
Maska U.S., Inc.
c/o Russell David
3500 De Maisonneuve Blvd. West
Suite 800
Westmount, Quebec
H3Z 3C1
Telecopier No.: (514) 932-6020
Telephone No.: (514) 932-5202
I-1
<PAGE>
with copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Mr. Jim Douglas
Telecopier No.: (212) 735-2000
Telephone No.: (212) 735-3000
(C) Communications with each Lender (other than GE Capital) shall be addressed
to the address of such Lender set forth under its name on the signature
pages of this Agreement, with a copy to Agent and each person to whom
copies of communications with Agent are to be given or served under this
Annex I.
I-2
<PAGE>
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
Lender(s)
---------
Revolving Loan Commitment
(including a Swing Line Commitment
of $3,500,000)
$35,000,000 General Electric Capital Corporation
J-1
EXECUTION COPY
--------------------------------------------------------------
CREDIT AGREEMENT
Made as of November 19, 1998
Between
SPORT MASKA INC. and TROPSPORT ACQUISITIONS INC.
as Borrowers
and
SLM INTERNATIONAL, INC. and
THE OTHER CREDIT PARTIES SIGNATORY HERETO
as Credit Parties
and
THE LENDERS SIGNATORY HERETO FROM TIME TO TIME
as Lenders
and
GENERAL ELECTRIC CAPITAL CANADA INC.
as Agent and Lender
--------------------------------------------------------------
MCMILLAN BINCH
---------------
BARRISTERS & SOLICITORS
<PAGE>
EXECUTION COPY
TABLE OF CONTENTS
RECITALS ...............................................................1
SECTION 1 -- AMOUNT AND TERMS OF CREDIT
1.1 Credit Facilities..............................................2
(1) Revolving Credit Facility.................................2
(2) Swing Line Facility.......................................3
(3) Reliance on Notices; Appointment of
Borrower Representative...................................5
1.2 Letters of Credit..............................................5
1.3 Prepayments....................................................5
(1) Voluntary Prepayments/Cancellation........................5
(2) Mandatory Prepayments.....................................6
(3) Application of Certain Mandatory Prepayments..............7
(4) Application of Prepayments from Insurance
Proceeds..................................................7
(5) No Consent Construed......................................8
1.4 Use of Proceeds................................................8
1.5 Interest and Applicable Margins................................8
(1) Interest Rates and Applicable Margins.....................8
(2) Business Day.............................................10
(3) Calculation of Rates.....................................10
(4) Default Rates............................................10
(5) Conversion/Continuation - BA Rate Loans..................10
(6) Conversion/Continuation - LIBOR Loans....................11
(7) Criminal Rates of Interest...............................12
(8) Interest Act.............................................12
1.6 Eligible Accounts.............................................12
1.7 Eligible Inventory............................................15
1.8 Cash Management Systems.......................................18
1.9 Fees..........................................................18
1.10 Receipt of Payments...........................................18
1.11 Application and Allocation of Payments........................19
1.12 Loan Account and Accounting...................................20
1.13 Indemnity.....................................................20
1.14 Access........................................................21
1.15 Taxes.........................................................22
1.16 Capital Adequacy; Increased Costs; Illegality.................24
1.17 Single Loan...................................................25
1.18 Currency Matters..............................................25
1.19 Joint and Several Obligations.................................25
1.20 Obligations of Canadian Credit Parties........................25
SECTION 2 -- CONDITIONS PRECEDENT
2.1 Conditions to the Initial Loans...............................26
(i)
<PAGE>
EXECUTION COPY
(1) Credit Agreement; Loan Documents.........................26
(2) Repayment of Prior Lender Obligations;
Satisfaction of Outstanding L/Cs.........................26
(3) Approvals................................................26
(4) Opening Availability.....................................26
(5) Payment of Fees..........................................27
(6) Capital Structure; Other Indebtedness; Due
Diligence................................................27
(7) Consummation of Related Transactions.....................27
(8) Escrow Arrangement For Pre-filings of
Certain Hypothecs........................................28
2.2 Further Conditions to Each Loan...............................28
SECTION 3 -- REPRESENTATIONS AND WARRANTIES
3.1 Corporate Existence; Compliance with Law......................29
3.2 Executive Offices.............................................29
3.3 Corporate Power, Authorization, Enforceable Obligations.......29
3.4 Financial Statements, Projections and Other Reports...........30
(1) Financial Statements.....................................30
(2) Pro Forma................................................31
(3) Projections; Operating Plans; Year 2000 Survey...........31
3.5 Material Adverse Effect.......................................31
3.6 Ownership of Property; Liens..................................32
3.7 Labor Matters.................................................32
3.8 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness........................................33
3.9 Government Regulation.........................................33
3.10 Taxes.........................................................33
3.11 Canadian Pension and Benefit Plans; ERISA.....................34
3.12 No Litigation.................................................35
3.13 Brokers.......................................................35
3.14 Intellectual Property.........................................36
3.15 Full Disclosure...............................................36
3.16 Environmental Matters.........................................36
3.17 Insurance.....................................................37
3.18 Deposit and Disbursement Accounts.............................37
3.19 Government Contracts..........................................37
3.20 Customer and Trade Relations..................................38
3.21 Agreements and Other Documents................................38
3.22 Solvency......................................................38
3.23 Reorganization Agreement......................................38
3.24 Status of Ultimate Parent; SHC; WAP; and CCM..................39
3.25 Senior Debt...................................................39
3.26 Leased Premises...............................................39
3.27 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices...........................................40
SECTION 4 -- FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices...........................................40
(ii)
<PAGE>
EXECUTION COPY
SECTION 5 -- AFFIRMATIVE COVENANTS
5.1 Maintenance of Existence and Conduct of Business..............40
5.2 Payment of Obligations........................................41
5.3 Books and Records.............................................41
5.4 Insurance; Damage to or Destruction of Collateral.............41
(1) Maintenance of Insurance.................................41
(2) Additional Insurance.....................................42
(3) Damage to or Destruction of Collateral...................42
5.5 Compliance with Laws..........................................44
5.6 Supplemental Disclosure.......................................45
5.7 Intellectual Property.........................................45
5.8 Environmental Matters.........................................46
5.9 Landlords' Agreements, Mortgagee Agreements and
Bailee Letters................................................47
5.10 Further Assurances............................................47
5.11 Year 2000 Problems............................................48
SECTION 6 -- NEGATIVE COVENANTS
6.1 Amalgamations, Subsidiaries, Etc..............................48
6.2 Investments; Loans and Advances...............................49
6.3 Indebtedness..................................................50
6.4 Employee Loans and Affiliate Transactions.....................52
6.5 Capital Structure and Business................................53
6.6 Guaranteed Indebtedness.......................................53
6.7 Liens.........................................................53
6.8 Sale of Stock and Assets......................................54
6.9 ERISA.........................................................54
6.10 Financial Covenants...........................................54
6.11 Hazardous Materials...........................................54
6.12 Sale-Leasebacks...............................................55
6.13 Cancellation of Indebtedness..................................55
6.14 Restricted Payments...........................................55
6.15 Change of Corporate Name or Location; Change of Fiscal Year...56
6.16 No Impairment of Intercompany Transfers.......................56
6.17 No Speculative Transactions...................................56
6.18 Changes Relating to Other Indebtedness. .....................56
6.19 Credit Parties Other than Borrowers; Inactive
Subsidiaries; CCM.............................................57
6.20 Deposit and Disbursement Accounts.............................57
6.21 Intellectual Property Licences; CCM Shareholder's
Agreement.....................................................58
6.22 Locations Leased From Designated Quebec Landlords and
Taft Corners Associates.......................................58
6.23 Inventory at Warehouse and Distribution Facilities............58
6.24 Manufacturing Facilities; Warehouse and Distribution
Facilities; Offices...........................................59
(iii)
<PAGE>
EXECUTION COPY
SECTION 7 -- TERM
7.1 Termination...................................................59
7.2 Survival of Obligations Upon Termination of
Financing Arrangements........................................59
SECTION 8 -- EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 Events of Default.............................................60
8.2 Remedies......................................................62
8.3 Waivers by Credit Parties.....................................63
SECTION 9 -- ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.................................63
9.2 Appointment of Agent..........................................65
9.3 Agent's Reliance, Etc.........................................66
9.4 GE Capital Canada and Affiliates..............................66
9.5 Lender Credit Decision........................................67
9.6 Indemnification...............................................67
9.7 Successor Agent...............................................67
9.8 Setoff and Sharing of Payments................................68
9.9 Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert............................................69
(1) Advances; Payments.......................................69
(2) Availability of Lender's Pro Rata Share..................70
(3) Return of Payments.......................................70
(4) Non-Funding Lenders......................................70
(5) Dissemination of Information.............................71
(6) Actions in Concert.......................................71
SECTION 10 -- SUCCESSORS AND ASSIGNS
10.1 Successors and Assigns........................................71
SECTION 11 -- MISCELLANEOUS
11.1 Complete Agreement; Modification of Agreement.................72
11.2 Amendments and Waivers........................................72
11.3 Fees and Expenses.............................................74
11.4 No Waiver.....................................................75
11.5 Remedies......................................................75
11.6 Severability..................................................76
11.7 Conflict of Terms.............................................76
11.8 Confidentiality...............................................76
11.9 Governing Law.................................................76
11.10 Notices.......................................................77
11.11 Section Titles................................................77
11.12 Counterparts..................................................78
11.13 Press Releases................................................78
(iv)
<PAGE>
EXECUTION COPY
11.14 Reinstatement.................................................78
11.15 Advice of Counsel.............................................78
11.16 No Strict Construction........................................78
11.17 Dollar References.............................................78
11.18 Judgment Currency.............................................79
11.19 Time of Day...................................................79
11.20 WAIVER OF JURY TRIAL..........................................79
SECTION 12 -- CROSS-GUARANTEE
12.1 Cross-Guarantee...............................................80
12.2 Waivers By Borrowers..........................................81
12.3 Benefit of Guarantee..........................................81
12.4 Subordination of Subrogation, Etc.............................81
12.5 Liability Cumulative..........................................81
12.6 Indemnification and Payment...................................82
12.7 Obligations Not Affected......................................82
12.8 Dealing with Others...........................................83
ANNEXES
Annex A - Definitions
Annex B - Letters of Credit
Annex C - Cash Management Systems
Annex D - Schedule of Additional Closing Documents
Annex E - Financial Statements and Projections - Reporting
Annex F - Collateral Reports
Annex G - Financial Covenants
Annex H - Lenders' Wire Transfer Information
Annex I - Notice Addresses
Annex J - Commitments
EXHIBITS
Exhibit 1.1(1)(a) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(1)(b)(x) - Form of US$ Revolving Note
Exhibit 1.1(1)(b)(y) - Form of Cdn$ Revolving Note
Exhibit 1.1(2)(b)(x) - Form of US$ Swing Line Note
Exhibit 1.1(2)(b)(y) - Form of Cdn$ Swing Line Note
Exhibit 1.5(5) - Form of Notice of Conversion/Continuation - B/A Rate
Exhibit 1.5(6) - Form of Notice of Conversion/Continuation - LIBOR
Exhibit 4.1(2) - Borrowing Base Certificate
Exhibit 9.1(1) - Assignment Agreement
SCHEDULES
Schedule 1.1 - Representative of Agent
Schedule 1.4 - Use and Sources of Funds/Funds Flow Memorandum
(v)
<PAGE>
EXECUTION COPY
Schedule 3.2 - Executive Offices
Schedule 3.4(1) - Financial Statements
Schedule 3.4(2) - Pro Forma
Schedule 3.4(3) - Projections
Schedule 3.6 - Ownership of Property; Liens
Schedule 3.7 - Labour Matters
Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness
Schedule 3.10 - Taxes
Schedule 3.11 - Canadian Pension and Benefit Plans; ERISA
Schedule 3.12 - Litigation
Schedule 3.14 - Intellectual Property
Schedule 3.16 - Environmental Matters
Schedule 3.17 - Insurance
Schedule 3.18 - Deposit and Disbursement Accounts
Schedule 3.19 - Government Contracts
Schedule 3.21 - Agreements and Other Documents
Schedule 3.26 - Leased Premises
Schedule 3.27 - Manufacturing Facilities; Warehouse and
Distribution Facilities; Offices
Schedule 5.1 - Corporate and Business Names
Schedule 6.3 - Indebtedness
Schedule 6.4(1) - Employee Loans and Affiliate Transactions
Schedule 6.7 - Additional Liens
(vi)
<PAGE>
EXECUTION COPY
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of November 19, 1998 among SPORT MASKA INC., a New
Brunswick corporation ("MASKA CANADA") and TROPSPORT ACQUISITIONS INC., a Canada
corporation ("TROPSPORT"), (Maska Canada and Tropsport are sometimes
collectively referred to herein as the "BORROWERS" and individually as a
"BORROWER"); the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL
CANADA INC., a Canada corporation (in its individual capacity, "GE CAPITAL
CANADA"), for itself, as Lender, and as Agent for Lenders, and the other Lenders
signatory hereto from time to time.
RECITALS
A. Borrowers desire that Lenders extend a revolving term credit facility to
Borrowers of up to US$35,000,000 in the aggregate, for the purpose of funding
certain transaction costs and expenses in connection with the Acquisition and
refinancing certain indebtedness of Tropsport and Maska Canada and to provide
(a) working capital financing for Borrowers, and (b) funds for other general
corporate purposes of Borrowers; and for these purposes, Lenders are willing to
make certain loans and other extensions of credit to Borrowers of up to such
amount upon the terms and conditions set forth herein.
B. SLM International, Inc., a Delaware corporation ("ULTIMATE PARENT"), is
willing to guarantee all of the Obligations of each Credit Party to Agent and
Lenders under the Loan Documents (the "ULTIMATE PARENT GUARANTEE").
C. The US Subsidiary Guarantors and the Canadian Subsidiary Guarantor are each
willing to guarantee all of the Obligations of Credit Parties to Agent and
Lenders under the Loan Documents (collectively, the "SUBSIDIARY GUARANTEES").
D. Credit Parties desire to secure all of their Obligations under the Loan
Documents by granting to Agent, for the benefit of Agent and Lenders, and to
Agent and Lenders, as applicable, a security interest (or the equivalent
thereof) in and Lien upon all of their existing and after-acquired personal and
real property, subject to the terms of the Intercreditor Agreement.
E. Capitalized terms used in this Agreement shall have the meanings given to
them in Annex A. All Annexes, Disclosure Schedules, Exhibits and other
attachments (collectively, "APPENDICES") hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together, shall
constitute a single agreement. These Recitals shall be construed as part of the
Agreement.
FOR VALUE RECEIVED, the parties agree as follows:
<PAGE>
EXECUTION COPY
- 2 -
SECTION 1 -- AMOUNT AND TERMS OF CREDIT
1.1 CREDIT FACILITIES.
(1) REVOLVING CREDIT FACILITY
(a) Subject to the terms and conditions hereof, each Revolving Lender agrees to
make available from time to time until the Commitment Termination Date its Pro
Rata Share of Canadian Dollar advances and US Dollar advances (each, a
"REVOLVING CREDIT ADVANCE"). The Pro Rata Share of the Revolving Loan of any
Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment. The obligations of each Revolving Lender hereunder shall be several
and not joint. The aggregate US Dollar Amount of Revolving Credit Advances
outstanding shall not exceed at any time the lesser of (A) the Maximum Amount
and (B) the Aggregate Borrowing Base, in each case less the sum of the US Dollar
Amounts of Letter of Credit Obligations and the Swing Line Loan outstanding at
such time ("BORROWING AVAILABILITY"). Moreover, with reference to either
Borrower, (x) the sum of the Loans outstanding to such Borrower shall not exceed
at any time the Aggregate Borrowing Base less the sum of the Loans outstanding
to the other Borrower and (y) the sum of the Loans denominated in US Dollars and
outstanding to such Borrower shall not exceed at any time Five Million US
Dollars (US$5,000,000) (the "US DOLLAR SUBLIMIT"). Until the Commitment
Termination Date, Borrowers may from time to time borrow, repay and reborrow
under this Section 1.1(1). Each Revolving Credit Advance shall be made on notice
by Borrower Representative on behalf of the applicable Borrower to the
representative of Agent identified on Schedule 1.1 at the address specified
thereon. Those notices must be given no later than (i) 11:00 a.m. (Toronto time)
on the Business Day of the proposed Revolving Credit Advance, in the case of a
Cdn Index Rate Loan or a US Index Rate Loan, (ii) 11:00 a.m. (Toronto time) on
the date which is three (3) Business Days prior to the proposed Revolving Credit
Advance, in the case of a LIBOR Loan and (iii)11:00 a.m. (Toronto time) on the
date which is two (2) Business Days prior to the proposed Revolving Credit
Advance, in the case of a BA Rate Loan. Each such notice (a "NOTICE OF REVOLVING
CREDIT ADVANCE") must be given in writing (by telecopy or overnight courier)
substantially in the form of Exhibit 1.1(1)(a), and shall include the
information required in such Exhibit, as such form may be amended, modified,
supplemented or restated by Agent from time to time in its sole discretion,
acting reasonably. If either Borrower desires to have a Revolving Credit Advance
in Canadian Dollars bear interest by reference to the BA Rate or a Revolving
Credit Advance in US Dollars bear interest by reference to a LIBOR Rate,
Borrower Representative must comply with Sections 1.5(5) or 1.5(6), as
applicable.
(b) Each Borrower shall execute and deliver to each Revolving Lender a US Dollar
promissory note and a Canadian Dollar promissory note to evidence the Revolving
Loan Commitment of that Revolving Lender. Each note shall be in the principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of (x) Exhibit 1.1(1)(b)(x)
in the case of Revolving Loans denominated in US Dollars and (y) Exhibit
1.1(1)(b)(y) in the case of Revolving Loans denominated in Canadian Dollars
(each, a "REVOLVING NOTE" and, collectively, the "REVOLVING NOTES"). Each
<PAGE>
EXECUTION COPY
- 3 -
Revolving Note shall represent the obligation of each Borrower to pay the amount
of each Revolving Lender's Revolving Loan Commitment or, if less, the applicable
Revolving Lender's Pro Rata Share of the aggregate unpaid principal amount of
all Revolving Credit Advances to Borrowers together with interest thereon, as
prescribed in Section 1.5. The entire unpaid balance of the Revolving Loan and
all other non-contingent Obligations shall be the obligation of each Borrower
and shall be immediately due and payable in full for value on the Commitment
Termination Date.
(2) SWING LINE FACILITY
(a) SWING LINE ADVANCES. Agent shall notify the Swing Line Lender upon Agent's
receipt of any Notice of Revolving Credit Advance in respect of a Cdn Index Rate
Loan or a US Index Rate Loan. Subject to the terms and conditions hereof, the
Swing Line Lender may, in its discretion, make available from time to time until
the Commitment Termination Date, Canadian Dollar advances and US Dollar advances
(each, a "SWING LINE ADVANCE") in accordance with any such notice. The aggregate
US Dollar Amount of Swing Line Advances outstanding shall not exceed the lesser
of (A) the Swing Line Commitment and (B) the lesser of the Maximum Amount and
the Aggregate Borrowing Base, in each case, less the outstanding balance of the
Revolving Loan at such time ("SWING LINE AVAILABILITY"). Moreover the Swing Line
Loan outstanding to each Borrower shall not exceed at any time the Aggregate
Borrowing Base less the sum of the Revolving Loan outstanding to such Borrower
plus all Loans outstanding to the other Borrower. Until the Commitment
Termination Date, Borrowers may from time to time borrow, repay and reborrow
under this Section 1.1(2). Each Swing Line Advance shall be made pursuant to a
Notice of Revolving Credit Advance delivered to Agent by Borrower Representative
on behalf of the applicable Borrower in accordance with Section 1.1(1). Those
notices must be given no later than 11:00 a.m. (Toronto time) on the Business
Day of the proposed Swing Line Advance. Notwithstanding any other provision of
this Agreement or the other Loan Documents, the Swing Line Loan shall constitute
a Cdn Index Rate Loan if Swing Line Advances are made in Canadian Dollars and a
US Index Rate Loan if Swing Line Advances are made in US Dollars. Borrowers
shall repay the aggregate outstanding principal amount of the Swing Line Loan
upon demand therefor by Agent in the currency, or proportions of currency, in
which Swing Line Advances were made.
(b) SWING LINE NOTES. Each Borrower shall execute and deliver to the Swing Line
Lender a US Dollar promissory note and a Canadian Dollar promissory note to
evidence the Swing Line Commitment. Each note shall be in the principal amount
of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date
and substantially in the form of (x) Exhibit 1.1(2)(b)(x) in the case of Swing
Line Loans denominated in US Dollars and (y) Exhibit 1.1(2)(b)(y) in the case of
Swing Line Loans denominated in Canadian Dollars (each, a "SWING LINE NOTE" and,
collectively, the "SWING LINE NOTES"). Each Swing Line Note shall represent the
obligation of each Borrower to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances made
to Borrowers together with interest thereon as prescribed in Section 1.5. The
entire unpaid balance of the Swing Line Loan and all other non-contingent
Obligations shall be the obligation of each Borrower and shall be
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immediately due and payable in full for value on the Commitment Termination Date
if not sooner paid in full.
(c) REFUNDING OF SWING LINE LOANS. The Swing Line Lender, at any time and from
time to time in its sole and absolute discretion, but no less frequently than
once weekly, shall on behalf of either Borrower (and each Borrower hereby
irrevocably authorizes the Swing Line Lender to so act on its behalf) request
each Revolving Lender (including the Swing Line Lender) to make a Revolving
Credit Advance to such Borrower in the currency or proportions of currencies in
which Swing Line Advances were made (which shall be a Cdn Index Rate Loan in the
case of Swing Line Advances made in Canadian Dollars and a US Index Rate Loan in
the case of Swing Line Advances made in US Dollars) in an amount equal to such
Revolving Lender's Pro Rata Share of the principal amount of the Swing Line Loan
of such Borrower (the "REFUNDED SWING LINE LOAN") outstanding on the date such
notice is given. Unless any of the events described in Section 8.1(8) or 8.1(9)
shall have occurred (in which event the procedures of Section 1.1(2)(d) shall
apply) and regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a
Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m.
(Toronto time), for value on the Business Day next succeeding the date such
notice is given. The proceeds of such Revolving Credit Advances shall be
immediately paid to the Swing Line Lender and applied to repay the Refunded
Swing Line Loan of the applicable Borrower.
(d) PARTICIPATION IN SWING LINE LOANS. If, prior to refunding a Swing Line Loan
with a Revolving Credit Advance pursuant to Section 1.1(2)(c), one of the events
described in Section 8.1(8) or 8.1(9) shall have occurred, then, subject to the
provisions of Section 1.1(2)(e) below, each Revolving Lender will, on the date
such Revolving Credit Advance was to have been made for the benefit of the
applicable Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan to such Borrower, in the currency,
or proportionately in the currencies, in which such Swing Line Loan was made, in
an amount equal to its Pro Rata Share of such Swing Line Loan. Upon request,
each Revolving Lender will promptly transfer to the Swing Line Lender, for value
that day, the amount of its participation.
(e) REVOLVING LENDERS' OBLIGATIONS UNCONDITIONAL. Each Revolving Lender's
obligation to make Revolving Credit Advances in accordance with Section
1.1(2)(c) and to purchase participating interests in accordance with Section
1.1(2)(d) shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any right of set-off, counterclaim, recoupment,
defense or other right which such Revolving Lender may have against the Swing
Line Lender, either Borrower or any other Credit Party or Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of either Borrower to satisfy the conditions
precedent to borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased or (D) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
If any Revolving Lender does not make available to Agent or the Swing Line
Lender, as applicable, the amount required pursuant to Section 1.1(2)(c) or
1.1(2)(d) as the case may be, the Swing Line Lender
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shall be entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full, in the case of Swing Line Advances made in Canadian
Dollars, at the Bank Rate for the first two Business Days and at the Cdn Index
Rate thereafter and, in the case of Swing Line Advances made in US Dollars, at
the Federal Funds Rate for the first two Business Days and at the US Index Rate
thereafter.
(3) RELIANCE ON NOTICES; APPOINTMENT OF BORROWER REPRESENTATIVE. Agent shall be
entitled to rely upon, and shall be fully protected in relying upon, any Notice
of Revolving Credit Advance, Notice of Conversion/Continuation-BA Rate, Notice
of Conversion/Continuation- LIBOR, or similar notice believed by Agent to be
genuine. Agent may assume that each Person executing and delivering such a
notice was duly authorized, unless the responsible individual acting thereon for
Agent has actual knowledge to the contrary. Each Borrower hereby designates
Borrower Representative as its representative and agent and mandatary on its
behalf for the purposes of issuing Notices of Revolving Credit Advance, Notices
of Conversion/Continuation - BA Rate and Notices of Conversion/Continuation -
LIBOR, giving instructions with respect to the disbursement of the proceeds of
the Loans, selecting interest rate options, requesting Letters of Credit, giving
and receiving all other notices and consents hereunder or under any of the other
Loan Documents and taking all other actions (including in respect of compliance
with covenants) on behalf of either Borrower or both Borrowers under the Loan
Documents. Borrower Representative hereby accepts such appointment. Agent and
each Lender may regard any notice or other communication pursuant to any Loan
Document from Borrower Representative as a notice or communication from both
Borrowers, and may give any notice or communication required or permitted to be
given to either Borrower or both Borrowers hereunder to Borrower Representative
on behalf of such Borrower or Borrowers. Each Borrower agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by Borrower Representative shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as if the same had been made directly
by such Borrower.
1.2 LETTERS OF CREDIT. Subject to and in accordance with the terms and
conditions contained herein and in Annex B, Borrower Representative, on behalf
of either Borrower, shall have the right to request, and Revolving Lenders agree
to incur, or purchase participations in, Letter of Credit Obligations in respect
of such Borrower.
1.3 PREPAYMENTS.
(1) VOLUNTARY PREPAYMENTS/CANCELLATION. Borrowers may at any time on at least
five (5) Business Days' prior written notice by Borrower Representative to Agent
terminate the Revolving Loan Commitment; provided, that upon such termination,
all Loans and other Obligations shall be immediately due and payable in full.
Any such voluntary prepayment and any such termination of the Revolving Loan
Commitment prior to the first anniversary of the Closing Date, must be
accompanied by the payment of the fee required by Section 1.9(3) plus the
payment of any BA Rate or LIBOR Rate funding breakage costs in accordance with
Section
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1.13(2). Upon any such prepayment and termination of the Revolving Loan
Commitment, each Borrower's right to request Revolving Credit Advances, or
request that Letter of Credit Obligations be incurred on its behalf, or request
Swing Line Advances, shall simultaneously be terminated.
(2) MANDATORY PREPAYMENTS.
(a) If on the due date for delivery of a Borrowing Base Certificate, or on any
other date if requested by Agent, solely as a result of exchange rate
fluctuations, the outstanding balance of the Revolving Loan plus the Swing Line
Loan exceeds the lesser of (A) the Maximum Amount and (B) the Aggregate
Borrowing Base on such date (such lesser amount, the "EXCESS THRESHOLD AMOUNT")
by an amount greater than five percent (5%) of such Excess Threshold Amount and
no Default or Event of Default has occurred and is continuing, then Borrowers
shall, on such date, repay the aggregate outstanding Revolving Credit Advances
to the extent required to eliminate such excess. If at any time, other than in
the circumstances in which the immediately preceding sentence applies, the sum
of the outstanding balance of the Revolving Loan plus the Swing Line Loan
exceeds the Excess Threshold Amount, Borrowers shall immediately repay the
aggregate outstanding Revolving Credit Advances to the extent required to
eliminate such excess. If any such excess remains after repayment in full of the
aggregate outstanding Revolving Credit Advances, Borrowers shall provide cash
collateral for the Letter of Credit Obligations in the manner set forth in Annex
B in an amount equal to such excess. Moreover, if the outstanding balance of the
Loans of either Borrower denominated in US Dollars exceeds the US Dollar
Sublimit at any time, Borrowers shall immediately repay Revolving Credit
Advances to the extent required to eliminate such excess (and, if necessary,
shall provide cash collateral for Letter of Credit Obligations as described
above).
(b) Immediately upon receipt by any Credit Party of cash proceeds of any asset
disposition (including condemnation proceeds, but excluding proceeds of asset
dispositions permitted by Section 6.8(1)) or any sale of Stock of any Subsidiary
of any Credit Party, Borrowers shall, subject to the Intercreditor Agreement,
prepay the Loans (in the case of proceeds pertaining to any Credit Party other
than Borrowers, to be applied ratably to all of the Loans owing by each
Borrower) in an amount equal to all (except as set forth in the last sentence of
this clause (b)) such cash proceeds, net of (A) commissions and other reasonable
and customary transaction costs, fees, discounts and expenses properly
attributable to such transaction and payable by a Credit Party in connection
therewith (in each case, paid to non-Affiliates) including, without limitation,
reasonable and customary fees payable to legal counsel, accountants and other
professionals, (B) transfer taxes, (C) amounts payable to holders of senior
Liens with respect to any asset subject to such disposition (to the extent such
Liens constitute Permitted Encumbrances; except that, with respect to any amount
payable to the Caisse Secured Parties, such amount may only be paid to the
Caisse Secured Parties if the Caisse Secured Parties have given the requisite
notice pursuant to the Intercreditor Agreement), if any, (D) an appropriate
reserve for income taxes in accordance with GAAP in connection therewith, and
(E) such other reserves as Agent may permit from time to time, acting
reasonably, including, for indemnification obligations or amounts held in
escrow. If Ultimate Parent shall receive any such
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proceeds, Borrowers shall prepay the Loans in an amount equal to the net amount,
as calculated above, multiplied by a fraction equal to the aggregate outstanding
amount of the Loans divided by the sum of the aggregate outstanding amount of
the Loans plus the revolving loans, swing line loans and letter of credit
obligations under the US Facility. Any such prepayment shall be applied in
accordance with clause (3) below.
(c) If Ultimate Parent issues Stock, no later than the Business Day following
the date of receipt of the proceeds thereof, Borrowers shall prepay the Loans,
to be applied ratably to all of the Loans owing by each Borrower, in an amount
equal to all such proceeds, net of underwriting discounts and commissions and
other reasonable costs paid to non-Affiliates in connection therewith,
multiplied by a fraction equal to the aggregate outstanding amount of the Loans
divided by the sum of the aggregate outstanding amount of the Loans plus the
revolving loans, swing line loans and letter of credit obligations under the US
Facility. Any such prepayment shall be applied in accordance with clause (3)
below.
(d) In the case of receipt by any Credit Party (other than Borrowers) of
proceeds as described in clauses (b) and (c) above, such Credit Party shall
distribute or contribute such proceeds to Borrowers to fund the prepayment
required under clause (b) or (c), as applicable.
(3) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any prepayments made by either
Borrower pursuant to Section 1.3(2)(b) or 1.3(2)(c) above shall be applied as
follows: first, to Fees and reimbursable expenses of Agent then due and payable
pursuant to any of the Loan Documents; second, to interest then due and payable
on such Borrower's Swing Line Loan; third, to the principal balance of such
Borrower's Swing Line Loan until the same shall have been repaid in full;
fourth, to interest then due and payable on such Borrower's Revolving Credit
Advances; fifth, to the principal balance of the Revolving Credit Advances
outstanding to such Borrower in such order as determined by Agent until the same
shall have been paid in full; sixth, to provide cash collateral for any Letter
of Credit Obligations of such Borrower in the manner set forth in Annex B, until
all such Letter of Credit Obligations have been fully cash collateralized in the
manner set forth in Annex B; seventh, to interest then due and payable on the
Swing Line Loan of the other Borrower; eighth, to the principal balance of the
Swing Line Loan outstanding to the other Borrower, until the same shall have
been repaid in full; ninth, to interest then due and payable on the Revolving
Credit Advances outstanding to the other Borrower; tenth, to the principal
balance of the Revolving Credit Advances made to the other Borrower, until the
same shall have been paid in full, and last to provide cash collateral for any
Letter of Credit Obligations of the other Borrower in the manner set forth in
Annex B, until all such Letter of Credit Obligations have been fully cash
collateralized. Neither the Revolving Loan Commitment nor the Swing Line
Commitment shall be permanently reduced by the amount of any such prepayments.
(4) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS. Prepayments from
insurance proceeds in accordance with Section 5.4(3) shall be applied, subject
to the terms of the Intercreditor Agreement, as follows: first, to the Swing
Line Loans, and, second, to the Revolving Credit Advances of the Borrowers in
such order as determined by Agent. Neither the
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Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments.
(5) NO CONSENT CONSTRUED. Nothing in this Section 1.3 shall be construed to
constitute Agent's or any Lender's consent to any transaction referred to in
Sections 1.3(2)(b) and 1.3(2)(c) above which is not permitted by other
provisions of this Agreement or the other Loan Documents.
1.4 USE OF PROCEEDS. Borrowers shall utilize the proceeds of the Revolving Loan
and the Swing Line Loan made on the Closing Date solely for certain transaction
costs and expenses in connection with the Acquisition and for the Refinancing in
respect of the indebtedness of Tropsport and Maska Canada, and Loans made after
the Closing Date will be used for the financing of Borrowers' ordinary working
capital and general corporate needs (but excluding, in any event, the making of
any Restricted Payment not specifically permitted by Section 6.14). Disclosure
Schedule 1.4 contains a description of Borrowers' sources and uses of funds as
of the Closing Date, including Loans and Letter of Credit Obligations to be made
or incurred on that date, and a funds flow memorandum detailing how funds from
each source are to be transferred to particular uses.
1.5 INTEREST AND APPLICABLE MARGINS.
(1) INTEREST RATES AND APPLICABLE MARGINS. Borrowers shall pay interest to
Agent, for the ratable benefit of Lenders in accordance with the various Loans
being made by each Lender, in arrears on each applicable Interest Payment Date,
at the following rates: (A) with respect to the Revolving Credit Advances in
Canadian Dollars, the Cdn Index Rate plus the Applicable Cdn Index Margin per
annum or, at the election of Borrower Representative, the applicable BA Rate
plus the Applicable BA Rate Margin per annum, based on the aggregate Revolving
Credit Advances in Canadian Dollars outstanding from time to time; (B) with
respect to Revolving Credit Advances in US Dollars, the US Index Rate plus the
Applicable US Index Margin per annum, or at the election of Borrower
Representative, the applicable LIBOR Rate plus the Applicable LIBOR Margin per
annum, based on the aggregate Revolving Credit Advances outstanding from time to
time; (C) with respect to the Swing Line Loan in Canadian Dollars, the Cdn Index
Rate plus the Applicable Cdn Index Margin per annum; and (D) with respect to the
Swing Line Loan in US Dollars, the US Index Rate plus the Applicable US Index
Margin per annum.
The Applicable Cdn Index Margin, Applicable US Index Margin, Applicable BA Rate
Margin and Applicable LIBOR Margin will be 0.75%, 0.50%, 2.00% and 2.00% per
annum, respectively, as of the Closing Date. The Applicable Margins will be
adjusted (up or down) prospectively on a quarterly basis as determined by
Ultimate Parent's consolidated financial performance for the four (4) most
recently ended Fiscal Quarters as described below, commencing with the date
specified below upon delivery to Lenders and Agent of Ultimate Parent's
quarterly Financial Statements for the third Fiscal Quarter ending September 30,
1999. Adjustments in Applicable Margins will be determined by reference to the
following grids:
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IF OPERATING CASH LEVEL OF
FLOW RATIO IS: APPLICABLE MARGINS:
-------------- -------------------
greater than 3.25 Level I
greater than 2.50, but less than/equal to 3.25 Level II
greater than 2.00, but less than/equal to 2.50 Level III
greater than 1.50, but less than/equal to 2.00 Level IV
less than/equal to 1.5 Level V
<TABLE>
<CAPTION>
APPLICABLE MARGINS
------------------
LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V
------- -------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Applicable Cdn Index Margin 0.50% 0.50% 0.75% 1.00% 1.25%
Applicable US Index Margin 0.25% 0.25% 0.50% 0.75% 1.00%
Applicable BA Rate Margin 1.50% 1.75% 2.00% 2.25% 2.50%
Applicable LIBOR Margin 1.50% 1.75% 2.00% 2.25% 2.50%
</TABLE>
All such adjustments in the Applicable Margins after the third Fiscal
Quarter ending September 30, 1999 will be implemented quarterly on the basis of
Ultimate Parent's consolidated financial performance for the then most recently
ended four (4) Fiscal Quarters as evidenced by the unaudited or annual audited
(as applicable) Financial Statements of Ultimate Parent evidencing the need for
an adjustment. If such Financial Statements are delivered to Lenders and Agent
on or before the fifth Business Day following the due date for delivery of such
Financial Statements, such adjustment shall be made (a) retroactively as of the
first day of the month in which such statements are delivered, with respect to
interest on Cdn Index Rate Loans and US Index Rate Loans (unless such Financial
Statements are delivered on or after the fifth day preceding the last day of a
calendar month, in which case, clause (b) shall apply) and Agent shall
retroactively adjust such Loan Account balances accordingly, and (b)
prospectively, with respect to interest on BA Rate Loans and LIBOR Loans, and
with respect to interest on Cdn Index Rate Loans and US Index Rate Loans in the
circumstances in which clause (a) does not apply, as of the fifth Business Day
following delivery of such Financial Statements. Concurrently with the delivery
of those Financial Statements, Borrower Representative shall deliver to Agent
and Lenders a certificate, signed by the Senior Vice-President, Finance of
Ultimate Parent, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins. Failure to deliver
such Financial Statements within five (5) Business Days following the due date
for delivery thereof shall, in addition to any other remedy provided for in this
Agreement, result in an increase in the Applicable Margins to the highest level
set forth in the foregoing grid until the first day of the first calendar month
following the delivery of those Financial Statements demonstrating that such an
increase is not required. If a Default or an
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Event of Default shall have occurred or be continuing at the time any reduction
in the Applicable Margins is to be implemented, that reduction shall be deferred
until the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
(2) BUSINESS DAY. Whenever any payment to be made hereunder or under any other
Loan Document shall be stated to be due and payable, or whenever the last day of
any BA Period or LIBOR Period would otherwise occur, on a day which is not a
Business Day (or a LIBOR Business Day, in the case of a LIBOR Period), such
payment shall be made, and the last day of such BA Period or LIBOR Period, as
applicable, shall occur, on the next succeeding Business Day (or the next
succeeding LIBOR Business Day in the case of a LIBOR Period), except as set
forth in the definitions of LIBOR Period or BA Period, as applicable, and such
extension of time shall in such case be included in computing interest on such
payment.
(3) CALCULATION OF RATES. All computations of Fees calculated on a per annum
basis and interest shall be made by Agent on the basis of a three hundred and
sixty (360) day year, in each case for the actual number of days occurring in
the period for which such interest and Fees are payable. The Cdn Index Rate and
the US Index Rate shall each be determined each day based upon the Cdn Index
Rate or US Index Rate, as applicable, as in effect each day. Each determination
by Agent of an interest rate and Fees hereunder shall be conclusive, absent
manifest error.
(4) DEFAULT RATES. Upon a default by a Borrower in the payment of interest or
any other amount (other than principal) due under this Agreement or any of the
other Loan Documents to which such Borrower is a party, at the election of Agent
(or upon the written request of Requisite Lenders) confirmed by written notice
from Agent to Borrower Representative, such Borrower shall pay interest on such
overdue amount, both before and after judgment, at a rate per annum equal to (a)
the rate of interest payable under this Section 1.5 on the principal amount to
which such overdue interest relates, in the case of overdue interest, (b) the
Cdn Index Rate plus two percent (2.00%), in the case of all such other overdue
amounts denominated in Canadian Dollars, and (c) the US Index Rate plus two
percent (2.00%), in the case of all such other overdue amounts denominated in US
Dollars (all of which other overdue amounts, for greater certainty, shall not
include overdue principal or interest in any case), in each case, calculated on
a daily basis from the date such amount becomes overdue for so long as such
amount remains overdue and on the basis of the actual number of days elapsed in
a 360 day year. Such interest shall be payable upon demand by Agent. From and
after the occurrence of any Event of Default that is continuing under Section
8.1(8) or 8.1(9)or so long as any other Event of Default shall have occurred and
be continuing and at the election of Agent (or upon the written request of
Requisite Lenders) confirmed by written notice from Agent to Borrower
Representative, the Letter of Credit Fee shall be increased by two percent
(2.00%) per annum.
(5) CONVERSION/CONTINUATION - BA RATE LOANS. So long as no Default or Event of
Default shall have occurred and be continuing, and subject to the additional
conditions precedent set forth in Section 2.2, Borrower Representative shall
have the option to (a) request that any Revolving Credit Advances in Canadian
Dollars be made as a BA Rate Loan, (b) convert at any
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time all or any part of outstanding Loans (other than the Swing Line Loan) from
Cdn Index Rate Loans to BA Rate Loans, (c) convert any BA Rate Loan to a Cdn
Index Rate Loan, subject to payment of BA Rate breakage costs in accordance with
Section 1.13(2) if such conversion is made prior to the expiration of the BA
Period applicable thereto, or (d) continue all or any portion of any BA Rate
Loan as a BA Rate Loan upon the expiration of the applicable BA Period and the
succeeding BA Period of that continued Loan shall commence on the last day of
the BA Period of the Loan to be continued. Any Loan to be made or continued as,
or converted into, a BA Rate Loan must be in a minimum amount of C$1,000,000 and
integral multiples of C$250,000 in excess of such amount. Any such election must
be made by 11:00 a.m. (Toronto time) on the second (2nd) Business Day prior to
(A) the date of any proposed Revolving Credit Advance which is to bear interest
at the BA Rate, (B) the end of each BA Period with respect to any BA Rate Loan
to be continued as such, or (C) the date on which Borrower Representative wishes
to convert any Cdn Index Rate Loan to a BA Rate Loan for a BA Period designated
by Borrower Representative in such election. If no election is received with
respect to a BA Rate Loan by 11:00 a.m. (Toronto time) on the second (2nd)
Business Day prior to the end of the BA Period with respect thereto (or if a
Default or an Event of Default shall have occurred and be continuing or if the
additional conditions precedent set forth in Section 2.2 shall not have been
satisfied), that BA Rate Loan shall be converted to a Cdn Index Rate Loan at the
end of its BA Period. Borrower Representative must make such election by notice
to Agent in writing, by telecopy or overnight courier. In the case of any
conversion or continuation, such election must be made pursuant to a written
notice (a "NOTICE OF CONVERSION/CONTINUATION - BA RATE") in the form of Exhibit
1.5(5).
(6) CONVERSION/CONTINUATION - LIBOR LOANS. So long as no Default or Event of
Default shall have occurred and be continuing, and subject to the additional
conditions precedent set forth in Section 2.2, Borrower Representative shall
have the option to (a) request that any Revolving Credit Advances in US Dollars
be made as a LIBOR Loan, (b) convert at any time all or any part of outstanding
Loans (other than the Swing Line Loan) from US Index Rate Loans to LIBOR Loans,
(c) convert any LIBOR Loan to a US Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(2) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or (d) continue
all or any portion of any LIBOR Loan as a LIBOR Loan upon the expiration of the
applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan
shall commence on the last day of the LIBOR Period of the Loan to be continued.
Any Loan to be made or continued as, or converted into, a LIBOR Loan must be in
a minimum amount of US$1,000,000 and integral multiples of US$250,000 in excess
of such amount. Any such election must be made by 11:00 a.m. (Toronto time) on
the third (3rd) Business Day prior to (A) the date of any proposed Revolving
Credit Advance which is to bear interest at the LIBOR Rate, (B) the end of each
LIBOR Period with respect to any LIBOR Loan to be continued as such, or (C) the
date on which Borrower Representative wishes to convert any US Index Rate Loan
to a LIBOR Loan for a LIBOR Period designated by Borrower Representative in such
election. If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(Toronto time) on the third (3rd) Business Day prior to the end of the LIBOR
Period with respect thereto (or if a Default or an Event of Default shall have
occurred and be continuing or if the additional conditions precedent set forth
in Section 2.2 shall
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not have been satisfied), that LIBOR Loan shall be converted to a US Index Rate
Loan at the end of its LIBOR Period. Borrower Representative must make such
election by notice to Agent in writing, by telecopy or overnight courier. In the
case of any conversion or continuation, such election must be made pursuant to a
written notice (a "NOTICE OF CONVERSION/CONTINUATION - LIBOR") in the form of
Exhibit 1.5(6).
(7) CRIMINAL RATES OF INTEREST. If any provision of this Agreement or any of the
other Loan Documents would obligate either Borrower to make any payment of
interest or other amount payable to any Lender in an amount or calculated at a
rate which would be prohibited by law or would result in a receipt by that
Lender of interest at a criminal rate (as such terms are construed under the
Criminal Code (Canada)) then, notwithstanding such provision, such amount or
rate shall be deemed to have been adjusted with retroactive effect to the
maximum amount or rate of interest, as the case may be, as would not be so
prohibited by law or so result in a receipt by that Lender of interest at a
criminal rate, such adjustment to be effected, to the extent necessary, as
follows: (a) firstly, by reducing the amount or rate of interest required to be
paid to the affected Lender under this Section 1.5; and (b) thereafter, by
reducing any fees, commissions, premiums and other amounts required to be paid
to the affected Lender which would constitute interest for purposes of Section
347 of the Criminal Code (Canada). Notwithstanding the foregoing, and after
giving effect to all adjustments contemplated thereby, if any Lender shall have
received an amount in excess of the maximum permitted by Section 347 of the
Criminal Code (Canada), then Borrower Representative, on behalf of the Borrower
making such payment, shall be entitled, by notice in writing to the affected
Lender, to obtain reimbursement from that Lender in an amount equal to such
excess, and pending such reimbursement, such amount shall be deemed to be an
amount payable by that Lender to that Borrower. Any amount or rate of interest
referred to in this Section 1.5(7) shall be determined in accordance with
generally accepted actuarial practices and principles as an effective annual
rate of interest over the term that any Loan remains outstanding on the
assumption that any charges, fees or expenses that fall within the meaning of
"INTEREST" (as defined in the Criminal Code (Canada)) shall, if they relate to a
specific period of time, be pro-rated over that period of time and otherwise be
pro-rated over the period from the Closing Date to the Termination Date and, in
the event of a dispute, a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by Agent shall be conclusive for the purposes of such
determination.
(8) INTEREST ACT. For purposes of disclosure pursuant to the Interest Act
(Canada), the annual rates of interest or fees to which the rates of interest or
fees provided in this Agreement and the other Loan Documents (and stated herein
or therein, as applicable, to be computed on the basis of a 360 day year or any
other period of time less than a calendar year) are equivalent are the rates so
determined multiplied by the actual number of days in the applicable calendar
year and divided by 360 or such other period of time, respectively.
1.6 ELIGIBLE ACCOUNTS. Based on the most recent Borrowing Base Certificate
delivered by each Borrower to Agent and on other information available to Agent,
Agent shall in its reasonable credit judgment determine which Accounts of each
Borrower shall be "ELIGIBLE ACCOUNTS" for purposes of this Agreement. In
determining whether a particular Account of
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either Borrower constitutes an Eligible Account, Agent shall not include any
such Account to which any of the exclusionary criteria set forth below applies.
Agent reserves the right, at any time and from time to time after the Closing
Date, upon prior written notice (which, if given by telecopier only, shall be
sufficient notwithstanding Section 11.10) to Borrower Representative (provided
that such notice shall not in any way limit Agent's discretion under this
Section 1.6), to adjust any such criteria or establish and to modify Reserves,
in its reasonable credit judgment, including, without limitation, based on
changes, following the Closing Date, in the collectibility of Accounts and Prior
Claims, subject to the approval of Supermajority Revolving Lenders in the case
of adjustments or modifications of Reserves which have the effect of making more
credit available. Eligible Accounts shall not include any Account of either
Borrower:
(1) which does not arise from the sale of goods or the performance of
services by such Borrower in the ordinary course of its business;
(2) upon which (a) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfilment of any condition
whatsoever or (b) as to which such Borrower is not able to bring
suit or otherwise enforce its remedies against the Account Debtor
through judicial process, or (c) if the Account represents a
progress billing consisting of an invoice for goods sold or used or
services rendered pursuant to a contract under which the Account
Debtor's obligation to pay that invoice is subject to such
Borrower's completion of further performance under such contract or
is subject to the equitable lien of a surety bond issuer;
(3) in the event that any defense, counterclaim, set-off or dispute is
asserted as to such Account;
(4) that is not a true and correct statement of bona fide indebtedness
incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(5) with respect to which an invoice or other statement of account,
acceptable to Agent in form and substance, acting reasonably, has
not been sent to the applicable Account Debtor;
(6) that (a) is not owned by such Borrower or (b) is subject to any
right, claim, security interest (or applicable equivalent) or other
interest of any other Person, other than (A) Liens in favour of
Agent, on behalf of itself and Lenders, or in favour of Agent and
Lenders, as appropriate, (B) the Term Loan Liens and the US Facility
Liens, and (C) Prior Claims that are unregistered and otherwise
unperfected and that secure amounts that are not yet due and
payable;
(7) that arises from a sale or performance of services to any director,
officer, other employee or Affiliate of any Credit Party, or to any
entity which has any common officer or director with any Credit
Party;
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(8) that is the obligation of an Account Debtor that is the Canadian
Government (Her Majesty the Queen in Right of Canada) or a political
subdivision thereof, or any province or territory, or any
municipality or department, agency or instrumentality thereof, or
that is the United States government or a political subdivision
thereof, or any state or municipality or department, agency or
instrumentality thereof, unless Agent, in its sole discretion, has
agreed to the contrary in writing, the Account is assignable by way
of security and such Borrower, if necessary or desirable, has
complied with the Financial Administration Act (Canada) and any
amendments thereto or the Federal Assignment of Claims Act of 1940
(United States), and any amendments thereto, or any applicable
provincial or state statute or municipal ordinance of similar
purpose and effect, with respect to such obligation;
(9) that is the obligation of an Account Debtor located in a foreign
country other than the United States of America unless payment
thereof is assured by a letter of credit assigned and delivered to
Agent, satisfactory to Agent as to form, amount and issuer;
(10) to the extent such Borrower or any Subsidiary thereof is liable for
goods sold or services rendered by the applicable Account Debtor to
such Borrower or any Subsidiary thereof but only to the extent of
the potential offset;
(11) that arises with respect to goods which are delivered on a
bill-and-hold, cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the
Account Debtor is or may be conditional;
(12) that is in default; provided, that, without limiting the generality
of the foregoing, an Account shall be deemed in default upon the
occurrence of any of the following:
(a) it is not paid within the earlier of: sixty (60) days
following its due date with respect to Accounts due ninety
(90) days from the date of the original invoice or thirty (30)
days following the due date with respect to Accounts with
dating terms,
(b) if any Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come
due,
(c) if any assignment or petition is filed by or against any
Account Debtor obligated upon such Account under any
Insolvency Laws, or
(d) if an Account is not due within 210 days of the date of the
most recent Borrowing Base Certificate which has been
delivered to Agent;
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(13) which is the obligation of an Account Debtor if fifty percent (50%)
or more of the dollar amount of all Accounts owing by that Account
Debtor are ineligible under the other criteria set forth in this
Section 1.6;
(14) as to which Agent, on behalf of itself and Lenders, does not have
therein a first priority perfected Lien, or, Agent and Lenders do
not have therein first priority perfected Liens, as appropriate;
(15) as to which any of the representations or warranties pertaining to
Accounts set forth in any of the Loan Documents is untrue;
(16) to the extent such Account is evidenced by a judgment, Instrument or
Chattel Paper;
(17) to the extent such Account exceeds any credit limit established by
Agent for the applicable Account Debtor, in its reasonable
discretion, following prior notice of such limit by Agent to
Borrower Representative;
(18) to the extent that such Account, together with all other Accounts
owing by such Account Debtor and its Affiliates as of any date of
determination exceed ten percent (10%) of all Eligible Accounts
except for Accounts of the following specified Account Debtors:
Canadian Tire Corp. Limited, Marchand Unis Inc., Sports Authority
Inc., Wal-Mart Stores, Forzani Group Ltd., Sears Roebuck & Co., and
Sports Distributor, or such other Account Debtors as may from time
to time be specified by Borrowers and approved by Agent, in its
reasonable credit judgment;
(19) which is payable in any currency other than Canadian Dollars or US
Dollars; or
(20) which is unacceptable to Agent in its reasonable credit judgment.
For the purpose of valuing (a) each Borrower's Borrowing Base in US Dollars,
such Borrower's Eligible Accounts denominated in Canadian Dollars shall be
converted into the Equivalent Amount thereof in US Dollars and (b) each
Borrower's Borrowing Base in Canadian Dollars, such Borrower's Eligible Accounts
denominated in US Dollars shall be converted into the Equivalent Amount thereof
in Canadian Dollars, in each case, as determined on the date of delivery of the
relevant Borrowing Base Certificate unless Agent has notified a Borrower that,
in light of recent or expected currency fluctuations, the conversion shall be
made on a more current basis.
1.7 ELIGIBLE INVENTORY. Based on the most recent Borrowing Base Certificate
delivered by each Borrower to Agent and on other information available to Agent,
Agent shall in its reasonable credit judgment determine which Inventory of each
Borrower shall be "ELIGIBLE INVENTORY" for purposes of this Agreement. In
determining whether any particular Inventory of
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either Borrower constitutes Eligible Inventory, Agent shall not include any such
Inventory to which any of the exclusionary criteria set forth below applies.
Agent reserves the right, at any time and from time to time after the Closing
Date, upon prior written notice (which, if given by telecopier only, shall be
sufficient notwithstanding Section 11.10) to Borrower Representative (provided
that such notice shall not in any way limit Agent's discretion under this
Section 1.7), to adjust any such criteria or establish and to modify Reserves,
in its reasonable credit judgment, including without limitation, based on its
determination that any Inventory is excess or having regard for the existence of
Prior Claims (including the rights of unpaid suppliers under Section 81.1 of the
Bankruptcy and Insolvency Act (Canada)), subject to the approval of
Supermajority Revolving Lenders in the case of adjustments or modification of
Reserves which have the effect of making more credit available. Eligible
Inventory shall not include any Inventory of either Borrower that:
(1) is not owned by such Borrower free and clear of all Liens and rights
of any other Person (including the rights of a purchaser that has
made progress payments and the rights of a surety that has issued a
bond to assure such Borrower's performance with respect to that
Inventory), except (a) the Liens in favour of Agent, on behalf of
itself and Lenders, or in favour of Agent and Lenders, as
applicable, (b) the Term Loan Liens and the US Facility Liens, and
(c) Prior Claims that are unregistered and otherwise unperfected and
that secure amounts that are not yet due and payable;
(2) is (a) not located on premises owned by such Borrower unless (A)
stored with a bailee, warehouseman or similar Person or (B) located
on premises leased and operated by Borrowers and, in the case of
clauses (A) and (B), (i) a satisfactory bailee letter or landlord
waiver, as the case may be, for such premises or storage location
has been delivered to Agent or (ii) Reserves satisfactory to Agent,
applying its reasonable credit judgment, have been established with
respect thereto, or (b) located at any site if the aggregate book
value of Inventory at any such location is less than C$100,000 or
the Equivalent Amount thereof, or (c) not located in Ontario or
Quebec;
(3) is placed on consignment or is in transit unless, if in transit, (A)
the aggregate book value of such Inventory in transit for both
Borrowers does not exceed US$500,000 or the Equivalent Amount
thereof, (B) such Inventory is in transit between locations in
Ontario or Quebec, and (C) such Inventory is covered by
non-negotiable documents of title held by such Borrower or
negotiable documents of title that meet the eligibility criteria
contained in clause (4) below;
(4) is covered by a negotiable document of title, unless such document
has been delivered to Agent with all necessary endorsements, free
and clear of all Liens except (a) the Liens in favour of Agent, on
behalf of itself and Lenders, or in favour of Agent and Lenders, as
appropriate, and (b) the Term Loan Liens and the US Facility Liens;
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(5) in Agent's reasonable determination, is unsalable, shopworn, seconds
or damaged;
(6) consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement
parts (other than replacement parts held for sale in the ordinary
course of business);
(7) consists of goods which have been returned by the buyer and are not
being held for resale;
(8) is not of a type held for sale in the ordinary course of such
Borrower's business;
(9) as to which Agent, on behalf of itself and Lenders, does not have
therein a first priority perfected Lien, or, Agent and Lenders do
not have therein first priority perfected Liens, as appropriate;
(10) as to which any of the representations or warranties pertaining to
Inventory set forth in this Agreement or any other Loan Document is
untrue;
(11) consists of any costs associated with "freight-in" charges;
(12) consists of Hazardous Materials or goods that can be transported or
sold only with licenses that are not readily available;
(13) is not covered by casualty insurance acceptable to Agent;
(14) is subject to a License from a Person (other than a Credit Party)
which could restrict Agent, Lenders and/or their agents from
exercising their rights and remedies in respect of such Inventory
and Agent does not hold a Consent and Acknowledgement Respecting
Intellectual Property duly executed by such Person substantially in
the form of the Consents and Acknowledgements Respecting
Intellectual Property executed by the European Subsidiaries on or
before the Closing Date, and otherwise in form and substance
satisfactory to Agent, acting reasonably;
(15) is Inventory that is associated with or related to Intellectual
Property in respect of which any Person claims that the use of that
Intellectual Property interferes with or infringes upon such
Person's rights therein; or
(16) is otherwise unacceptable to Agent in its reasonable credit
judgment.
For the purpose of valuing (a) each Borrower's Borrowing Base in US Dollars,
such Borrower's Eligible Inventory denominated in Canadian Dollars shall be
converted into the Equivalent Amount thereof in US Dollars and (b) each
Borrower's Borrowing Base in Canadian Dollars, such Borrower's Eligible
Inventory denominated in US Dollars shall be converted into the
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Equivalent Amount thereof in Canadian Dollars, in each case, as determined on
the date of delivery of the relevant Borrowing Base Certificate unless Agent has
notified a Borrower that, in light of recent or expected currency fluctuations,
the conversion shall be made on a more current basis.
1.8 CASH MANAGEMENT SYSTEMS. On or prior to the Closing Date, Borrowers will
establish and will maintain until the Termination Date, the cash management
systems described in Annex C (the "CASH MANAGEMENT SYSTEMS").
1.9 FEES.
(1) Borrowers shall pay to GE Capital Canada, individually, the Fees specified
in that certain fee letter dated as of October 6, 1998 between Ultimate Parent,
Maska Canada, GE Capital Canada and others, as supplemented by the supplemental
fee letter dated as of the Closing Date between Credit Parties, GE Capital
Canada and GE Capital (collectively, as amended, supplemented, modified or
restated from time to time, the "GE CAPITAL FEE LETTER"), at the times specified
for payment therein.
(2) As additional compensation for Revolving Lenders, Borrowers agree to pay to
Agent, for the ratable benefit of Revolving Lenders, in arrears, on the first
Business Day of each month prior to the Commitment Termination Date and on the
Commitment Termination Date, a fee for Borrowers' non-use of available funds in
an amount equal to three-eighths of one percent (0.375%) per annum (calculated
on the basis of a 360 day year for actual days elapsed) of the difference
between (a) the Maximum Amount and (b) the average for the period of the daily
closing balances of the Revolving Loan and the Swing Line Loan outstanding
during the period for which such fee is due.
(3) If Borrowers prepay the Revolving Loan and terminate the Revolving Loan
Commitment before the first anniversary of the Closing Date, whether voluntarily
or involuntarily and whether before or after acceleration of the Obligations,
Borrowers shall pay to Agent, for the ratable benefit of Lenders, as liquidated
damages and compensation for the costs of being prepared to make funds available
hereunder and not as a penalty, an amount equal to US$350,000. Notwithstanding
the foregoing, for greater certainty, no prepayment fee shall be payable by
Borrowers upon a mandatory prepayment made pursuant to Section 1.3(2), 1.16(3)
or 5.4(3); provided that, in the case of prepayments made pursuant to Section
1.3(2)(b) or 1.3(2)(c), the transaction giving rise to the applicable prepayment
is expressly permitted under Section 6.
1.10 RECEIPT OF PAYMENTS. Borrowers shall make each payment under this Agreement
or any Loan Document not later than 2:00 p.m. (Toronto time) on the day when due
in immediately available funds in Canadian Dollars (if such obligations are
denominated in Canadian Dollars) to the Canadian Dollar Collection Account and,
otherwise, in US Dollars to the US Dollar Collection Account. For purposes of
computing interest and Fees and determining Borrowing Availability or Net
Borrowing Availability as of any date, all payments shall be deemed received on
the day of receipt for value therefor in the appropriate Collection Account
prior to 2:00 p.m.
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(Toronto time). Payments received after 2:00 p.m. (Toronto time) on any Business
Day shall be deemed to have been received on the following Business Day. If
Agent receives any payment from or on behalf of any Credit Party in a currency
other than the currency in which an Obligation due and payable is denominated,
Agent may convert the payment (including the monetary proceeds of realization
upon any Collateral and any funds then held in a cash collateral account) into
the currency of the relevant Obligation at the exchange rate that Agent would be
prepared to sell the currency in which the relevant Obligation is denominated
against the currency received in Toronto on the Business Day immediately
preceding the date of actual payment. The Obligations shall be satisfied only to
the extent of the amount actually received by Agent upon such conversion.
1.11 APPLICATION AND ALLOCATION OF PAYMENTS.
(1) So long as no Default or Event of Default shall have occurred and be
continuing, (a) payments consisting of proceeds of Accounts received in the
ordinary course of business shall be applied to the Swing Line Loan and the
Revolving Loan; (b) payments matching specific scheduled payments then due shall
be applied to those scheduled payments; (c) voluntary prepayments shall be
applied as determined by Borrower Representative, subject to the provisions of
Section 1.3(1); and (d) mandatory prepayments shall be applied as set forth in
Sections 1.3(3) and 1.3(4). All payments and prepayments applied to a particular
Loan shall be applied ratably to the portion thereof held by each Lender as
determined by its Pro Rata Share. As to each other payment, and as to all
payments made when a Default or Event of Default shall have occurred and be
continuing or following the Commitment Termination Date, each Borrower hereby
irrevocably waives the right to direct the application of any and all payments
received from or on behalf of either Borrower, and each Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to apply
any and all such payments against the Obligations of Borrowers as Agent may deem
advisable notwithstanding any previous entry by Agent in the Loan Account or any
other books and records. In the absence of a specific determination by Agent
with respect thereto, payments shall be applied to amounts then due and payable
in the following order: (A) to Fees and Agent's expenses reimbursable hereunder;
(B) to interest on the Swing Line Loan; (C) to principal payments on the Swing
Line Loan; (D) to interest on the Revolving Loan; (E) to principal payments on
the Revolving Loan and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the aggregate,
combined principal balance of the Revolving Loan and outstanding Letter of
Credit Obligations; and (F) to all other Obligations, including expenses of
Lenders to the extent reimbursable under Section 11.3.
(2) Agent is authorized to, and at its sole election may, charge to the
Revolving Loan balance on behalf of each Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
Section 5.4(1)) and interest and principal owing by Borrowers under this
Agreement or any of the other Loan Documents if and to the extent Borrowers fail
to pay any such amounts promptly as and when due, even if such charges would
cause the aggregate balance of the Revolving Loan to exceed Borrowing
Availability or would cause the balance of the Revolving Loan and the Swing Line
Loan of either Borrower
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denominated in US Dollars to exceed the US Dollar Sublimit. At Agent's option
and to the extent permitted by law, any charges so made shall constitute part of
the Revolving Loan hereunder.
1.12 LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain a loan account (the "LOAN
ACCOUNT") on its books to record: all Loans, all payments made by Borrowers and
all other debits and credits as provided in this Agreement with respect to the
Loans or any other Obligations. All entries in the Loan Account shall be made in
accordance with Agent's customary accounting practices as in effect from time to
time. The balance in the Loan Account, as recorded on Agent's most recent
printout or other written statement, shall, absent manifest error, be
presumptive evidence of the amounts due and owing to Agent and Lenders by each
Borrower; provided that any failure to so record or any error in so recording
shall not limit or otherwise affect either Borrower's duty to pay the
Obligations. Agent shall render to Borrower Representative a monthly accounting
of transactions with respect to the Loans setting forth the balance of the Loan
Account as to each Borrower. Unless Borrower Representative notifies Agent in
writing of any objection to any such accounting (specifically describing the
basis for such objection), within thirty (30) days after the date thereof, each
and every such accounting shall, absent manifest error, be deemed final, binding
and conclusive upon Borrowers in all respects as to all matters reflected
therein. Only those items expressly objected to in such notice shall be deemed
to be disputed by Borrowers. Notwithstanding any provision herein contained to
the contrary, any Lender may elect (which election may be revoked) to dispense
with the issuance of Notes to that Lender and may rely on the Loan Account as
evidence of the amount of Obligations from time to time owing to it.
1.13 INDEMNITY.
(1) Each Credit Party that is a signatory hereto shall jointly and severally
indemnify and hold harmless each of Agent, Lenders and their respective
Affiliates, and each such Person's respective officers, directors, employees,
attorneys, agents and representatives (each, an "INDEMNIFIED PERSON"), to the
extent that such indemnification would not be prohibited or restricted under
applicable law, from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses (including reasonable legal
fees, on a solicitor and client basis, and disbursements and other costs of
investigation or defence, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents in accordance with their respective
terms, and the administration of such credit, and in connection with or arising
out of the transactions contemplated hereunder and thereunder and any actions or
failures to act in connection therewith, including any and all Environmental
Liabilities and legal costs and expenses arising out of or incurred in
connection with disputes between or among any parties to any of the Loan
Documents (collectively, "INDEMNIFIED LIABILITIES"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from that Indemnified Person's gross negligence or
willful misconduct. NO INDEMNIFIED PERSON SHALL BE
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RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(2) To induce Lenders to provide the BA Rate option or the LIBOR Rate option on
the terms provided herein, if (a) any BA Rate Loans or any LIBOR Loans are
repaid in whole or in part prior to the last day of any applicable BA Period or
LIBOR Period (whether that repayment is made pursuant to any provision of this
Agreement or any other Loan Document or is the result of acceleration, by
operation of law or otherwise); (b) either Borrower shall default in payment
when due of the principal amount of or interest on any BA Rate Loans or any
LIBOR Loan; (c) either Borrower shall default in making any borrowing of,
conversion into or continuation of BA Rate Loans or LIBOR Loans after Borrower
Representative has given notice requesting the same in accordance herewith; or
(d) either Borrower shall fail to make any prepayment of a BA Rate Loan or LIBOR
Loan after Borrower Representative has given a notice thereof in accordance
herewith, Borrowers shall jointly and severally indemnify and hold harmless each
Lender from and against all losses, costs and expenses resulting from or arising
from any of the foregoing. Such indemnification shall include any loss
(including loss of margin) or expense arising from the reemployment of funds
obtained by it or from fees payable to terminate deposits from which such funds
were obtained. For the purpose of calculating amounts payable to a Lender under
this subsection, each Lender shall be deemed to have actually funded its
relevant BA Rate Loan or LIBOR Loan through the purchase of a deposit bearing
interest at the BA Rate or LIBOR Rate, as applicable, in an amount equal to the
amount of that BA Rate Loan or LIBOR Loan, as applicable and having a maturity
comparable to the relevant BA Period or LIBOR Period, as applicable; provided,
however, that each Lender may fund each of its LIBOR Loans and BA Rate Loans in
any manner it sees fit, and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.13(2), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.
1.14 ACCESS. Each Credit Party which is a party hereto shall, during normal
business hours, from time to time upon one (1) Business Day's prior notice (to
either Borrower) as frequently as Agent determines to be appropriate, acting
reasonably: (1) provide Agent and any of its officers, employees and agents
access to the properties, facilities, officers and auditors of such Credit Party
and to the Collateral, (2) permit Agent, and any of its officers, employees and
agents, to inspect, audit and make extracts from such Credit Party's books and
records, and (3) permit Agent, and its officers, employees and agents, to
inspect, review, evaluate and make test
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verifications and counts of the Accounts, Inventory and other Collateral of such
Credit Party. If an Event of Default shall have occurred and be continuing or if
access is necessary to preserve or protect the Collateral as determined by
Agent, each such Credit Party shall provide such access to Agent and to each
Lender at all times and without advance notice. Furthermore, so long as any
Event of Default shall have occurred and be continuing, Borrowers shall provide
Agent and each Lender with access to their suppliers and customers. Each Credit
Party shall make available to Agent and its counsel, as quickly as is possible
under the circumstances, originals or copies of all books and records which
Agent may request. Each Credit Party shall deliver any document or instrument
necessary for Agent, as it may from time to time request, to obtain records from
any service bureau or other Person which maintains records for such Credit
Party, and shall maintain duplicate records or supporting documentation on
media, including computer tapes and discs owned by such Credit Party. Agent will
give Lenders at least ten (10) days' prior written notice of regularly scheduled
audits. Representatives of other Lenders may accompany Agent's representatives
on regularly scheduled audits at no charge to Borrowers.
1.15 TAXES.
(1) Any and all payments by each Credit Party hereunder (including any sum
payable pursuant to Section 12) or under the other Loan Documents shall be made,
in accordance with this Section 1.15, free and clear of and without deduction
for any and all present or future Taxes, excluding any Taxes imposed on or
measured by the net income of Agent or Lenders by the jurisdictions under the
laws of which they are organized or any political subdivisions thereof. If any
Credit Party shall be required by law to deduct any Taxes from or in respect of
any sum payable hereunder (including any sum payable pursuant to Section 12) or
under any other Loan Document (excluding any Taxes imposed on or measured by the
net income of Agent or Lenders by the jurisdictions under the laws of which they
are organized or any political subdivisions thereof), (a) the sum payable shall
be increased as much as shall be necessary so that after making all required
withholdings and deductions (including withholdings and deductions applicable to
additional sums payable under this Section 1.15) Agent or Lenders, as
applicable, receive an amount equal to the sum they would have received had no
such withholdings or deductions been made, (b) the applicable Credit Party shall
make such deductions and (c) the applicable Credit Party shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Within thirty (30) days after the date of any payment of Taxes,
Borrower Representative shall furnish to Agent the original or a certified copy
of a receipt evidencing payment thereof.
(2) In addition, each Credit Party agrees to pay any present or future Taxes
that arise from any payment made under this Agreement or under any other Loan
Document or from the execution, sale, transfer, delivery or registration of, or
otherwise with respect to, this Agreement, the other Loan Documents and any
other agreements and instruments contemplated hereby or thereby (except for any
Taxes imposed on or measured by the net income of Agent or Lenders by the
jurisdictions under the laws of which they are organized or any political
subdivisions
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thereof). Each Lender agrees that, as promptly as reasonably practicable after
it becomes aware of any circumstances referred to above which would result in
additional payments under this Section 1.15(2), it shall notify Borrower
Representative thereof.
(3) Each Credit Party shall indemnify Agent and each Lender for the full amount
of the Taxes referred to in this Section 1.15 (except for any Taxes imposed on
or measured by the net income of Agent or Lenders by the jurisdictions under the
laws of which they are organized or any political subdivisions thereof, but
including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable by that Credit Party under this Section 1.15) paid by Agent or such
Lender and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes were correctly or
legally asserted. This indemnification shall be made within 10 days after the
date Agent makes written demand therefor for its own benefit or the benefit of
the affected Lender.
(4) If a Credit Party pays any additional amount under this Section 1.15 to a
Lender and such Lender determines in its sole discretion that it has actually
received or realized in connection therewith any refund or any reduction of, or
credit against, its Tax liabilities in or with respect to the taxable year in
which the additional amount is paid, such Lender shall pay to the Credit Party
an amount that such Lender shall, in its sole discretion, determine is equal to
the net benefit, after tax, which was obtained by the Lender in such year as a
consequence of such refund, reduction or credit. Such amount shall be paid as
soon as practicable after receipt or realization by such Lender of such refund,
reduction or credit. Nothing in this Section 1.15(4) shall interfere with the
right of a Lender to arrange its tax affairs in whatever manner it deems fit
and, in particular, no Lender shall be under any obligation to claim relief from
its corporate profits or similar tax liability in respect of any such deduction
or withholding in priority to any other reliefs, claims, credits or deductions
available to it and nothing in this Section 1.15(4) shall require any Lender to
disclose or detail the basis of its calculation of the amount of any refund or
reduction of, or credit against, its tax liabilities or any other information to
any Credit Party or any other Person. Any amount paid by a Lender to a Credit
Party under this Section 1.15(4) shall be conclusive evidence of the amount due
to such Credit Party and shall be accepted by such Credit Party in full and
final settlement of its rights under this Section 1.15(4).
(5) Each Lender shall use reasonable efforts (consistent with legal and
regulatory restrictions and subject to overall policy considerations of such
Lender and in respect of which each Credit Party will reimburse such Lender for
its related expenses on demand) to file any certificate or document or to
furnish any information as reasonably requested by a Credit Party pursuant to
any applicable treaty, law or regulation, if the making of such filing or the
furnishing of such information would avoid the need for or reduce the amount of
any amounts payable by a Credit Party under Section 1.15 and would not, in the
reasonable judgment of such Lender, be disadvantageous to such Lender.
(6) Without prejudice to the survival of any other agreement of any Credit Party
under this Agreement, the agreements and obligations of each Credit Party
contained in this Section 1.15 shall survive the Termination Date.
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1.16 CAPITAL ADEQUACY; INCREASED COSTS; ILLEGALITY.
(1) If any Lender shall have determined that any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy, reserve requirements or similar requirements or compliance by any
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law),
in each case, adopted after the Closing Date, from any central bank or other
Governmental Authority increases or would have the effect of increasing the
amount of capital, reserves or other funds required to be maintained by such
Lender and thereby reducing the rate of return on such Lender's capital as a
consequence of its obligations hereunder, then Borrowers shall from time to time
upon demand by such Lender (with a copy of such demand to Agent) pay to Agent,
for the account of such Lender, additional amounts sufficient to compensate such
Lender for such reduction. A certificate as to the amount of that reduction and
showing the basis of the computation thereof submitted by such Lender to
Borrower Representative and to Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(2) If, due to either (a) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (b) the compliance
with any guideline or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to any Lender of
agreeing to make or making, funding or maintaining any Loan, then Borrowers
shall from time to time, upon demand by such Lender (with a copy of such demand
to Agent), pay to Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost. A certificate as
to the amount of such increased cost, submitted to Borrower Representative and
to Agent by such Lender, shall be conclusive and binding on Borrowers for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrowers pursuant to this Section 1.16(2).
(3) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower Representative
through Agent, (a) the obligation of such Lender to agree to make or to make or
to continue to fund or maintain LIBOR Loans shall terminate and (b) each
Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing by
such Borrower to such Lender, together with interest accrued thereon, unless
Borrower Representative on behalf of such Borrower, within five (5) Business
Days after the delivery of such notice and demand, converts all such Loans into
a Loan bearing interest based on the US Index Rate.
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(4) Within fifteen (15) days after receipt by Borrower Representative of written
notice and demand from any Lender (an "AFFECTED LENDER") for payment of
additional amounts or increased costs as provided in Sections 1.15, 1.16(1) or
1.16(2), Borrower Representative may, at its option, notify Agent and such
Affected Lender of its intention to replace the Affected Lender. So long as no
Default or Event of Default shall have occurred and be continuing, Borrower
Representative, with the consent of Agent, not to be unreasonably withheld, may
obtain, at Borrowers' expense, a replacement Lender ("REPLACEMENT LENDER") for
the Affected Lender, which Replacement Lender must be satisfactory to Agent,
acting reasonably. If Borrowers obtain a Replacement Lender within ninety (90)
days following notice of their intention to do so, the Affected Lender must sell
and assign its Loans and Revolving Loan Commitment to such Replacement Lender
for an amount equal to the principal balance of all Loans held by the Affected
Lender and all accrued interest and Fees with respect thereto through the date
of such sale, provided that Borrowers shall have reimbursed such Affected Lender
for the additional amounts or increased costs that it is entitled to receive
under this Agreement through the date of such sale and assignment.
Notwithstanding the foregoing, Borrowers shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within fifteen (15) days following its
receipt of Borrowers' notice of intention to replace such Affected Lender.
Furthermore, if Borrowers give a notice of intention to replace and do not so
replace such Affected Lender within ninety (90) days thereafter, Borrowers'
rights under this Section 1.16(4) shall terminate and Borrowers shall promptly
pay all increased costs or additional amounts demanded by such Affected Lender
pursuant to Sections 1.15, 1.16(1) or 1.16(2).
1.17 SINGLE LOAN. All Loans to each Borrower and all of the other Obligations of
each Borrower arising under this Agreement and the other Loan Documents shall
constitute one general obligation of that Borrower secured, until the
Termination Date, by all of its Collateral.
1.18 CURRENCY MATTERS. Principal, interest, reimbursement obligations, fees, and
all other amounts payable under this Agreement and the other Loan Documents to
the Agent and the Lenders shall be payable in the currency in which such
Obligations are denominated. Unless stated otherwise, all calculations,
comparisons, measurements or determinations under this Agreement shall be made
in US Dollars. For the purpose of such calculations, comparisons, measurements
or determinations, amounts denominated in other currencies shall be converted in
the Equivalent Amount of US Dollars on the date of calculation, comparison,
measurement or determination.
1.19 JOINT AND SEVERAL OBLIGATIONS. Each Borrower hereby agrees that all payment
or other obligations expressed under this Agreement as being the obligations of
either Borrower, each Borrower, all Borrowers or Borrowers shall be the joint
and several obligation of each Borrower.
1.20 OBLIGATIONS OF CANADIAN CREDIT PARTIES. Notwithstanding anything in this
Agreement or any Loan Document to the contrary, wherever in this Agreement or
any Loan Document a
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representation or warranty, indemnity, covenant or other obligation is expressed
to be given or made by or imposed upon either of Tropsport or Continuing
Borrower, if a Canada corporation, (whether by name or in its capacity as a
Credit Party), such representation, warranty, indemnity, covenant or obligation
shall in each case be understood not to impose on such Credit Party any
obligation to give financial assistance by way of loan, guarantee, the giving of
security, the payment of money or otherwise within the meaning of Section 44 of
the Canada Business Corporations Act, to or for the benefit of any Credit Party
other than Ultimate Parent and, in the case of Tropsport, Maska Canada.
SECTION 2 -- CONDITIONS PRECEDENT
2.1 CONDITIONS TO THE INITIAL LOANS. No Lender shall be obligated to make any
Loan or incur any Letter of Credit Obligations on the Closing Date, or to take,
fulfill, or perform any other action hereunder, until the following conditions
have been satisfied or provided for in a manner satisfactory to Agent, or waived
in writing by Agent and Lenders:
(1) CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement or counterparts hereof
shall have been duly executed by, and delivered to, Borrowers, each other Credit
Party signatory hereto, Agent and Lenders; and Agent shall have received such
documents, instruments, agreements and legal opinions as Agent shall reasonably
request in connection with the transactions contemplated by this Agreement and
the other Loan Documents, including all those listed in the Closing Checklist
attached hereto as Annex D, each in form and substance satisfactory to Agent.
(2) REPAYMENT OF PRIOR LENDER OBLIGATIONS; SATISFACTION OF OUTSTANDING L/CS. (a)
Agent shall have received fully executed originals of a payoff letter from the
HKBC Lenders and a payoff letter from the Chase Lenders, each satisfactory to
Agent and, together, confirming, that all of the Prior Lender Obligations will
be repaid in full from the proceeds of the initial Revolving Credit Advance and
the initial advance under the US Facility and all Liens upon any of the property
of Credit Parties or any of their Subsidiaries in favour of Prior Lenders shall
be terminated by Prior Lenders immediately upon such payment; and (b) all
letters of credit issued or guaranteed by Prior Lenders shall have been cash
collateralized, supported by a guarantee of Agent or supported by a Letter of
Credit issued pursuant to Annex B, as mutually agreed upon by Agent, Borrowers
and Prior Lenders.
(3) APPROVALS. Agent shall have received (a) satisfactory evidence that the
Credit Parties have obtained all required consents and approvals of all Persons,
including all requisite Governmental Authorities, to the execution, delivery and
performance of this Agreement and the other Loan Documents and the consummation
of the Related Transactions or (b) an officer's certificate in form and
substance satisfactory to Agent affirming that no such consents or approvals are
required.
(4) OPENING AVAILABILITY. The Eligible Accounts and Eligible Inventory of each
Borrower supporting the initial Revolving Credit Advances and the initial Letter
of Credit Obligations incurred and the amount of the Reserves to be established
on the Closing Date shall be sufficient
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in value, as determined by Agent, to provide Borrowers, collectively, with Net
Borrowing Availability, after giving effect to the initial Revolving Credit
Advance made to each Borrower, the incurrence of any initial Letter of Credit
Obligations (except, with respect to the requirement in clauses (b) and (c)
below, for any such Letter of Credit Obligations incurred for the purposes of
indemnifying any lender to the European Subsidiaries) and the consummation of
the Related Transactions (on a pro forma basis, with trade payables being paid
currently, and expenses and liabilities being paid in the ordinary course of
business and without acceleration of sales) of at least (a) US$2,500,000 if the
Closing Date occurs on or before October 30, 1998, (b) US$5,000,000, if the
Closing Date occurs after October 30, 1998 and on or before November 30, 1988,
or (c) US$7,500,000, if the Closing Date occurs after November 30, 1998.
(5) PAYMENT OF FEES. Borrowers shall have paid the Fees required to be paid on
the Closing Date in the respective amounts specified in Section 1.9 (including
the Fees specified in the GE Capital Fee Letter), and shall have reimbursed
Agent for all fees, costs and expenses of closing presented as of the Closing
Date.
(6) CAPITAL STRUCTURE; OTHER INDEBTEDNESS; DUE DILIGENCE. The capital structure
and tax structure of each Credit Party and the terms and conditions of all
Indebtedness of each Credit Party shall be acceptable to Agent in its sole
discretion. Agent shall have completed all other business and legal due
diligence with results satisfactory to it, including, without limitation, review
of the tax effects of the Related Transactions.
(7) CONSUMMATION OF RELATED TRANSACTIONS. Agent shall have received fully
executed copies of the Related Transactions Documents, each of which shall be in
form and substance satisfactory to Agent and its counsel. The Related
Transactions shall have been consummated on such terms as are satisfactory to
Agent and Lenders, including, without limitation, the following:
(a) Ultimate Parent shall have received cash proceeds of the Term Loan
in the amount of at least the Equivalent Amount in Canadian Dollars
of US$47,500,000 and Maska Canada shall have received cash proceeds
of the Term Loan in the amount of at least the Equivalent Amount in
Canadian Dollars of US$40,000,000;
(b) Ultimate Parent shall have received cash proceeds of at least
US$12,500,000 from the Phoenix Investment;
(c) the Reorganization has been completed, all of the conditions
precedent thereto have been met and have not been waived and the
aggregate cash consideration paid in connection therewith shall not
have exceeded US$67,450,000 (subject to adjustments in the purchase
price and other adjustments as are acceptable to Agent in its sole
discretion);
(d) the conditions precedent under the US Facility Agreement to the
making of the initial revolving credit advance thereunder have been
met or waived by US Agent and US Lenders;
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(e) the Refinancing shall not exceed, in aggregate, US$45,400,000 or the
Equivalent Amount thereof; and
(f) aggregate fees and closing costs in connection with the Related
Transactions (including fees payable under this Agreement) shall not
exceed US$7,500,000 or the Equivalent Amount thereof.
(8) ESCROW ARRANGEMENT FOR PRE-FILINGS OF CERTAIN HYPOTHECS. Agent shall have
received confirmation from the Escrow Agent (as defined under the Escrow
Agreement) that the Escrow Agent will release the Documents (as defined under
the Escrow Agreement) to Agent upon the completion of the funding of the initial
Revolving Credit Advances and the incurrence of the initial Letter of Credit
Obligations.
2.2 FURTHER CONDITIONS TO EACH LOAN. Except as otherwise expressly provided
herein, no Lender on any date shall be obligated to fund any Loan, convert or
continue any Loan as a BA Rate Loan or a LIBOR Loan or incur any Letter of
Credit Obligation, if, as of the date thereof:
(1) any representation or warranty by any Credit Party contained herein
or in any of the other Loan Documents shall be untrue or incorrect
as of such date (except to the extent that such representation or
warranty expressly relates to an earlier date and except for changes
therein expressly permitted or expressly contemplated by this
Agreement); or
(2) any event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof as determined by the Requisite
Lenders; or
(3) (a) any Event of Default shall have occurred and be continuing or
would result after giving effect to any Loan (or the incurrence of
any Letter of Credit Obligations), or (b) a Default shall have
occurred and be continuing or would result after giving effect to
any Loan, and Agent or Requisite Lenders shall have determined not
to make, convert or continue any Loan or incur any Letter of Credit
Obligation so long as that Default is continuing; or
(4) after giving effect to any Revolving Credit Advance or Swing Line
Advance (or the incurrence of any Letter of Credit Obligations), (a)
the outstanding principal amount of the Revolving Loan would exceed
the lesser of the Aggregate Borrowing Base and the Maximum Amount,
less, in each case, the then outstanding principal amount of the
Swing Line Loan, or (b) the aggregate US Dollar Amount of all Letter
of Credit Obligations would exceed the L/C Sublimit, or (c) the
outstanding balance of the Loans of either Borrower, denominated in
US Dollars, would exceed the US Dollar Sublimit.
The request and acceptance by either Borrower of the proceeds of any Loan,
the incurrence of any Letter of Credit Obligations or the conversion or
continuation of any Loan into,
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or as, a BA Rate Loan or a LIBOR Loan, as the case may be, shall be deemed to
constitute, as of the date of such request or acceptance, (A) a representation
and warranty by Borrowers that the conditions in this Section 2.2 have been
satisfied and (B) a reaffirmation by Borrowers of the cross-guarantee provisions
set forth in Section 12 and of the granting to Agent for itself and Lenders, and
to Agent and Lenders, the Liens pursuant to the Collateral Documents.
SECTION 3 -- REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement make the following
representations and warranties to Agent and each Lender with respect to itself
and, to the extent not prohibited or restricted under applicable law, with
respect to all other Credit Parties, each and all of which shall survive the
execution and delivery of this Agreement.
3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit Party (1) is a
corporation duly incorporated, organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation; (2) is duly qualified to
conduct business and is in good standing in each other jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not result in
exposure to losses, damages or liabilities in excess of C$50,000 or the
Equivalent Amount thereof in another currency and would not restrict the Credit
Party from collecting (including bringing any legal action to collect) any of
its Accounts; (3) has the requisite corporate power and authority and the legal
right to own, pledge, mortgage, hypothecate or otherwise encumber and operate
its properties, to lease the property it operates under lease and to conduct its
business as now, heretofore and proposed to be conducted; (4) subject to
specific representations regarding Environmental Laws, has all licenses,
permits, consents or approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction,
where the failure to have such licenses, permits or consents could, in any
material respect, affect such ownership, operation and conduct; (5) is in
compliance with its constating documents and by-laws; and (6) subject to
specific representations set forth herein regarding ERISA, Environmental Laws,
tax and other laws, is in compliance with all applicable provisions of law,
except where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
3.2 EXECUTIVE OFFICES. As of the Closing Date, the current location of each
Credit Party's chief executive office, principal place of business and domicile
(within the meaning of the Quebec Civil Code) is set forth in Disclosure
Schedule 3.2, and none of such locations have changed within the twelve (12)
months preceding the Closing Date, except as set forth in Disclosure Schedule
3.2. In addition, Disclosure Schedule 3.2 lists each jurisdiction in which each
Credit Party is duly qualified to conduct business and in good standing and also
lists the Federal Employee Identification Number of each US Subsidiary Guarantor
and Ultimate Parent.
3.3 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance by each Credit Party, and each other Subsidiary of
Ultimate Parent, of the Loan
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Documents to which it is a party and the creation of all Liens provided for
therein: (1) are within such Person's corporate power; (2) have been duly
authorized by all necessary or proper corporate and shareholder action; (3) do
not contravene any provision of such Person's constating documents or bylaws;
(4) do not violate any law or regulation, or any order or decree of any court or
Governmental Authority; (5) do not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (6) do not result in the
creation or imposition of any Lien upon any of the property of such Person other
than those in favour of Agent, on behalf of itself and Lenders, or Agent and
Lenders, as applicable, pursuant to the Loan Documents, the Term Loan Liens and
the US Facility Liens; and (7) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in Section
2.1(3), all of which will have been duly obtained, made or complied with prior
to the Closing Date. On or prior to the Closing Date, each of the Loan Documents
shall have been duly executed and delivered by each Credit Party and each other
Subsidiary of Ultimate Parent which is a party thereto and each such Loan
Document shall then constitute a legal, valid and binding obligation of such
Credit Party and such Subsidiary of Ultimate Parent, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium laws or similar laws affecting creditors' rights generally and to the
fact that the availability of equitable remedies, such as specific performance
and injunctive relief, is in the discretion of a court.
3.4 FINANCIAL STATEMENTS, PROJECTIONS AND OTHER REPORTS. Except for the
Projections, all Financial Statements concerning Ultimate Parent and its
Subsidiaries and SHC and its Subsidiaries which are referenced below have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for the absence of footnotes and normal year-end audit
adjustments) and present fairly in all material respects the financial position
of the Persons covered thereby as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
(1) FINANCIAL STATEMENTS. The following Financial Statements attached hereto as
Disclosure Schedule 3.4(1) have been delivered on the date hereof:
(a) the audited consolidated and unaudited consolidating balance sheets
of Ultimate Parent and its Subsidiaries and of SHC and its
Subsidiaries for the Fiscal Year ended December 31, 1997 and the
audited consolidated balance sheets of Ultimate Parent and its
Subsidiaries and of SHC and its Subsidiaries for the Fiscal Year
ended December 31, 1996 and their respective related statements of
income and cash flows for the Fiscal Years then ended, certified by
Ernst & Young;
(b) the unaudited consolidated and consolidating balance sheets of
Ultimate Parent and its Subsidiaries and of SHC and its Subsidiaries
at September 30, 1998 and
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their respective related statements of income and cash flows for the
three Fiscal Quarters then ended.
(2) PRO FORMA. The Pro Forma delivered on the date hereof and attached hereto as
Disclosure Schedule 3.4(2) was prepared by Ultimate Parent giving pro forma
effect to the Related Transactions, was based on the unaudited consolidated and
consolidating balance sheets of Ultimate Parent and its Subsidiaries and SHC and
its Subsidiaries dated September 30, 1998 and was prepared in a manner generally
consistent with Ultimate Parent's past practices in preparing unaudited
financial statements.
(3) PROJECTIONS; OPERATING PLANS; YEAR 2000 SURVEY. The Projections delivered on
the date hereof and attached hereto as Disclosure Schedule 3.4(3) have been
prepared by Ultimate Parent in light of the past operations of the businesses of
its Subsidiaries, but including future payments of known contingent liabilities
(disclosed therein), and reflect projections for the period from October 1, 1998
to December 31, 1998 on a month by month basis and for the four (4) year period
beginning on December 31, 1998 on a month by month basis for the first year and
on a year by year basis thereafter. The Projections and the Year 2000 survey
delivered to Agent on or before the Closing Date and the operating plans from
time to time delivered, as required under Annex E, are based upon estimates and
assumptions stated therein, all of which Credit Parties believe to be reasonable
and fair in light of current conditions and current facts known to Credit
Parties, as of the Closing Date (in the case of the Projections and such Year
2000 survey), and as of the date of delivery (in the case of such operating
plan), and reflect Credit Parties' good faith and reasonable estimates of the
future financial performance of Credit Parties and of the other information
projected therein for the periods set forth therein, it being recognized by
Lenders that such Projections, Year 2000 survey and operating plan, as they
relate to future events, are not to be viewed as facts or an assurance of
performance and that actual results during the period or periods covered by such
Projections, Year 2000 survey and operating plans may differ from the forecasted
or projected results set forth therein.
3.5 MATERIAL ADVERSE EFFECT. Between December 31, 1997 and the Closing Date, (1)
no Credit Party has incurred any obligations, contingent or non-contingent
liabilities, liabilities for Charges, long-term leases or unusual forward or
long-term commitments which are not reflected in the Pro Forma and which, alone
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (2) no contract, lease or other agreement or instrument has been entered
into by any Credit Party or has become binding upon any Credit Party's assets
and no law or regulation applicable to any Credit Party has been adopted which
has had or could reasonably be expected to have a Material Adverse Effect, and
(3) no Credit Party is in default and to the best of each Credit Party's
knowledge no third party is in default under any material contract, lease or
other agreement or instrument, which alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect. Between December 31, 1997 and the
Closing Date no event has occurred, which alone or together with other events,
could reasonably be expected to have a Material Adverse Effect.
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3.6 OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date, the real estate ("REAL
ESTATE") listed on Disclosure Schedule 3.6 constitutes all of the real property
owned, leased, subleased, or used by any Credit Party. Each Credit Party owns
good and marketable (and in the case of Real Estate located outside of Quebec)
fee simple title to all of its owned Real Estate, and valid and marketable
leasehold interests in all of its leased Real Estate, all as described on
Disclosure Schedule 3.6 (which includes the municipal address of each leasehold
interest), except where failure to have such title or interest could not
reasonably be expected to have a Material Adverse Effect, and complete copies of
all such leases or a summary of all material terms thereof satisfactory to Agent
have been delivered to Agent. With respect to all leased Real Estate, Disclosure
Schedule 3.6 also sets out the name and address of each mortgagee with respect
to each such leased premises and, to the best of the knowledge of each Credit
Party, the principal amount of such mortgage on the leased premises. Disclosure
Schedule 3.6 further describes any Real Estate with respect to which any Credit
Party is a lessor, sublessor or assignor as of the Closing Date. Each Credit
Party also has good and marketable title to, or valid leasehold interests in,
all of its personal properties and assets, except where failure to have such
title or interest could not reasonably be expected to have a Material Adverse
Effect. As of the Closing Date, none of the properties and assets of any Credit
Party, and none of the Intellectual Property in respect of which any Credit
Party holds a Licence from any European Subsidiary, are subject to any Liens
other than Permitted Encumbrances and there are no facts, circumstances or
conditions known to any Credit Party that may result in any Liens (including
Liens arising under Environmental Laws) other than Permitted Encumbrances.
Except as set forth on Disclosure Schedule 3.6, each Credit Party has received
all deeds, assignments, waivers, consents, non-disturbance and recognition or
similar agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Credit Party's right, title and interest in and to all such Real
Estate and other properties and assets. Disclosure Schedule 3.6 also describes
any purchase options, rights of first refusal or other similar contractual
rights pertaining to any Real Estate. As of the Closing Date, no portion of any
Credit Party's Real Estate has suffered any material damage by fire or other
casualty loss which has not heretofore been repaired and restored in all
material respects to its original condition or otherwise remedied. As of the
Closing Date, all material permits required to have been issued or appropriate
to enable the Real Estate to be lawfully occupied and used for all of the
purposes for which they are currently occupied and used have been lawfully
issued and are in full force and effect, except where failure to have such
permits could not reasonably be expected to have a Material Adverse Effect.
3.7 LABOR MATTERS. As of the Closing Date (1) no strikes or other material
labour disputes against any Credit Party are pending or, to any Credit Party's
knowledge, threatened; (2) hours worked by and payment made to employees of each
Credit Party comply in all material respects with each federal, provincial,
local or foreign law applicable to such matter; (3) all payments due from any
Credit Party for employee health and welfare insurance have been paid or accrued
as a liability on the books of such Credit Party; (4) except as set forth in
Disclosure Schedule 3.7, no Credit Party is a party to or bound by any
collective bargaining agreement, management agreement, consulting agreement or
any employment agreement with any senior officer thereof (and true and complete
copies of any agreements, or summaries thereof in the case of
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employment agreements, described on Disclosure Schedule 3.7 have been delivered
to Agent); (5) there is no organizing activity involving any Credit Party
pending or, to any Credit Party's knowledge, threatened by any labour union or
group of employees; (6) there are no certification applications or
representation proceedings pending or, to any Credit Party's knowledge,
threatened with any labour relations board, and no labour organization or group
of employees of any Credit Party has made a pending demand for recognition; and
(7) except as set forth in Disclosure Schedule 3.7, there are no complaints or
charges against any Credit Party pending or, to the knowledge of any Credit
Party, threatened to be filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment by any Credit Party of any individual.
3.8 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND INDEBTEDNESS.
Except as set forth in Disclosure Schedule 3.8, as of the Closing Date, no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. As of
the Closing Date, all of the issued and outstanding Stock of each Credit Party
is owned by each of the stockholders and in the amounts set forth on Disclosure
Schedule 3.8. Except as set forth on Disclosure Schedule 3.8 in regard to
Ultimate Parent, there are no outstanding rights to purchase, options, warrants
or similar rights or agreements pursuant to which any Credit Party may be
required to issue, sell, repurchase or redeem any of its Stock or other equity
securities or any Stock or other equity securities of its Subsidiaries. All
outstanding Indebtedness of each Credit Party as of the Closing Date is
described in Section 6.3 (including Disclosure Schedule 6.3). None of Ultimate
Parent, SHC, WAP, SLM Trademark US, CCM and Canadian Subsidiary Guarantor has
any assets (except Stock of their Subsidiaries; in the case of SLM Trademark US,
CCM and Canadian Subsidiary Guarantor, Intellectual Property; in the case of
Canadian Subsidiary Guarantor, Stock of CCM; and, in the case of Ultimate
Parent, the Account owing by SHC resulting from the transaction described in
Section 6.3(1)(f) and the Accounts owing to Ultimate Parent from other Credit
Parties resulting from loans made on the Closing Date described under
"Intercompany Loans" in Disclosure Schedule 1.4) or any Indebtedness or
Guaranteed Indebtedness (except the Obligations, the obligations under the US
Facility, the Term Loans and obligations to the extent permitted under Sections
6.3(1)(f), (g) and (i)). None of the Inactive Subsidiaries has any assets (other
than tax credits and a nominal amount of cash to pay contingent tax
liabilities), Indebtedness or Guaranteed Indebtedness and none of them carries
on any business.
3.9 GOVERNMENT REGULATION. No Credit Party is subject to regulation under any
Canadian or United States federal law, or any provincial, state, local or
foreign law that restricts or limits its ability to incur Indebtedness or to
perform its obligations hereunder. The making of the Loans by Lenders to
Borrowers, the incurrence of the Letter of Credit Obligations on behalf of
Borrowers, the application of the proceeds thereof and repayment thereof and the
consummation of the Related Transactions will not violate any provision of any
such statute or any rule, regulation or order issued by or policy of any
securities regulatory authority or stock exchange.
3.10 TAXES. All tax returns, reports and statements, including information
returns, required by any Governmental Authority to be filed by any Credit Party
have been filed with the appropriate
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Governmental Authority and all Charges have been paid prior to the date on which
any fine, penalty, interest or late charge may be added thereto for nonpayment
thereof (or any such fine, penalty, interest, late charge or loss has been
paid), excluding Charges or other amounts being contested in accordance with
Section 5.2(2). Proper and accurate amounts have been withheld by each Credit
Party from payments to its respective employees, customers and other applicable
payees for all periods in full as required by all applicable Canadian and United
States federal law and all applicable provincial, state, local and foreign law
and such withholdings have been timely paid to the respective Governmental
Authorities. Disclosure Schedule 3.10 sets forth as of the Closing Date in
respect of each Credit Party (1) those taxation years that have not yet been
assessed by Revenue Canada, the IRS or the applicable provincial or state
Governmental Authorities, (2) the taxation years that are currently being
audited by Revenue Canada, the IRS or the applicable provincial or state
Governmental Authorities, (3) any assessments or, to such Credit Party's
knowledge, threatened assessments in connection with such audit, or otherwise
currently outstanding, and (4) the most recent taxation year that an audit by
Revenue Canada, the IRS or the applicable provincial or state Governmental
Authorities has been completed. Except as described on Disclosure Schedule 3.10,
no Credit Party has executed or filed with Revenue Canada, the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges. As
of the Closing Date, except as set forth on Disclosure Schedule 3.10, none of
the Credit Parties and their respective predecessors is liable for any Charges:
(a) under any agreement (including any tax sharing agreements) or (b) to each
Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit
Party has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, which would
have a Material Adverse Effect.
3.11 CANADIAN PENSION AND BENEFIT PLANS; ERISA.
(1) Disclosure Schedule 3.11 sets forth all Canadian Benefit Plans (other than,
for greater certainty, universal plans created by and to which Borrower is
obligated to contribute by statute) and Canadian Pension Plans adopted by each
Credit Party. The Canadian Pension Plans are duly registered under the ITA and
all other applicable laws which require registration and no event has occurred
which is reasonably likely to cause the loss of such registered status. All
material obligations of each Credit Party (including fiduciary, funding,
investment and administration obligations) required to be performed in
connection with the Canadian Pension Plans and the funding agreements therefor
have been performed in a timely fashion. There have been no improper withdrawals
or applications of the assets of the Canadian Pension Plans or the Canadian
Benefit Plans. There are no outstanding disputes concerning the assets of the
Canadian Pension Plans or the Canadian Benefit Plans. Each of the Canadian
Pension Plans is fully funded on a solvency basis (using actuarial methods and
assumptions which are consistent with the valuations last filed with the
applicable Governmental Authorities and which are consistent with generally
accepted actuarial principles).
(2) Disclosure Schedule 3.11 lists and separately identifies all Title IV Plans,
Multiemployer Plans, ESOPs and Retiree Welfare Plans. Copies of all such listed
Plans, together with a copy of
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the latest form 5500 for each such Plan, have been delivered to Agent. Except
with respect to Multiemployer Plans, each Qualified Plan has been determined by
the IRS to qualify under Section 401 of the IRC, and the trusts created
thereunder have been determined to be exempt from tax under the provisions of
Section 501 of the IRC, and nothing has occurred which would cause the loss of
such qualification or tax-exempt status. Each Plan is in compliance in all
material respects with the applicable provisions of ERISA and the IRC, including
the filing of reports required under the IRC or ERISA. All contributions and any
amounts due under either Section 412 of the IRC or Section 302 of ERISA or the
terms of any such Plan and any Title IV Plan have been made. No Credit Party or
ERISA Affiliate has engaged in a prohibited transaction, as defined in Section
4975 of the IRC, in connection with any Plan, which would subject any Credit
Party to a material tax on prohibited transactions imposed by Section 4975 of
the IRC.
(3) Except as set forth in Disclosure Schedule 3.11: (a) no Title IV Plan has
any Unfunded Pension Liability; (b) no ERISA Event or event described in Section
4062(e) of ERISA with respect to any Title IV Plan has occurred or is reasonably
expected to occur that has resulted or could reasonably be expected to result in
a material liability; (c) there are no pending, or to the knowledge of any
Credit Party, threatened claims (other than claims for benefits in the normal
course), sanctions, actions or lawsuits, asserted or instituted against any Plan
or any Person as fiduciary or sponsor of any Plan that could reasonably be
expected to result in a material liability; (d) no Credit Party or ERISA
Affiliate has incurred or reasonably expects to incur any liability as a result
of a complete or partial withdrawal from a Multiemployer Plan; (e) within the
last five years no Title IV Plan with Unfunded Pension Liabilities has been
transferred outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate; and (f) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that was not rated AAA by the Standard &
Poor's Corporation or the equivalent by another nationally recognized rating
agency at the time such purchase was made.
3.12 NO LITIGATION. No action, claim, lawsuit, demand, investigation or
proceeding is now pending or, to the knowledge of any Credit Party, threatened
against any Credit Party, before any Governmental Authority or before any
arbitrator or panel of arbitrators (collectively, "LITIGATION"), (1) which
challenges any Credit Party's right or power to enter into or perform any of its
obligations under the Loan Documents to which it is a party, or the validity or
enforceability of any Loan Document or any action taken thereunder, or (2)
which, as of the Closing Date, has a reasonable risk of being determined
adversely to any Credit Party and which, if so determined, could have a Material
Adverse Effect. Except as set forth on Disclosure Schedule 3.12, as of the
Closing Date there is no Litigation pending or threatened which seeks damages in
excess of C$500,000 or the Equivalent Amount thereof in another currency or
injunctive relief or alleges criminal misconduct of any Credit Party.
3.13 BROKERS. No broker or finder acting on behalf of any Credit Party brought
about the obtaining, making or closing of the Loans or the Related Transactions,
and no Credit Party has any obligation to any Person in respect of any finder's
or brokerage fees in connection therewith.
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3.14 INTELLECTUAL PROPERTY. As of the Closing Date, each Credit Party owns or
has rights to use all Intellectual Property necessary to continue to conduct its
business as now or heretofore conducted by it or proposed to be conducted by it,
and each Patent, Design, Trademark, Copyright, Software and License, which is
material in any respect to the conduct of the business of such Credit Party
(excluding any readily commercially available software used in such Credit
Party's business of which a Credit Party has provided Agent with reasonable
details), is listed, together with application or registration numbers and the
properties covered by and material obligations under each Licence, as
applicable, in Disclosure Schedule 3.14 hereto. No Intellectual Property (other
than readily commercially available software of which a Credit Party has
provided Agent with reasonable details) necessary to conduct the business of any
Credit Party as now or heretofore conducted by it or proposed to be conducted by
it is owned by any Person other than Credit Parties and those Persons who have
granted Licences to such Credit Party. With respect to all Intellectual Property
that is licensed to any Credit Party and is material in any respect to the
conduct of its business (except readily commercially available software of which
a Credit Party has provided Agent with reasonable details), all such licensors
(other than any Credit Party) have, in respect of such Intellectual Property,
executed and delivered to Agent and Lenders the Consents and Acknowledgements
Respecting Intellectual Property as listed under Section (11) of Annex D hereto.
Except as set out on Disclosure Schedule 3.14, each Credit Party conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person.
3.15 FULL DISCLOSURE. No information contained in this Agreement, any of the
other Loan Documents, Financial Statements or Collateral Reports or other
reports from time to time delivered hereunder or any written statement furnished
by or on behalf of any Credit Party to Agent or any Lender pursuant to the terms
of this Agreement contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Liens granted to Agent, on behalf
of itself and Lenders, and to Agent and Lenders, as applicable, pursuant to the
Collateral Documents are (subject to publication, registration or filing of, or
in respect of, the Hypothecs of SHC, WAP and, with respect to immoveable
property only, Tropsport, to be registered in the Province of Quebec, the
General Assignments of Debts to be registered in Newfoundland and Northwest
Territories, and the UCC-1 financing statements for filing in the applicable
States of the United States, all of which have been duly executed and delivered
to Agent and Lenders on the Closing Date, and filings of certain of the
Collateral Documents in the applicable intellectual property offices in Ottawa,
Ontario and Washington, D.C.) fully perfected first priority Liens in and to the
Collateral described therein subject, as to priority, only to Permitted
Encumbrances.
3.16 ENVIRONMENTAL MATTERS.
(1) Except as set forth in Disclosure Schedule 3.16, as of the Closing Date: (a)
the Real Estate is free of contamination from any Hazardous Material; (b) no
Credit Party has caused or suffered to occur any Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate; (c) the
Credit Parties are and have been in compliance with all
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Environmental Laws; (d) the Credit Parties have obtained, and are in compliance
with, all Environmental Permits required by Environmental Laws for the
operations of their respective businesses as presently conducted or as proposed
to be conducted, and all such Environmental Permits are valid, uncontested and
in good standing; (e) no Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials that are likely to result in any Environmental Liabilities of such
Credit Party and no Credit Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations; (f) there is no
Litigation arising under or related to any Environmental Laws, Environmental
Permits or Hazardous Material, or which alleges criminal misconduct by any
Credit Party; (g) no notice has been received by any Credit Party identifying it
as a "potentially responsible party" or requesting information under any
Environmental Law, and to the knowledge of the Credit Parties, there are no
facts, circumstances or conditions that may result in any Credit Party being
identified as a "potentially responsible party" under any Environmental Law; and
(h) the Credit Parties have provided to Agent copies of all existing
environmental reports, reviews and audits and all material written information
pertaining to any actual or potential Environmental Liabilities, in each case
relating to any Credit Party; except, in the case of clauses (a), (b), (c), (d),
(e) and (f), to the extent that such contamination, Release, non-compliance,
failure to be valid, uncontested and in good standing, or operations, factors,
circumstances or conditions, or Litigation, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(2) Each Credit Party hereby acknowledges and agrees that Agent (a) is not now,
and has not ever been, in control of any of the Real Estate or any Credit
Party's affairs, and (b) does not have the capacity through the provisions of
the Loan Documents or otherwise to influence any Credit Party's conduct with
respect to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.
3.17 INSURANCE. Disclosure Schedule 3.17 lists all insurance policies of any
nature maintained, as of the Closing Date, for current occurrences by each
Credit Party, as well as a summary of the terms of each such policy.
3.18 DEPOSIT AND DISBURSEMENT ACCOUNTS. Disclosure Schedule 3.18 lists, as of
the Closing Date, all banks and other financial institutions at which either
Borrower maintains deposits and/or other accounts and/or Lock Boxes, including
any Maska Disbursement Accounts and Tropsport Disbursement Accounts, and such
Schedule correctly identifies, as of the Closing Date, the name, address and
telephone number of each depository, the complete account number of each account
maintained by either Borrower at each depository, the name in which the account
is held, a description of the purpose of the account, and the complete lock box
number and particulars of all Lock Boxes maintained by either Borrower.
3.19 GOVERNMENT CONTRACTS. Except as set forth in Disclosure Schedule 3.19, as
of the Closing Date, no Credit Party is a party to any contract or agreement
with any Governmental Authority and no Credit Party's Accounts are subject to
any of the requirements or proceedings applicable to assignments of accounts
under the Financial Administration Act (Canada), as
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amended, the Federal Assignment of Claims Act of 1940 (United States), as
amended (31 U.S.C. Section 3727) or any similar provincial, state or local or
foreign law.
3.20 CUSTOMER AND TRADE RELATIONS. As of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or
cancellation of, or any material adverse modification or change in: the business
relationship of any Credit Party with any customer or group of customers whose
purchases during the preceding twelve (12) months caused them to be ranked among
the ten largest customers of such Credit Party; or the business relationship of
any Credit Party with any supplier material to its operations.
3.21 AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date, each Credit Party
has provided to Agent or its counsel, on behalf of Lenders, accurate and
complete copies (or summaries) of all of the following agreements or documents
to which any it is subject and each of which are listed on Disclosure Schedule
3.21: supply agreements and purchase agreements not terminable by such Credit
Party within sixty (60) days following written notice issued by such Credit
Party and involving transactions in excess of C$1,000,000 or the Equivalent
Amount thereof in another currency per annum; any lease of Equipment having a
remaining term of one year or longer and requiring aggregate rental and other
payments in excess of C$500,000 or the Equivalent Amount thereof in another
currency per annum; licenses and permits held by the Credit Parties, the absence
of which could be reasonably likely to have a Material Adverse Effect;
instruments or documents evidencing Indebtedness of such Credit Party and any
security interest granted by such Credit Party with respect thereto; and
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party,
including the Phoenix Investment Agreement, but excluding such instruments and
agreements with respect to employee stock options and other warrants of Ultimate
Parent entitling the holder thereof to acquire Stock of Ultimate Parent.
3.22 SOLVENCY. Both before and after giving effect to (1) the Loans and Letter
of Credit Obligations to be made or extended on the Closing Date or such other
date as Loans and Letter of Credit Obligations requested hereunder are made or
extended, (2) the disbursement of the proceeds of such Loans pursuant to the
instructions of Borrower Representative, (3) the Acquisition, the Refinancing
and the consummation of the other Related Transactions and (4) the payment and
accrual of all transaction costs in connection with the foregoing, each Borrower
and each US Borrower, individually, and Ultimate Parent and its Subsidiaries
taken as a whole, is Solvent.
3.23 REORGANIZATION AGREEMENT. As of the Closing Date, Borrowers have delivered
to Agent a complete and correct copy of the Reorganization Agreement (including
all schedules, exhibits, amendments, supplements, modifications, assignments and
all other documents delivered pursuant thereto or in connection therewith). No
Credit Party and no other Person party thereto is in default in the performance
or compliance with any provisions thereof. The Reorganization Agreement complies
with, and the Reorganization has been consummated in accordance with, all
applicable laws. The Reorganization Agreement is in full force and effect as of
the Closing Date, has not been terminated, rescinded or withdrawn. All requisite
approvals by Governmental
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Authorities having jurisdiction over any Credit Party and other Persons
referenced therein, with respect to the transactions contemplated by the
Reorganization Agreement, have been obtained, and no such approvals impose any
conditions to the consummation of the transactions contemplated by the
Reorganization Agreement or to the conduct by any Credit Party of its business
thereafter. Each of the representations and warranties given by each applicable
Credit Party and US Acquisition Sub in the Reorganization Agreement is true and
correct in all material respects or, if made as of a specified earlier date, is
true and correct as of such earlier date. Notwithstanding anything contained in
the Reorganization Agreement to the contrary, such representations and
warranties of the Credit Parties are incorporated into this Agreement by this
Section 3.23 and shall, solely for purposes of this Agreement and the benefit of
Agent and Lenders, survive the consummation of the Reorganization.
3.24 STATUS OF ULTIMATE PARENT; SHC; WAP; AND CCM. Prior to the Closing Date,
Ultimate Parent, SHC, WAP and CCM will not have engaged in any business or
incurred any Indebtedness or any other liabilities (except in connection with
their corporate formation, the Related Transactions Documents or the Prior
Lender Obligations which have been irrevocably repaid and extinguished in full
on or before the Closing Date, this Agreement, and in the case of CCM, except in
connection with owning and licensing (as licensor under Licences) Intellectual
Property).
3.25 SENIOR DEBT. As of the Closing Date, Ultimate Parent, SHC and Borrowers
have delivered to Agent a complete and correct copy of the Term Loan Agreement
and the US Facility Agreement and all agreements in respect of the Prior Lender
Obligations, all as in effect on the Closing Date (including all schedules,
exhibits, amendments, supplements, modifications, assignments and all other
documents delivered pursuant thereto or in connection therewith).
3.26 LEASED PREMISES.
(1) As of the Closing Date, no Collateral, except office furniture, is held or
stored at 6531- 6559 Mississauga Road, Mississauga, Ontario, and no Collateral
is held or stored at 110 Lauder St., Cowansville, Quebec.
(2) Disclosure Schedule 3.26 sets forth, as of the Closing Date, (a) the annual
rent payments due under each lease for each leased location in the Province of
Quebec in respect of which a Credit Party has granted to the landlord of such
location a hypothec on such Credit Party's moveable property, and for the
premises leased by Maska U.S., Inc. at 139 Harvest Lane, Williston, Vermont, for
the five (5) calendar years from and including 1998 to and including 2003, or if
the lease expires prior to 2004, then for each calendar year of the remaining
term of the lease, (b) additional rent payments, on an annual basis, for each
such leased location for 1997 and to approximately the Closing Date for 1998,
and, to the extent reasonably estimatable, for the periods set forth in clause
(a) above, and (c) the amount of the rent security deposits (if any) held by the
landlord with respect to each such leased location. As of the Closing Date, the
rental payments in respect of each such leased location are due monthly in
advance no later than the first day of each month.
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3.27 MANUFACTURING FACILITIES; WAREHOUSE AND DISTRIBUTION FACILITIES; OFFICES.
Disclosure Schedule 3.27 sets forth, as of the Closing Date, for each Credit
Party: (1) all owned manufacturing facilities, (2) all leased manufacturing
facilities, (3) all owned distribution and/or warehouse facilities, (4) all
leased distribution and/or warehouse facilities, (5) all owned manufacturing
facilities with distribution and/or warehouse facilities located thereon, (6)
all owned Offices, (7) all Offices located at manufacturing facilities, (8) all
other Offices, and (9) all other facilities or premises, whether leased or
owned.
SECTION 4 -- FINANCIAL STATEMENTS AND INFORMATION
4.1 REPORTS AND NOTICES.
(1) Each Credit Party executing this Agreement hereby agrees that from and after
the Closing Date and until the Termination Date, it shall deliver to Agent
and/or Lenders, as required, the Financial Statements, notices, Projections and
other information at the times, to the Persons and in the manner set forth in
Annex E.
(2) Each Credit Party executing this Agreement hereby agrees that from and after
the Closing Date and until the Termination Date, it shall deliver to Agent
and/or Lenders, as required, the various Collateral Reports (including Borrowing
Base Certificates in the form of Exhibit 4.1(2)) at the times, to the Persons
and in the manner set forth in Annex F.
SECTION 5 -- AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement agrees on its own behalf and,
to the extent not prohibited or restricted under applicable law, on behalf of
all other Credit Parties, that from and after the date hereof and until the
Termination Date:
5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Credit Party shall:
(1) do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and its rights and franchises, except
as expressly permitted under Sections 6.1, 6.5 and 6.15; (2) continue to conduct
its business substantially as now conducted or as otherwise permitted hereunder;
(3) at all times maintain, preserve and protect, all of its assets and
properties used or useful in the conduct of its business, where failure to so
maintain, preserve and protect would, in any material respect, affect the
conduct or carrying on of its business, and keep the same in good repair,
working order and condition, in all material respects, (taking into
consideration ordinary wear and tear) and from time to time make, or cause to be
made all necessary or appropriate repairs, replacements and improvements thereto
consistent with industry practices; and transact business only in such corporate
and trade names as are set forth in Disclosure Schedule 5.1.
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5.2 PAYMENT OF OBLIGATIONS.
(1) Subject to Section 5.2(2), each Credit Party shall pay and discharge or
cause to be paid and discharged promptly all Charges payable by it, including
(a) Charges imposed upon it, its income and profits, or any of its property
(real, personal or mixed) and all Charges with respect to tax, social security
and unemployment withholding with respect to its employees, and (b) lawful
claims for labor, materials, supplies and services or otherwise, before any
thereof under clauses (a) or (b) above shall become past due.
(2) Each Credit Party may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges or claims described in Section 5.2(1);
provided, that (a) adequate reserves with respect to such contest are maintained
on the books of such Credit Party, in accordance with GAAP, (b) any Lien
securing payment of such Charges arises solely by operation of law and is
unregistered, in the case of a Lien that may arise on the assets of either
Borrower, and, in the case of a Lien that may arise on the assets of any other
Credit Party, no such Lien shall be imposed to secure payment of such Charges
that is superior to any of the Liens securing payment of the Obligations, and
such contest is, in each case, maintained and prosecuted continuously and with
diligence and operates to suspend collection or enforcement of such Charges, (c)
none of the Collateral becomes subject to forfeiture or loss as a result of such
contest, (d) such Credit Party shall promptly pay or discharge such contested
Charges or claims and all additional charges, interest, penalties and expenses,
if any, and shall deliver to Agent evidence acceptable to Agent of such
compliance, payment or discharge, if such contest is terminated or discontinued
adversely to such Credit Party or the conditions set forth in this Section
5.2(2) are no longer met, (e) at the time of commencement and during the term of
any such contest no Default or Event of Default shall have occurred and be
continuing, (f) Agent has not advised Borrowers in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect, and (g) if non-payment of the Charge could result in
any Lien against either Borrower's personal or real property, Borrowers have
notified Agent of the maximum amount of such Charges and, without duplication,
such amount has been deducted from the Aggregate Borrowing Base as a Reserve.
5.3 BOOKS AND RECORDS. Each Credit Party shall keep adequate books and records
with respect to its business activities in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a basis
consistent with the Financial Statements attached as Disclosure Schedule 3.4(1).
In the event that any Credit Party keeps any books and records with respect to
its Inventory and Accounts in Quebec, such Credit Party shall keep, on computer
disks or tapes, a duplicate set of such books and records at a location outside
of Quebec in a jurisdiction in which Agent has confirmed that it has perfected
security in books and records, if requested by Agent in its discretion, acting
reasonably.
5.4 INSURANCE; DAMAGE TO OR DESTRUCTION OF COLLATERAL.
(1) MAINTENANCE OF INSURANCE. The Credit Parties shall, at their sole cost and
expense, maintain the policies of insurance described on Disclosure Schedule
3.17 as in effect on the date
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hereof, or comparable policies having similar coverage and terms and otherwise
in form and amounts and with insurers acceptable to Agent, in each case, to the
extent available on commercially reasonable terms. If any Credit Party at any
time or times hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay all premiums relating thereto, Agent may at
any time or times thereafter obtain and maintain such policies of insurance and
pay such premiums and take any other action with respect thereto which Agent
reasonably deems advisable. Agent shall have no obligation to obtain insurance
for any Credit Party or pay any premiums therefor. By doing so, Agent shall not
be deemed to have waived any Default or Event of Default arising from any Credit
Party's failure to maintain such insurance or pay any premiums therefor. All
sums so disbursed, including legal fees, court costs and other charges related
thereto, shall be payable on demand by Borrowers to Agent and shall be
additional Obligations hereunder secured by the Collateral.
(2) ADDITIONAL INSURANCE. Agent reserves the right at any time upon any change
in any Credit Party's risk profile (including any change in the product mix
maintained by any Credit Party or any laws affecting the potential liability of
such Credit Party) to require additional forms and limits of insurance, except
with respect to Accounts, to ensure that each Credit Party is protected by
insurance in amounts and with coverage customary for its industry. If reasonably
requested by Agent, each Credit Party shall deliver to Agent from time to time a
report of a reputable insurance broker, satisfactory to Agent, with respect to
its insurance policies.
(3) DAMAGE TO OR DESTRUCTION OF COLLATERAL.
(a) DELIVERY OF INSURANCE ENDORSEMENTS. Each Credit Party shall deliver to
Agent, in form and substance satisfactory to Agent, acting reasonably,
endorsements to (A) all "All Risk" and business interruption insurance naming
Agent, on behalf of itself and Lenders, and (with respect to any insurance
policy covering assets located in the Province of Quebec) Agent and Lenders, as
loss payees, and containing the standard mortgage clause approved by the
Insurance Bureau of Canada and (B) all general liability and other liability
policies naming Agent, on behalf of itself and Lenders, and (with respect to any
insurance policy covering assets located in the Province of Quebec) Agent and
Lenders, as additional insureds.
(b) NOTICE OF LOSS. Borrower Representative shall promptly notify Agent of any
loss, damage or destruction to the Collateral in the amount of C$250,000 (or the
Equivalent Amount thereof in another currency) or more, whether or not covered
by insurance.
(c) AGENT AS ATTORNEY-IN-FACT. Each Credit Party irrevocably makes, constitutes
and appoints Agent (and all officers, employees or agents designated by Agent),
so long as any Default or Event of Default shall have occurred and be continuing
or the anticipated insurance proceeds exceed, per occurrence or in the aggregate
for all occurrences, for all Credit Parties at any time, US$1,500,000 or the
Equivalent Amount thereof in another currency, as such Credit Party's true and
lawful agent, mandatary and attorney-in-fact for the purpose of making, settling
and adjusting claims under such "All Risk" and business interruption policies of
insurance, endorsing the name of such Credit Party on any check or other item of
payment for the proceeds
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of such "All Risk" and business interruption policies of insurance and for
making all determinations and decisions with respect to such "All Risk" and
business interruption policies of insurance; provided, that so long as any
obligations are outstanding under the US Facility Agreement or the commitments
of the US Lenders thereunder have not been terminated, Agent shall defer to US
Agent for the foregoing purposes with respect to US Subsidiary Guarantors and
Ultimate Parent; and, provided further, that the foregoing shall be subject to
the Intercreditor Agreement. Agent shall have no duty to exercise any rights or
powers granted to it pursuant to the foregoing power-of-attorney. After
deducting from such proceeds the expenses, if any, incurred by Agent in the
collection or handling thereof, Agent may, at its option, subject to Sections
5.4(3)(d) and 5.4(3)(f) below, and the terms of the Intercreditor Agreement, (A)
apply such proceeds to the reduction of the Obligations in accordance with
Section 1.3(4), or (B) permit or require the applicable Credit Party to use such
money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.
(d) CREDIT PARTIES' OPTION TO REPLACE, RESTORE, REPAIR OR REBUILD. If the
casualty giving rise to such insurance proceeds would not reasonably be expected
to have a Material Adverse Effect and such insurance proceeds do not exceed, per
occurrence or in the aggregate for all occurrences, for all Credit Parties at
any time, (A) US$1,500,000 or the Equivalent Amount thereof in another currency,
in the case of any such proceeds relating to Inventory, and (B) US$3,000,000 or
the Equivalent Amount thereof in another currency, in the case of any such
proceeds relating to Equipment, Fixtures or Real Estate, and provided, that in
the case of clause (B), business interruption insurance proceeds receivable by
the applicable Credit Party would reasonably be expected to be sufficient to
cover the period required to complete such replacement, rebuilding, restoration,
or repair, and Agent shall have received a certificate of the Senior
Vice-President, Finance of such Credit Party certifying that, to the best of his
knowledge, the foregoing condition is true, then Agent shall permit the
applicable Credit Party to replace, restore, repair or rebuild the property;
provided, that if such Credit Party shall not have completed or entered into
binding agreements to complete such replacement, restoration, repair or
rebuilding within 180 days of such casualty, Agent may, subject to the terms of
the Intercreditor Agreement and Section 5.4(3)(f), apply such insurance proceeds
to the Obligations in accordance with Section 1.3(4).
(e) APPLICATION OF PROCEEDS TO REPLACE, RESTORE, REPAIR OR REBUILD. All
insurance proceeds which are to be made available to either Borrower to replace,
repair, restore or rebuild the Collateral in accordance with this Section 5.4,
subject to the terms of the Intercreditor Agreement, shall be applied ratably by
Agent to reduce the outstanding principal balance of the Revolving Loan of
Borrowers (which application shall not result in a permanent reduction of the
Revolving Loan Commitment) and upon such application, Agent shall establish a
Reserve against the Aggregate Borrowing Base in an amount equal to the amount of
such proceeds so applied. All insurance proceeds made available to any Credit
Party that is not a Borrower to replace, repair, restore or rebuild the
Collateral, in accordance with this Section 5.4, subject to the terms of the
Intercreditor Agreement and Section 5.4(3)(f), shall be deposited in a cash
collateral account. Thereafter, such funds shall be made available to that
Borrower or Credit
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Party, as applicable, to provide funds to replace, repair, restore or rebuild
the Collateral as follows: (A) Borrower Representative shall request a Revolving
Credit Advance or release from the cash collateral account be made to such
Borrower or Credit Party in the amount requested to be released; (B) so long as
the conditions set forth in Section 2.2 have been met, Revolving Lenders shall
make such Revolving Credit Advance or Agent shall release funds from the cash
collateral account, as applicable; and (C) in the case of insurance proceeds
applied against the Revolving Loan, the Reserve established with respect to such
insurance proceeds shall be reduced by the amount of such Revolving Credit
Advance. To the extent not used to replace, repair, restore or rebuild the
Collateral, such insurance proceeds, subject to the terms of the Intercreditor
Agreement and Section 5.4(3)(f), shall be applied to reduce the Obligations in
accordance with Section 1.3(4).
(f) BUSINESS INTERRUPTION INSURANCE. Before an Event of Default (as defined
under the Intercreditor Agreement), all proceeds of business interruption
insurance payable in respect of an occurrence shall be applied as follows:
(A) to the extent such occurrence affects either Borrower or Canadian
Subsidiary Guarantor, such proceeds shall be applied in accordance
with Sections 5.4(3)(c), (d) and (e);
(B) to the extent such occurrence affects either US Borrower or SLM
Trademark US, such proceeds shall be applied as provided under the
US Facility Agreement, except that, if no obligations are
outstanding under the US Facility and the commitments of the US
Lenders have been terminated, then such proceeds shall be applied in
accordance with Sections 5.4(3)(c), (d) and (e); and
(C) to the extent such occurrence affects Ultimate Parent, SLM Trademark
US or WAP, such proceeds shall be applied as provided under Sections
5.4(3)(c), (d) and (e) in an amount equal to all such proceeds
multiplied by a fraction equal to the aggregate outstanding amount
of the Loans divided by the sum of the aggregate outstanding amount
of the Loans plus the revolving loans, swing line loans and letter
of credit obligations under the US Facility.
5.5 COMPLIANCE WITH LAWS.
(1) Each Credit Party shall comply with all Canadian federal, provincial and
local laws and regulations, all United States federal, state, local laws and
regulations and all other foreign laws and regulations applicable to it,
including those relating to licensing, ERISA, employment and labor matters and
Environmental Laws and Environmental Permits, except to the extent that the
failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(2) For each existing Canadian Pension Plan, each Credit Party shall ensure that
such plan retains its registered status under and is administered in a timely
manner in all material respects
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in accordance with the applicable pension plan text, funding agreement, the ITA
and all other applicable laws.
(3) For each Canadian Pension Plan hereafter adopted by any Credit Party which
is required to be registered under the ITA or any other applicable laws, that
Credit Party shall use its best efforts to seek and receive confirmation in
writing from the applicable Governmental Authorities to the effect that such
plan is unconditionally registered under the ITA and such other applicable laws.
(4) For each existing Canadian Pension Plan and Canadian Benefit Plan hereafter
adopted, each Credit Party shall in a timely fashion perform in all material
respects all obligations (including fiduciary, funding, investment and
administration obligations) required to be performed in connection with such
plan and the funding media therefor.
(5) Each Credit Party shall deliver to Agent if requested by Agent, promptly
after the filing thereof by any Credit Party with any applicable Governmental
Authority, copies of each annual and other return, report or valuation with
respect to each Canadian Pension Plan; promptly after receipt thereof, a copy of
any direction, order, notice, ruling or opinion that any Credit Party may
receive from any applicable Governmental Authority with respect to any Canadian
Pension Plan; and notification within 30 days of any increases having a cost to
such Credit Party in excess of C$250,000 per annum, in the benefits of any
existing Canadian Pension Plan or Canadian Benefit Plan, or the establishment of
any new Canadian Pension Plan or Canadian Benefit Plan, or the commencement of
contributions to any such plan to which any Credit Party was not previously
contributing.
5.6 SUPPLEMENTAL DISCLOSURE. From time to time as may be requested by Agent
(which request will not be made more frequently than once each year absent the
occurrence and continuance of a Default or an Event of Default), the Credit
Parties shall supplement each Disclosure Schedule hereto, or any representation
herein or in any other Loan Document, with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Disclosure Schedule or
as an exception to such representation or which is necessary to correct any
information in such Disclosure Schedule or representation which has been
rendered inaccurate thereby (and, in the case of any supplements to any
Disclosure Schedule, such Disclosure Schedule shall be appropriately marked to
show the changes made therein); provided that (1) no such supplement to any such
Disclosure Schedule or representation shall be or be deemed a waiver of any
Default or Event of Default resulting from the matters disclosed therein, except
as consented to by Agent and Requisite Lenders in writing or except if such
Disclosure Schedule or representation is accurately supplemented prior to or
concurrently with such representation being made or deemed to be made; and (2)
no supplement shall be required as to representations and warranties that relate
solely to the Closing Date.
5.7 INTELLECTUAL PROPERTY. Each Credit Party will conduct its business and
affairs without (1) infringement of or interference with any Intellectual
Property of any other Person that is
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material to the conduct of a Credit Party's or such other Person's business,
except to the extent that such infringement or interference could not reasonably
be expected to have a Material Adverse Effect, and (2) infringement of or
interference with any Intellectual Property of any other Person if Agent
determines, acting reasonably, that the value of the Inventory to which such
Intellectual Property relates would be materially adversely affected or Agent's
and Lenders' rights and remedies (or the ability of Agent and Lenders to
exercise such rights and remedies) in respect of the Inventory to which such
Intellectual Property relates would be materially adversely affected. With
respect to any new Licence of Intellectual Property, or any renewal of, or
amendment to, any Licence of Intellectual Property, granted to a Credit Party by
a Person that is not a Credit Party, such new Licence and such renewal of or
amendment to a Licence, as the case may be, shall be on the same or similar
terms or on terms consistent with those of other licensees of such Person for
similar products in similar markets.
5.8 ENVIRONMENTAL MATTERS. Each Credit Party shall and shall cause each Person
within its control to: (1) conduct its operations and keep and maintain its Real
Estate in compliance with all Environmental Laws and Environmental Permits other
than noncompliance which could not reasonably be expected to have a Material
Adverse Effect; (2) implement any and all investigation, remediation, removal
and response actions which are necessary to maintain the value and marketability
of the Real Estate (except Real Estate owned by Maska US in Pierson Industrial
Park, Bradford, Vermont) or to otherwise comply with Environmental Laws and
Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate except where
failure to implement such activities or so comply could not reasonably be
expected to have a Material Adverse Effect; (3) notify Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or about
any Real Estate which is reasonably likely to result in Environmental
Liabilities in excess of C$500,000 or the Equivalent Amount thereof in another
currency; and (4) promptly forward to Agent a copy of any order, notice, request
for information or any communication or report received by such Credit Party in
connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities in excess of C$500,000 or the
Equivalent Amount thereof in another currency, in each case whether or not any
Canadian federal or provincial environment Ministry, the Environmental
Protection Agency or any other Governmental Authority has taken or threatened
any action in connection with any such violation, Release or other matter. If
Agent at any time has a reasonable basis to believe that there may be a
violation of any Environmental Laws or Environmental Permits by any Credit Party
or any Environmental Liability arising thereunder, or a Release of Hazardous
Materials on, at, in, under, above, to, from or about any of its Real Estate,
which, in each case, could reasonably be expected to have a Material Adverse
Effect, then each Credit Party shall, upon Agent's written request (a) cause the
performance of such environmental audits including subsurface sampling of soil
and groundwater, and preparation of such environmental reports, at Borrowers'
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance acceptable to Agent, and (b) permit
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Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater. Borrowers shall reimburse
Agent for the costs of such audits and tests and the same will constitute a part
of the Obligations secured hereunder.
5.9 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS AND BAILEE LETTERS. Each Credit
Party shall obtain a landlord's agreement, mortgagee agreement or bailee letter,
as applicable, from the lessor of each leased property or mortgagee of owned
property or with respect to any warehouse, processor or converter facility or
other location where Collateral is located, which agreement or letter shall
contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee or bailee may assert against the Inventory or Collateral at that
location, and shall otherwise be satisfactory in form and substance to Agent,
acting reasonably. With respect to such locations or warehouse space leased or
owned as of the Closing Date and thereafter, if Agent has not received a
landlord or mortgagee agreement or bailee letter as of the Closing Date (or, if
later, as of the date such location is acquired or leased), in form and
substance satisfactory to Agent, acting reasonably, either Borrower's Eligible
Inventory at that location shall, in Agent's discretion, be excluded from the
Borrowing Base or be subject to such Reserves as may be established by Agent in
its reasonable credit judgment. After the Closing Date, no real property or
warehouse space shall be leased or acquired by any Credit Party and no Inventory
shall be shipped to a processor or converter under arrangements established
after the Closing Date without the prior written consent of Agent (which
consent, in Agent's discretion, may be conditioned upon the exclusion from the
Borrowing Base of Eligible Inventory at that location or the establishment of
Reserves acceptable to Agent) or, unless and until a satisfactory landlord or
mortgagee agreement or bailee letter, as appropriate, shall first have been
obtained with respect to such location. Each Credit Party shall timely and fully
pay and perform its obligations under all leases and other agreements with
respect to each leased location or public warehouse where any Collateral is or
may be located. For the purposes of determining the eligibility of Inventory
under Section 1.7, establishing and modifying Reserves and evaluating whether a
landlord agreement, bailee letter or mortgagee agreement is in form and
substance satisfactory to Agent, acting reasonably, landlord agreements
delivered on or before the Closing Date from Alexis Nihon (Banlieue) Inc. and
Investors Group Trust Co. Ltd., 293801 Canada Inc., ZMD Sports Investments Inc.
and Taft Corners Associates shall not be considered, in form and substance,
satisfactory to Agent, acting reasonably.
5.10 FURTHER ASSURANCES. Each Credit Party executing this Agreement agrees that
it shall and shall cause each other Credit Party to, at such Credit Party's
expense and upon request of Agent, duly execute and deliver, or cause to be duly
executed and delivered, to Agent such further instruments and do and cause to be
done such further acts as may be necessary or proper in the reasonable opinion
of Agent to carry out more effectively the provisions and purposes of this
Agreement or any other Loan Document. For greater certainty, each Credit Party
agrees to take all action necessary to ensure that the Liens granted to Agent,
on behalf of itself and Lenders, and to Agent and Lenders, as applicable,
pursuant to the Collateral Documents will at all times be fully perfected first
priority Liens in and to the Collateral described therein, subject, as to
priority, only to Permitted Encumbrances.
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5.11 YEAR 2000 PROBLEMS. On or prior to December 31, 1998, each Credit Party
shall complete and deliver to Agent a Year 2000 Assessment, and on or prior to
April 30, 1999, each Credit Party shall complete and deliver to Agent a Year
2000 Corrective Plan. On or prior to June 30, 1999, each Credit Party shall
implement Year 2000 Corrective Actions. On or before September 30, 1999, each
Credit Party shall complete Year 2000 Corrective Actions, and Year 2000
Implementation Testing and shall remediate all Year 2000 Problems, except where
the failure to remediate the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.
SECTION 6 -- NEGATIVE COVENANTS
Each Credit Party executing this Agreement agrees on its own behalf and,
to the extent not prohibited or restricted under applicable law, on behalf of
all other Credit Parties that, without the prior written consent of Agent and
the Requisite Lenders, from and after the date hereof until the Termination
Date:
6.1 AMALGAMATIONS, SUBSIDIARIES, ETC. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (x) form or acquire any
Subsidiary, or (y) amalgamate or merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with
or acquire, any Person, except that Maska Canada may amalgamate with Tropsport,
US Borrowers may merge with each other and the other US Subsidiary Guarantors,
together with Ultimate Parent, may merge with each other, (in each case, a
"PERMITTED AMALGAMATION"; the continuing corporation from such Permitted
Amalgamation of Borrowers, the "CONTINUING BORROWER"; and, the surviving
corporation from a Permitted Amalgamation of the other Credit Parties, the
"CONTINUING CREDIT PARTY"); provided that:
(1) Agent shall receive at least thirty (30) days' prior written notice
of any such proposed Permitted Amalgamation, which notice shall
include a reasonably detailed description of such proposed Permitted
Amalgamation;
(2) in any Permitted Amalgamation of Borrowers, Continuing Borrower
shall have been amalgamated under the laws of New Brunswick; in any
Permitted Amalgamation among the other Credit Parties, Continuing
Credit Party shall have been merged under the laws of a State of the
United States; Ultimate Parent shall be the survivor in any such
merger to which it is a party; after giving effect to such Permitted
Amalgamation of Borrowers, Ultimate Parent shall hold direct legal
and beneficial title to all of the issued and outstanding capital
Stock of Continuing Borrower; and, after giving effect to any
Permitted Amalgamation, Ultimate Parent shall hold direct or
indirect legal and beneficial title to all of the issued and
outstanding capital Stock of all Continuing Credit Parties;
(3) at the closing of, and upon giving effect to, any such Permitted
Amalgamation, (a) Continuing Borrower, if applicable, shall have
assumed all obligations of the amalgamating Borrowers under all Loan
Documents to which such Borrowers are
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parties and the other Credit Parties (including any Continuing
Credit Parties, if applicable), shall have confirmed and
acknowledged their continuing Guarantees and all other obligations
under the Loan Documents in form and substance satisfactory to
Agent, acting reasonably; (b) Continuing Borrower, if applicable,
shall grant to Agent, on behalf of Agent and Lenders, and to Agent
and Lenders, as appropriate, first priority perfected Liens (subject
to Permitted Encumbrances) in all assets of the Continuing Borrower
after giving effect to such Permitted Amalgamation; and Ultimate
Parent shall grant to Agent and Lenders a perfected security
interest in and hypothec on all issued and outstanding Stock of
Continuing Borrower together with a Stock power of attorney executed
in blank; and (c) Agent and Lenders shall have received copies of
such other documents, instruments, agreements, waivers, consents,
legal opinions, search results and certificates as Agent may
reasonably request in connection with such transactions, all in form
and substance reasonably satisfactory to it; and
(4) at the time of such Permitted Amalgamation and after giving effect
thereto, no Default or Event of Default shall have occurred and be
continuing.
6.2 INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly permitted by
this Section 6, no Credit Party shall make or permit to exist any investment in,
or make, accrue or permit to exist loans or advances of money to, any Person,
through the direct or indirect lending of money, holding of securities or
otherwise, except that (1) Borrowers may hold investments comprised of notes
payable, or stock or other securities issued by Account Debtors to either
Borrower pursuant to negotiated agreements with respect to settlement of such
Account Debtor's Accounts in the ordinary course of business, so long as the
aggregate amount of such Accounts so settled by Borrowers does not exceed at any
time, C$2,000,000 or the Equivalent Amount thereof in another currency;
provided, that such notes, Stock or other securities are delivered promptly to
Agent and Agent, for itself and Lenders, or Agent and Lenders, as appropriate,
will have first priority perfected Liens in such investments; (2) each Credit
Party may maintain its existing investments in its Subsidiaries and CCM as of
the Closing Date; (3) Credit Parties may hold Cash Equivalents subject to
Control Letters in favour of Agent for the benefit of itself and Lenders or
otherwise subject to first priority perfected Liens in favour of Agent for the
benefit of itself and Lenders, or Agent and Lenders, as appropriate; (4) Credit
Parties may make loans and advances to their respective officers and employees
in the ordinary course of business and consistent with past practices, not to
exceed, in the aggregate amount outstanding at any time, for all Credit Parties,
US$1,000,000 or the Equivalent Amount thereof; (5) Credit Parties may extend
trade credit in the ordinary course of business; and (6) Credit Parties may make
advances to suppliers not to exceed, in the aggregate amount outstanding at any
time, for all Credit Parties, US$500,000 or the Equivalent Amount thereof, for
the purposes of prepaying the purchase price of goods or services.
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6.3 INDEBTEDNESS.
(1) No Credit Party shall create, incur, assume or permit to exist any
Indebtedness, except (without duplication) (a) Indebtedness secured by purchase
money security interests and Capital Leases permitted in Section 6.7(3), (b) the
Loans and the other Obligations, (c) unfunded pension fund and other employee
benefit plan obligations and liabilities to the extent they are permitted to
remain unfunded under applicable law, (d) (i) existing Indebtedness described in
Disclosure Schedule 6.3, (ii) with respect to the US Borrowers, Indebtedness
under the US Facility not to exceed US$35,000,000 and (iii) with respect to
Ultimate Parent, Indebtedness under the Term Loan not to exceed the Equivalent
Amount in Canadian Dollars of US$47,500,000 less, at any time, the aggregate
amount thereof repaid and, with respect to Maska Canada, Indebtedness under the
Term Loan not to exceed the Equivalent Amount in Canadian Dollars of
US$40,000,000 less, at any time, the aggregate amount thereof repaid and, with
respect to Indebtedness permitted under each of the foregoing clauses (a) and
(d) (i), refinancings thereof or amendments or modifications thereto which do
not have the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same) and which are otherwise on
terms and conditions no less favourable to any Credit Party, Agent or any
Lender, as determined by Agent, acting reasonably, than the terms of the
Indebtedness being refinanced, amended or modified, (e) Indebtedness under
interest rate and currency hedging arrangements entered into in the ordinary
course of a Credit Party's business, consistent with past practices, (f)
Indebtedness of SHC to Ultimate Parent in the amount of US$58,750,000 payable on
demand resulting from an intercompany advance made by Ultimate Parent to US
Acquisition Sub with the proceeds of the Term Loan and the Phoenix Investment
for the purpose of consummating the transactions contemplated by the US
Acquisition, (g) Indebtedness in the form of loans made by Maska Canada and
Maska US to Ultimate Parent that are payable on demand and do not exceed,
individually or in the aggregate for all such loans, in any Fiscal Year,
US$900,000 or the Equivalent Amount thereof (on a pro-rata basis, based on
EBITDA of Borrowers (on a consolidated basis), in the case of such loans to be
made by Maska Canada, and of US Borrowers (on a combined basis), in the case of
loans to be made by Maska US, for the Fiscal Quarter most recently ended before
any such loan) for the purposes of paying the necessary fees and expenses to
maintain Ultimate Parent's corporate existence, the reasonable costs of its
directors' and officers' insurance, its legal and accounting fees to the extent
such fees relate to legal and accounting services provided directly to it by
entities that are not its Affiliates, and its other general, administrative and
regulatory fees, (h) Indebtedness in the form of loans made by Maska Canada to
Maska US that are payable on demand and the proceeds of which are used for the
purpose of paying trade creditors of Maska US, in an aggregate amount
outstanding not to exceed, at any time, C$1,000,000 or the Equivalent Amount
thereof; (i) Indebtedness in the form of loans made by Maska US to Ultimate
Parent for the purpose of paying, to the extent otherwise expressly permitted in
this Agreement, up to ninety percent (90%) of fifty-four percent (54%) of
regularly scheduled interest payments on, and prepayments of principal of, the
Term Loan and regularly scheduled agency fees and other charges in respect of
the Term Loan; (j) indemnity obligations of Ultimate Parent or any of its
Subsidiaries (other than Borrowers or US Borrowers) in favour of the directors
or officers of Ultimate Parent or any of its Subsidiaries in respect of all
costs, charges and expenses incurred by them by reason of any action taken in
their
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capacity as such; (k) Indebtedness in the form of loans made by Tropsport to SHC
Hockey for the purpose of paying trade creditors of SHC Hockey, in an aggregate
amount outstanding not to exceed, at any time, C$75,000 or the Equivalent Amount
thereof; and (l) Indebtedness in the form of intercompany loans made on the
Closing Date described under "Intercompany Loans" in Disclosure Schedule 1.4;
provided that, in the cases of clauses (f), (g), (h), (i), (j), (k) and (l), (A)
each Credit Party shall record all intercompany transactions to which it is a
party on its books and records in accordance with GAAP; (B) at the time any such
intercompany loan is made by a Credit Party and after giving effect thereto,
each Credit Party party thereto shall be Solvent; (C) such intercompany loan
would not be prohibited by any applicable law (including financial assistance
and fraudulent conveyance provisions, if any, thereunder) and (D) no Default or
Event of Default has occurred that is continuing or would occur and be
continuing after giving effect to any such proposed intercompany loan; and
provided, further, that in the case of clause (i), if such intercompany loan is
made, in whole or in part, for the purpose of making a prepayment of principal
on the Term Loan under clause (i), then the Fixed Charge Coverage Ratio,
calculated on a pro forma basis, after giving effect to the aggregate amount of
such prepayment of principal of the Term Loan and based on the financial results
of Ultimate Parent for the four Fiscal Quarters then most recently ended, shall
not be less than 1.25:1 and Ultimate Parent shall have delivered to Agent and
Lenders, prior to such payment being made, a certificate of the Senior
Vice-President, Finance showing in reasonable detail the calculation used in
determining compliance with the foregoing financial test and certifying that the
other financial covenants set forth on Annex G shall be met, on a pro forma
basis, after giving effect to such prepayment of principal.
(2) The payment of any of the obligations of Maska Canada and Maska US under the
intercompany loans made by Ultimate Parent permitted in Section 6.3(1)(l) above
(the "SUBORDINATED OBLIGATIONS") shall hereby be subordinated to the extent and
in the manner provided for herein, to the prior payment in full of all
Obligations. Upon any distribution of assets of Maska Canada or Maska US in any
dissolution, winding up, liquidation or reorganization (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):
(a) Agent and Lenders shall first be entitled to receive payment in full
in cash of the Obligations before Ultimate Parent is entitled to
receive any payment on account of the Subordinated Obligations;
(b) any payment or distribution of assets of Maska Canada or Maska US of
any kind or character, whether in cash, property or securities, to
which Ultimate Parent would be entitled except for the provisions of
this Section 6.3(2), shall be paid by the trustee or agent or other
Person making such payment or distribution directly to Agent in the
manner set forth in this Agreement, to the extent necessary to make
payment in full of all Obligations remaining unpaid after giving
effect to any concurrent payment or distribution or provisions
therefor to Agent for itself and Lenders; and
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(c) in the event that notwithstanding the foregoing provisions of this
Section 6.3(2), any payment or distribution of assets of Maska
Canada or Maska US of any kind or character, whether in cash,
property or securities, shall be received by Ultimate Parent on
account of the Subordinated Obligations before all Obligations are
paid in full, such payment or distribution shall be received and
held in trust for and shall be paid over to Agent for itself and
Lenders for application to the payment of the Obligations until all
of the Obligations shall have been paid in full, after giving effect
to any concurrent payment or distribution or provision therefor to
Agent for itself and Lenders.
No right of Agent or any Lender to enforce the subordination provisions herein
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of a Credit Party or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by a Credit Party with the
terms of this Agreement, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with.
(3) No Credit Party shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness, other than (a) the Obligations, (b)
Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with Sections
6.8(2) or 6.8(3), (c) other Indebtedness (excluding the Term Loan) not in excess
of C$250,000 or the Equivalent Amount thereof in another currency, and (d)
Indebtedness under the Term Loan permitted to be prepaid under Section 6.14.
6.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.
(1) No Credit Party shall enter into or be a party to any transaction with any
other Credit Party or any Affiliate thereof except (a) in the ordinary course of
and pursuant to the reasonable requirements of such Credit Party's business, (b)
in compliance with applicable financial assistance and fraudulent conveyance
provisions, if any, under applicable laws and (c) upon fair and reasonable terms
that are no less favourable to such Credit Party than would be obtained in a
comparable arm's length transaction with a Person not an Affiliate of such
Credit Party. If such transaction is between a Borrower and another Credit Party
that is not a Borrower, the requirements in the immediately preceding sentence
shall apply except that, with reference to clause (c), the transaction shall be
upon fair and reasonable terms that are no less favourable to such Borrower than
would be obtained in a comparable arm's length transaction with a Person not an
Affiliate of such Borrower. In addition, if any such transaction or series of
related transactions involves payments in excess of C$250,000 or the Equivalent
Amount thereof in another currency in the aggregate, the terms of these
transactions must be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described on Disclosure Schedule
6.4(1).
(2) No Credit Party shall enter into any lending or borrowing transaction with
any employees of any Credit Party, except loans to its employees and officers,
as permitted under Section 6.2(4).
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6.5 CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall (1) make any changes
in any of its business objectives, purposes or operations which could in any way
materially adversely affect (as determined by Agent, acting reasonably) the
repayment of the Loans or any of the other Obligations or could reasonably be
expected to have or result in a Material Adverse Effect, (2) make any change in
its capital structure as described on Disclosure Schedule 3.8, including the
issuance of any shares of Stock, Stock purchase warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock,
except that Ultimate Parent may make a Public Offering of its common Stock or
issue employee stock options or warrants to purchase common Stock or issue Stock
pursuant to the exercise of warrants or as payments in kind in connection with
the Phoenix Investment so long as (a) the proceeds thereof are applied in
prepayment of the Obligations as required by Section 1.3(2)(c), (b) no Change of
Control occurs after giving effect thereto, and (c) any preferred Stock issued
by Ultimate Parent, including in connection with the Phoenix Investment, shall
only contain rights to dividends payable in kind and not in cash, (3) amend its
constating documents or bylaws in a manner which would adversely affect Agent or
Lenders or such Credit Party's duty or ability to repay the Obligations, or (4)
take any action to continue its corporate existence, or cause any other Credit
Party to continue its corporate existence, under the laws of another
jurisdiction (except in connection with or pursuant to a Permitted
Amalgamation). No Credit Party shall engage in any business other than the
sporting goods and sporting apparels business and the distribution of Merrell
products worldwide and businesses and activities reasonably related thereto. At
all times prior to the termination of this Agreement, Ultimate Parent shall not
cease to hold directly legal and beneficial title to all of the capital stock of
Maska Canada and Maska Canada shall not cease to hold directly all legal and
beneficial title to Tropsport (subject, in each case, to the Permitted
Amalgamation) and, immediately following the Permitted Amalgamation becoming
effective, Ultimate Parent shall hold directly, legal and beneficial title to
all of the capital Stock of Continuing Borrower.
6.6 GUARANTEED INDEBTEDNESS. No Credit Party shall create, incur, assume or
permit to exist any Guaranteed Indebtedness except (1) by endorsement of
instruments or items of payment for deposit to the general account of any Credit
Party, and (2) for Guaranteed Indebtedness incurred for the benefit of any other
Credit Party if the primary obligation is permitted by this Agreement, and, for
greater certainty, each Borrower shall be entitled to guarantee trade
indebtedness incurred by the other Borrower on an unsecured basis in the
ordinary course of business.
6.7 LIENS. No Credit Party shall create, incur, assume or permit to exist any
Lien on or with respect to its Accounts or any of its other properties or assets
(whether now owned or hereafter acquired) except for (1) Permitted Encumbrances;
(2) Liens in existence on the date hereof and summarized on Disclosure Schedule
6.7; (3) Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations
(for all Credit Parties) of not more than US$7,000,000 or the Equivalent Amount
thereof in another currency outstanding at any one time for all such Liens
(provided that such Liens attach only to the assets subject to such purchase
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money debt and such Indebtedness is incurred within thirty-five (35) days
following such purchase and does not exceed 100% of the purchase price of the
subject assets); (4) Liens of the US Lenders and the US Agent in the Collateral
securing Indebtedness and Guaranteed Indebtedness under the US Facility subject
to the Intercreditor Agreement and to the extent such Indebtedness and
Guaranteed Indebtedness is permitted by Sections 6.3(1) and 6.6, as applicable
(the "US FACILITY LIENS"); and (5) Liens of the Caisse Secured Parties in the
Collateral securing Indebtedness and Guaranteed Indebtedness under the Term Loan
to the extent such Liens are subject to the Intercreditor Agreement and such
Indebtedness and Guaranteed Indebtedness is permitted by Sections 6.3(1) and
6.6, as applicable, (the "TERM LOAN LIENS"). No Credit Party shall create,
incur, assume or permit to exist, or permit to be created, incurred or assumed,
any Lien on the Intellectual Property of any European Subsidiary other than
Liens of the Caisse Secured Parties. In addition, no Credit Party shall become a
party to any agreement, note, indenture or instrument, or take any other action,
which would prohibit the creation of a Lien on any of its properties or other
assets in favour of Agent, on behalf of itself and Lenders, or the Lenders, as
applicable, as additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses, the US Facility Agreement or the Term Loan
Agreement which prohibit additional Liens upon the assets that are subject
thereto.
6.8 SALE OF STOCK AND ASSETS. No Credit Party shall sell, transfer, convey,
assign or otherwise dispose of any of its properties or other assets, including
its Stock or the capital Stock of any of its Subsidiaries or CCM (whether in a
public or a private offering or otherwise) or any of their Accounts, other than
(1) the sale of Inventory in the ordinary course of business, (2) the sale,
transfer, conveyance or other disposition by a Credit Party of Equipment,
Fixtures or Real Estate that are obsolete or no longer used or useful in such
Credit Party's business, (3) other Equipment and Fixtures having a value not
exceeding C$250,000 or the Equivalent Amount thereof in another currency in any
single transaction or C$750,000 or the Equivalent Amount thereof in another
currency in the aggregate in any Fiscal Year, and (4) any issuances of Stock
permitted under Section 6.5. With respect to any disposition of assets or other
properties permitted pursuant to clause (2) and clause (3) above, Agent and
Lenders, if applicable, agree on reasonable prior written notice to release
their Liens on such assets or other properties in order to permit the applicable
Credit Party to effect such disposition and shall execute and deliver to
Borrowers, at Borrowers' expense, appropriate financing change statements and
other releases as reasonably requested by Borrowers.
6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA Affiliate
to, cause or permit to occur an event which could result in the imposition of a
Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or
permit to occur an ERISA Event to the extent such ERISA Event could reasonably
be expected to have a Material Adverse Effect.
6.10 FINANCIAL COVENANTS. Borrowers shall not breach or fail to comply with any
of the Financial Covenants (the "FINANCIAL COVENANTS") set forth in Annex G.
6.11 HAZARDOUS MATERIALS. No Credit Party shall cause or permit a Release of any
Hazardous Material on, at, in, under, above, to, from or about any of the Real
Estate where such Release
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would (1) violate in any respect, or form the basis for any Environmental
Liabilities under, any Environmental Laws or Environmental Permits or (2)
otherwise adversely impact the value or marketability of any of the Real Estate
or any of the Collateral, other than such violations or impacts which could not
reasonably be expected to have a Material Adverse Effect.
6.12 SALE-LEASEBACKS. No Credit Party shall engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets.
6.13 CANCELLATION OF INDEBTEDNESS. No Credit Party shall cancel any claim or
debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14 RESTRICTED PAYMENTS. No Credit Party shall make any Restricted Payment,
except (1) dividends and distributions by Subsidiaries of either Borrower paid
to such Borrower, (2) employee loans permitted under Section 6.4(2) above, (3)
payment on the Closing Date of management fees by Ultimate Parent to Ultimate
Parent Stockholders in the aggregate amount of US$1,000,000 in connection with
services provided in closing the Related Transactions, (4) dividend payments in
kind (that is, in the form of common Stock) including, without limitation, in
respect of the Phoenix Investment; (5) Ultimate Parent may issue common Stock
issuable upon the exercise of warrants or options, as permitted under Section
6.5; (6) payments by Ultimate Parent and Maska Canada of the Equivalent Amount
in Canadian Dollars of US$5,000,000 of outstanding principal on the Term Loan
and prepayment fees with respect thereto of the Equivalent Amount in Canadian
Dollars of US$825,000, such principal and fees to be paid on or after the second
anniversary of the Closing Date if the maturity of the Term Loan is extended to
a date at least one year from the second anniversary of the Closing Date; (7)
loans by Maska Canada and Maska US to Ultimate Parent in the form, on the terms
and to the extent permitted under Section 6.3(1)(g) and loans by Maska US to
Ultimate Parent in the form, on the terms and to the extent permitted under
Section 6.3(1)(i); (8) Ultimate Parent and Maska Canada may prepay the principal
of the Term Loan, as permitted under the Term Loan Agreement, provided, that (a)
the amount of Ultimate Parent's prepayment shall not exceed fifty-four percent
(54%) of the amount being prepaid and the amount of Maska Canada's prepayment
shall not exceed forty-six percent (46%) of the amount being prepaid; (b)
Requisite Lenders shall have given their prior consent to each prepayment,
exercising their reasonable credit judgment, (c) after giving effect to each
prepayment, Net Borrowing Availability shall be at least fifteen percent (15%)
of the lesser of the Maximum Amount and the Aggregate Borrowing Base, and, (d)
the Fixed Charge Coverage Ratio, calculated on a pro forma basis, after giving
effect to the aggregate amount of such prepayments of principal under the Term
Loan and based on the financial results of Ultimate Parent for the four Fiscal
Quarters then most recently ended, shall not be less than 1.25:1 and Ultimate
Parent shall have delivered to Agent and Lenders, prior to each payment being
made, a certificate of the Senior Vice-President, Finance showing in reasonable
detail the calculation used in determining compliance with the foregoing
financial test and certifying that the other financial covenants set forth on
Annex G shall be met, on a pro forma basis, after giving effect to such
prepayment of principal; and (9) Ultimate Parent and Maska Canada may pay (on a
pro rata basis based on the amounts that their respective portions
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of the Term Loan (as described in Section 6.3(1)(d)(iii)) represent of the total
Term Loan) regularly scheduled interest, agency fees and other charges in
respect of the Term Loan; provided that, in the cases of clauses (3), (6), (7),
(8) and (9), no Default or Event of Default shall have occurred and be
continuing or would result after giving effect to any payment under such
clauses; and provided further, that at least ten percent (10%) of Ultimate
Parent's payments under clauses (8) and (9) shall be obtained or contributed
from Subsidiaries of Ultimate Parent other than the Credit Parties.
6.15 CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR. No Credit
Party shall (1) change its corporate name, or (2) change its chief executive
office, principal place of business, domicile (within the meaning of Quebec
Civil Code), corporate offices or warehouses or locations at which Collateral is
held or stored, or the location of its records concerning the Collateral, in any
case without at least thirty (30) days' prior written notice to Agent and after
Agent's written acknowledgment (not to be unreasonably delayed) that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favour of Agent, on behalf of Agent and
Lenders, or in favour of Agent and Lenders, as appropriate, in any Collateral,
has been completed or taken (provided that, in requesting any reasonable action
be taken, Agent shall acknowledge the limitation periods under applicable law
for taking appropriate actions in order to ensure the continuation of perfection
of such Liens), and provided that any such new location shall be in Canada or
the United States of America. So long as any Lien (other than the Liens
specified in clauses (3), (4) and (5) of Section 6.7 and the Liens of Agent and
Lenders) is registered against any Credit Party in respect of Collateral located
at 110 Lauder St., Cowansville, Quebec, no Collateral shall be held or stored at
such location. No Collateral (except office furniture) shall be stored or held
at 6531-6559 Mississauga Road, Mississauga, Ontario unless and until a
landlord's agreement in form and substance satisfactory to Agent, acting
reasonably, has been delivered to Agent with respect to such location. No Credit
Party shall change its Fiscal Year without the prior written consent of Agent,
not to be unreasonably withheld.
6.16 NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Credit Party shall directly or
indirectly enter into or become bound by any agreement, instrument, indenture or
other obligation (other than this Agreement and the other Loan Documents, the US
Facility Agreement and the Term Loan Agreement) which could directly or
indirectly restrict, prohibit or require the consent of any Person with respect
to the payment of dividends or distributions or the making or repayment of
intercompany loans by such Credit Party to any Credit Party or between Credit
Parties.
6.17 NO SPECULATIVE TRANSACTIONS. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies
receivable or payable by it and interest swaps, caps or collars.
6.18 CHANGES RELATING TO OTHER INDEBTEDNESS. No Credit Party shall change or
amend the terms of the Term Loan as in effect on the Closing Date (or any
indenture or agreement in
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connection therewith) if the effect of such amendment is to: (1) increase the
interest rate on such Indebtedness; (2) change the dates upon which payments of
principal or interest are due on such Indebtedness other than to extend such
dates; (3) change any default or event of default other than to delete or make
less restrictive any default provision therein, or add any covenant with respect
to such Indebtedness; (4) change the redemption or prepayment provisions of such
Indebtedness other than to extend the dates therefor or to reduce the premiums
payable in connection therewith; (5) grant any security or collateral to secure
payment of such Indebtedness other than the Liens granted as of the Closing Date
on the Collateral; or (6) change or amend any other term if such change or
amendment would increase the obligations of the obligor or confer additional
rights to the Term Lenders in a manner materially adverse to any Credit Party,
Agent or any Lender, as determined by Agent in its discretion, acting
reasonably.
6.19 CREDIT PARTIES OTHER THAN BORROWERS; INACTIVE SUBSIDIARIES; CCM. No Credit
Party, other than Borrowers or US Borrowers, shall engage in any trade or
business, or own any assets (other than Stock of their Subsidiaries; in the case
of SLM Trademark US and Canadian Subsidiary Guarantor, Intellectual Property; in
the case of Canadian Subsidiary Guarantor, Stock of CCM; and, in the case of
Ultimate Parent, the Account owing by SHC resulting from the transaction
described in Section 6.3(1)(f) and the Accounts owing to Ultimate Parent from
other Credit Parties resulting from loans made on the Closing Date described
under "Intercompany Loans" in Disclosure Schedule 1.4). No Credit Party shall
permit CCM to engage in any trade or business other than owning and licensing
Intellectual Property. No Credit Party shall permit any Inactive Subsidiary to
engage in any trade or business, own any assets (other than tax credits and a
nominal amount of cash to pay contingent tax liabilities) or have any
Indebtedness or other liabilities. On or before January 1, 2000, Ultimate Parent
shall provide Agent with a certificate of the Senior Vice-President, Finance of
Ultimate Parent certifying as to the date by which the Credit Parties propose to
dissolve each Inactive Subsidiary together with reasonable details of the
business rationale for the necessity of the period proposed prior to such
dissolution, all in form and substance satisfactory to Agent, acting reasonably.
Credit Parties shall dissolve each Inactive Subsidiary existing under the laws
of Canada or the United States of America, or any political subdivision thereof,
on or before the relevant date set out in such certificate; provided that, if
the business rationale for the period proposed prior to dissolution of an
Inactive Subsidiary, as provided in such certificate, is unsatisfactory to
Agent, acting reasonably, the Credit Parties shall dissolve such Inactive
Subsidiary on such earlier date as Agent may specify, acting reasonably.
6.20 DEPOSIT AND DISBURSEMENT ACCOUNTS. Neither Borrower shall maintain any
deposits and/or other accounts and/or Lock Boxes except as described in
Disclosure Schedule 3.18, as amended from time to time in accordance with Annex
C. No Credit Party shall make any transfer or deposit of funds to any account in
contravention of this Agreement or any applicable fraudulent conveyance or
financial assistance provisions, if any, under applicable laws.
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6.21 INTELLECTUAL PROPERTY LICENCES; CCM SHAREHOLDER'S AGREEMENT. No Credit
Party shall fail or omit to take all action necessary to ensure that it and each
of its Subsidiaries complies with and keeps in full force and effect all
provisions of each Licence of Intellectual Property granted to it by CCM, NHL
Enterprises Canada, L.P. and NHL Enterprises, L.P., and the European
Subsidiaries. With respect to each Licence of Intellectual Property granted to a
Credit Party by any Person other than CCM, NHL Enterprises Canada, L.P., NHL
Enterprises L.P. and the European Subsidiaries, no Credit Party shall fail or
omit to take all action necessary to ensure that it and each of its Subsidiaries
complies with and keeps in full force and effect all provisions of each such
Licence granted to it to the extent such Licence is material to the conduct of
its business. Canadian Subsidiary Guarantor shall not fail or omit to take any
action necessary to ensure that it complies in all material respects with its
obligations under the CCM Shareholders Agreement and shall not amend, waive or
otherwise modify the terms of the CCM Shareholders Agreement existing as of the
Closing Date or vote, take any action or omit or fail to vote or take any action
under the CCM Shareholders Agreement, if such amendment, waiver, other
modification, vote, action, omission or failure would increase its obligations
or otherwise adversely affect its interests thereunder or the Agent's and
Lenders' interests under the Consent and Acknowledgement Respecting Intellectual
Property executed by CCM and acknowledged by Gestion Pro-Velo Inc.
6.22 LOCATIONS LEASED FROM DESIGNATED QUEBEC LANDLORDS AND TAFT CORNERS
ASSOCIATES. After the Closing Date, no Credit Party shall amend (if such
amendment would increase its obligations under such lease or confer any
additional rights on the landlord thereunder), renew or extend any existing
lease with respect to any leased location in Quebec existing as of the Closing
Date as set out on Disclosure Schedule 3.26, or execute any new lease with
respect to any such leased location without the prior consent of Agent in
writing. Moreover, Agent shall be given thirty (30) days' prior written notice
of the entering into of such amendment, renewal, extension or lease and shall be
provided with details of all proposed rents, security deposits, term of renewal,
and all other additional material terms of such amendment, renewal, extension or
lease, as Agent may reasonably request. Borrowers shall notify Agent of each
reduction of any security deposit made by a Credit Party with a landlord prior
to the reduction being made and of any change in either Borrower's obligation to
pay rent monthly in advance no later than the first day of each month. If Credit
Parties propose to amend, renew or extend the lease with respect to 139 Harvest
Lane, Williston, Vermont, Credit Parties shall, prior to agreeing to any such
amendment, renewal or extension, use all commercially reasonable efforts to
obtain a new landlord's agreement from the lessor of such property on such terms
as are, in form and substance, satisfactory to Agent, acting reasonably.
6.23 INVENTORY AT WAREHOUSE AND DISTRIBUTION FACILITIES. No Credit Party shall
keep or maintain:
(1) at any manufacturing facility (other than 375 Sligo Road, Mount
Forest, Ontario), any finished goods Inventory, having an aggregate
value, in respect of each such location, in excess of US$2,000,000,
or the Equivalent Amount thereof;
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(2) at any warehouse or distribution facility which is owned by a Credit
Party or located at a manufacturing facility, any finished goods
Inventory having an aggregate value, in respect of each such
location, in excess of US$15,000,000, or the Equivalent Amount
thereof; and
(3) at 77 Route 25, Bradford, Vermont, any finished goods Inventory
having an aggregate value in excess of US$10,000,000, or the
Equivalent Amount thereof.
6.24 MANUFACTURING FACILITIES; WAREHOUSE AND DISTRIBUTION FACILITIES; OFFICES.
On and after the first anniversary of the Closing Date, no Credit Party shall
maintain or keep any Offices (except the Offices of Maska Canada located at 375
Sligo Road, Mount Forest, Ontario) at any location except locations for which
the Accounts Liquidation Period is a minimum of 180 days under the Intercreditor
Agreement. No Credit Party shall acquire, without the prior consent of Agent,
any of the following facilities:
(1) any manufacturing facility (by lease, purchase or otherwise),
(2) any warehouse or distribution facility, if such facility would be
owned by a Credit Party, or, otherwise, located at a manufacturing
facility, or
(3) any Offices, if such Offices would be owned by a Credit Party or,
otherwise, located at any manufacturing facility.
No Credit Party shall convert, change or otherwise modify any of its facilities
if as a result thereof the Liquidation Period applicable thereto under the
Intercreditor Agreement would be shorter than exists on the Closing Date.
SECTION 7 -- TERM
7.1 TERMINATION. The financing arrangements contemplated hereby shall be in
effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING ARRANGEMENTS. Except
as otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under this Agreement shall in any way affect or impair the obligations, duties
and liabilities of the Credit Parties or the rights of Agent and Lenders
relating to any unpaid portion of the Loans or any other Obligations, due or not
due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is required after the Commitment Termination Date. Except
as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon the Credit Parties, and all rights of Agent and each Lender, all as
contained in the Loan Documents, shall not terminate or expire, but rather shall
survive any such termination or
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cancellation and shall continue in full force and effect until the Termination
Date; provided however, that in all events the provisions of Section 11, the
payment obligations under Sections 1.15 and 1.16, and the indemnities contained
in the Loan Documents shall survive the Termination Date.
SECTION 8 -- EVENTS OF DEFAULT: RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "EVENT OF DEFAULT"
hereunder:
(1) either Borrower (a) fails to make any payment of principal of, or
interest on, or Fees owing in respect of, the Loans or any of the
other Obligations when due and payable, or (b) fails to pay or
reimburse Agent or Lenders for any expense reimbursable hereunder or
under any other Loan Document within ten (10) days following Agent's
demand for such reimbursement or payment of expenses;
(2) any Credit Party shall fail or neglect to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 5.4, 6 or clause 11(iii)
of Annex E, or any of the provisions set forth in Annexes C or G,
respectively;
(3) any Credit Party shall fail or neglect to perform, keep or observe
any of the provisions of Section 4 or any provisions set forth in
Annexes E or F, respectively, and (a) in the case of any provision
set forth in Annex E (except clauses 6 and 11(iii) thereof) the same
shall remain unremedied for five (5) Business Days or more, and (b)
in all other cases (except clause 11(iii) of Annex E), the same
shall remain unremedied for three (3) days or more;
(4) any Credit Party shall fail or neglect to perform, keep or observe
any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any
other clause of this Section 8.1) and the same shall remain
unremedied for twenty-five (25) days or more;
(5) a default or breach shall occur under any other agreement, document
or instrument to which any Credit Party is a party which is not
cured within any applicable grace period, and such default or breach
(a) involves the failure to make any payment when due in respect of
any Indebtedness (other than the Obligations) of any Credit Party,
individually, or of all Credit Parties, considered together, in
excess of US$1,500,000 (or the Equivalent Amount thereof in another
currency) in the aggregate, or (b) causes, or permits any holder of
such Indebtedness or a trustee to cause, Indebtedness or a portion
thereof in excess of US$1,500,000 (or the Equivalent Amount thereof
in another currency) in the aggregate to become due prior to its
stated maturity or prior to its regularly scheduled dates of
payment, regardless of whether such right is exercised, by such
holder or trustee;
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(6) any information contained in any Borrowing Base Certificate is
untrue or incorrect (unless immaterial and inadvertent) in any
respect, or any representation or warranty herein or in any Loan
Document or in any written statement, report, financial statement or
certificate (other than a Borrowing Base Certificate) made or
delivered to Agent or any Lender by any Credit Party is untrue or
incorrect in any material respect as of the date when made or deemed
made;
(7) assets of any one Credit Party or more than one Credit Party, with a
fair market value of US$1,500,000 (or the Equivalent Amount thereof
in another currency) or more shall be attached, seized, levied upon
or subjected to execution, garnishment, distress or any other
similar process, or come within the possession of any receiver,
trustee, custodian, liquidator, administrator, sequestrator,
sheriff, bailiff or assignee for the benefit of creditors of such
Credit Party or Credit Parties and such process, possession or other
condition shall not, within thirty (30) days after the commencement
thereof, have been discharged, released or execution thereof stayed
or bonded pending appeal, or shall not have been discharged or
released prior to the expiration of any such stay;
(8) any involuntary case or proceeding (including the filing of any
notice in respect thereof) is commenced against any Credit Party
under any Insolvency Law, any incorporation law or other applicable
law in any jurisdiction in respect of the:
(a) bankruptcy, liquidation, winding-up, dissolution or suspension
of general operations,
(b) composition, rescheduling, reorganization, arrangement or
readjustment of, or other relief from, or stay of proceedings
to enforce, some or all of the debts or obligations,
(c) appointment of a trustee, interim receiver, receiver, receiver
and manager, liquidator, administrator, custodian,
sequestrator, agent or other similar official for, or for all
or a substantial part of the assets, or
(d) possession, foreclosure, seizure or retention, sale or other
disposition of, or other proceedings to enforce security over,
all or a substantial part of the assets,
of any Credit Party and such case or proceeding shall remain
undismissed or unstayed for sixty (60) days or more or such court
shall enter a decree or order granting the relief sought in such
case or proceeding;
(9) any Credit Party (a) shall commence or fail to contest in a timely
and appropriate manner or shall consent to the institution of
proceedings referred to in Section 8.1(8) above or to the filing of
any such petition or to the appointment of or taking
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possession by a custodian, receiver, liquidator, assignee, trustee
or sequestrator (or similar official) of any Credit Party or of any
substantial part of any such Person's assets or (b) shall take any
corporate action in furtherance of any of the foregoing or of any of
the proceedings referred to in Section 8.1(8) above or (c) shall
admit in writing its inability to pay its debts as such debts become
due or (d) shall become insolvent;
(10) a final judgment or judgments for the payment of money in excess of
US$1,500,000 (or the Equivalent Amount thereof in another currency)
in the aggregate at any time outstanding shall be rendered against
any one Credit Party or more than one Credit Party, and the same
shall not, within thirty (30) days after the entry thereof, have
been discharged or execution thereof stayed or bonded pending
appeal, or shall not have been discharged prior to the expiration of
any such stay;
(11) any material provision of any Loan Document shall for any reason
cease to be valid, binding and enforceable in accordance with its
terms (or any Credit Party or European Subsidiary or other Person
that is a party thereto shall challenge the enforceability of any
Loan Document or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of any of
the Loan Documents has ceased to be or otherwise is not valid,
binding and enforceable in accordance with its terms), or any
security interest created under any Loan Document shall cease to be
a valid and perfected first priority security interest or Lien
(except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby;
(12) any Change of Control shall occur; or
(13) any event shall occur, which is not fully insured (except to the
extent of the deductible amount) as a result of which
revenue-producing activities cease or are substantially curtailed at
any facility of Borrowers generating more than 30% of Borrowers'
consolidated revenues for the Fiscal Year preceding such event and
such cessation or curtailment continues for more than 20 days.
8.2 REMEDIES.
(1) If any Event of Default shall have occurred and be continuing, or if a
Default shall have occurred and be continuing and Agent or Requisite Lenders
shall have determined not to make any Revolving Credit Advances or Swing Line
Advances or incur any Letter of Credit Obligations so long as that specific
Default is continuing, Agent may (and at the written request of the Requisite
Lenders shall), without notice, suspend the Revolving Loan facility with respect
to further Revolving Credit Advances, Swing Line Advances and/or the incurrence
of further Letter of Credit Obligations whereupon any further Revolving Credit
Advances, Swing Line Advances and Letter of Credit Obligations shall be made or
extended in Agent's sole discretion
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(or in the sole discretion of the Requisite Lenders, if such suspension occurred
at their direction) so long as such Default or Event of Default is continuing.
If any Event of Default shall have occurred and be continuing, Agent may (and at
the written request of Requisite Lenders shall), without notice except as
otherwise expressly provided herein, increase the rate of interest applicable to
the Loans and the Letter of Credit Fees to the Default Rate.
(2) If any Event of Default shall have occurred and be continuing, Agent may
(and at the written request of the Requisite Lenders shall), without notice, (a)
terminate the Revolving Loan facility with respect to further Revolving Credit
Advances, Swing Line Advances or the incurrence of further Letter of Credit
Obligations; (b) declare all or any portion of the Obligations, including all or
any portion of any Loan to be forthwith due and payable, and require that the
Letter of Credit Obligations be cash collateralized as provided in Annex B, all
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by Borrowers and each other Credit Party; and (c) exercise
any rights and remedies provided to Agent under the Loan Documents and/or at law
or equity, including all remedies provided under the PPSA or other laws similar
thereto in other jurisdictions; provided, however, that upon the occurrence of
an Event of Default specified in Sections 8.1(7), 8.1(8) or 8.1(9), the
Revolving Loan facility shall be immediately terminated and all of the
Obligations, including the Revolving Loan, shall become immediately due and
payable without declaration, notice or demand by any Person.
8.3 WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives (including for purposes
of Section 12): (1) presentment, demand and protest and notice of presentment,
dishonour, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guarantees at any time held by Agent on which any
Credit Party may in any way be liable, and hereby ratifies and confirms whatever
Agent may do in this regard, (2) all rights to notice and a hearing prior to
Agent's taking possession or control of, or to Agent's replevy, attachment or
levy upon, the Collateral or any bond or security which might be required by any
court prior to allowing Agent to exercise any of its remedies, and (3) the
benefit of all valuation, appraisal, marshalling and exemption laws. All
payments to be made by each Credit Party shall be made without set-off or
counterclaim and without deduction of any kind.
SECTION 9 -- ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 ASSIGNMENT AND PARTICIPATIONS.
(1) Each Lender may assign, at any time or times, the Loan Documents, Loans,
Letter of Credit Obligations and any Revolving Loan Commitment or of any portion
thereof or interest therein, including any Lender's rights, title, interests,
remedies, powers or duties thereunder, whether evidenced by a writing or not;
provided, that any assignment by a Lender shall (a) require the consent of Agent
and, so long as no Event of Default has occurred and is continuing, Borrower
Representative (which consent shall only be in respect of the identity of the
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prospective assignee and not in respect of the terms of the assignment and shall
not be unreasonably withheld or delayed) and the execution of an assignment
agreement (an "ASSIGNMENT AGREEMENT" substantially in the form attached hereto
as Exhibit 9.1(1) and otherwise in form and substance satisfactory to, and
acknowledged by, Agent; (b) be conditioned on such assignee Lender representing
to the assigning Lender and Agent that it is purchasing the applicable Loans to
be assigned to it for its own account, for investment purposes and not with a
view to the distribution thereof; (c) not be made to an entity that is a
non-resident of Canada for purposes of the ITA, unless an Event of Default has
occurred and is continuing at the time of such assignment; (d) if a partial
assignment, be in an amount at least equal to US$5,000,000, and, after giving
effect to any such partial assignment, the assigning Lender shall have retained
a Revolving Loan Commitment in an amount at least equal to US$5,000,000; and (e)
include a payment to Agent of an assignment fee of US$3,500. In the case of an
assignment by a Lender under this Section 9.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were a Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Revolving Loan Commitment or assigned
portion thereof from and after the date of such assignment. Each Borrower hereby
acknowledges and agrees that any assignment will give rise to a direct
obligation of Borrowers to the assignee and that the assignee shall be
considered to be a "LENDER". In all instances, each Lender's liability to make
Loans hereunder shall be several and not joint and shall be limited to such
Lender's Pro Rata Share of the Revolving Loan Commitment. In the event Agent or
any Lender assigns or otherwise transfers all or any part of the Obligations,
Agent or any such Lender shall so notify Borrowers and Borrowers shall, upon the
request of Agent or such Lender, execute new Notes in exchange for the Notes, if
any, being assigned.
(2) Each Lender may sell participations in all or any part of its Revolving Loan
Commitment without the consent of any Credit Party; provided, (i) all amounts
payable by Borrowers hereunder shall be determined as if that Lender had not
sold such participation, and that the holder of any such participation shall not
be entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (a) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (b) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (c) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents) and (ii) no such participation shall be
sold to an entity that is a non-resident of Canada for the purposes of the ITA,
unless an Event of Default has occurred and is continuing at the time of such
sale. Without limiting the foregoing, solely for purposes of Sections 1.13,
1.15, 1.16 and 9.8, each Credit Party acknowledges and agrees that a
participation shall give rise to a direct obligation of the Credit Parties to
the participant in respect of the portion of the Revolving Loan Commitment sold
to such participant, and the participant shall be considered to be a "LENDER".
Except as set forth in the preceding sentence no Borrower or Credit Party shall
have any obligation or duty to any participant. Neither Agent nor any Lender
(other than the Lender selling a participation) shall have any duty to any
participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.
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(3) Except as expressly provided in this Section 9.1, no Lender shall, as
between Borrowers and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(4) Each Credit Party executing this Agreement shall assist any Lender permitted
to sell assignments or participations under this Section 9.1 as reasonably
required to enable the assigning or selling Lender to effect any such assignment
or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each Credit
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Credit Parties and their affairs contained
in any selling materials provided by them and all other information provided by
them and included in such materials, except that any Projections delivered by
Borrowers shall only be certified by Borrowers as having been prepared by
Borrowers in compliance with the representations contained in Section 3.4(3).
(5) A Lender may furnish any information concerning Credit Parties in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants). Each Lender shall obtain
from assignees or participants confidentiality covenants substantially
equivalent to those contained in Section 11.8.
(6) So long as no Event of Default shall have occurred and be continuing, no
Lender shall assign or sell participations in any portion of its Loans or
Revolving Loan Commitment to a potential Lender or participant, if, as of the
date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.16(1), increased costs under Section 1.16(2), an inability to fund LIBOR Loans
under Section 1.16(3), or withholding taxes in accordance with Section 1.15(1).
9.2 APPOINTMENT OF AGENT. GE Capital Canada is hereby appointed to act on behalf
of all Lenders as Agent under this Agreement and the other Loan Documents. The
provisions of this Section 9.2 are solely for the benefit of Agent and Lenders
and no Credit Party nor any other Person shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement and the other Loan Documents, Agent shall act solely
as an agent and mandatary of Lenders and does not assume and shall not be deemed
to have assumed any obligation toward or relationship of agency, mandatary or
trust with or for any Credit Party or any other Person. Agent shall have no
duties or responsibilities except for those expressly set forth in this
Agreement and the other Loan Documents. The duties of Agent shall be mechanical
and administrative in nature and Agent shall not have, or be deemed to have, by
reason of this Agreement, any other Loan Document or otherwise a fiduciary
relationship in respect of any Lender. Neither Agent nor any of its Affiliates
nor any of their respective officers, directors, employees, agents or
representatives shall be liable to any Lender for any action taken or omitted to
be taken by it hereunder or under any other Loan Document, or
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in connection herewith or therewith, except for damages solely caused by its or
their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders, Supermajority
Revolving Lenders or all affected Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from Requisite
Lenders, Supermajority Revolving Lenders, or all affected Lenders, as the case
may be, and Agent shall not incur liability to any Person by reason of so
refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (1) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (2) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (3) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with the instructions
of Requisite Lenders, Supermajority Revolving Lenders or all affected Lenders,
as applicable.
9.3 AGENT'S RELIANCE, ETC. Neither Agent nor any of its Affiliates nor any of
their respective directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages solely
caused by its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, Agent: (1) may treat the payee of
any Note as the holder thereof until Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
Agent; (2) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (3) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Loan Documents; (4) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(5) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (6) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4 GE CAPITAL CANADA AND AFFILIATES. With respect to its Revolving Loan
Commitment hereunder, GE Capital Canada shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may
exercise the same as though it were not
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Agent; and the term "LENDER" or "LENDERS" shall, unless otherwise expressly
indicated, include GE Capital Canada in its individual capacity. GE Capital
Canada and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Credit Party, any of their Affiliates and any
Person who may do business with or own securities of any Credit Party or any
such Affiliate, all as if GE Capital Canada were not Agent and without any duty
to account therefor to Lenders. GE Capital Canada and its Affiliates may accept
fees and other consideration from any Credit Party for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders. GE Capital, an affiliate of GE Capital Canada, is a US Lender and US
Agent under the US Facility. Each Lender acknowledges the potential conflict of
interest between GE Capital Canada as a Lender holding disproportionate
interests in the Loans, GE Capital as US Agent and US Lender and GE Capital
Canada as Agent.
9.5 LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently
and without reliance upon Agent or any other Lender and based on the Financial
Statements referred to in Section 3.4(1) and such other documents and
information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
9.6 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent not
reimbursed by Credit Parties and without limiting the obligations of Credit
Parties hereunder), rateably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
wilful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and each other Loan Document, to the extent that Agent is not reimbursed for
such expenses by Credit Parties.
9.7 SUCCESSOR AGENT. Agent may resign at any time by giving not less than thirty
(30) days' prior written notice thereof to Lenders and Borrower Representative.
Upon any such resignation, the Requisite Lenders shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent's giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is
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willing to accept such appointment, or otherwise shall be a commercial bank or
financial institution or a subsidiary of a commercial bank or financial
institution if such commercial bank or financial institution is organized under
the laws of Canada or any province thereof and has a combined capital and
surplus of at least C$100,000,000 or the Equivalent Amount thereof in another
currency. If no successor Agent has been appointed pursuant to the foregoing, by
the 30th day after the date such notice of resignation was given by the
resigning Agent, such resignation shall become effective and the Requisite
Lenders shall thereafter perform all the duties of Agent hereunder until such
time, if any, as the Requisite Lenders appoint a successor Agent as provided
above. Any successor Agent appointed by Requisite Lenders hereunder shall be
subject to the approval of Borrower Representative, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if an Event of Default shall have occurred and be continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. Upon the earlier of the acceptance
of any appointment as Agent hereunder by a successor Agent or the effective date
of the resigning Agent's resignation, the resigning Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents, except that any indemnity rights or other rights in favor of such
resigning Agent shall continue. After any resigning Agent's resignation
hereunder, 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.
9.8 SETOFF AND SHARING OF PAYMENTS. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of any Event of Default, each
Lender and each holder of any Note is hereby authorized at any time or from time
to time, without notice to any Credit Party or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all balances held by it at any of its offices for the account of either
Borrower or any other Credit Party (regardless of whether such balances are then
due to such Borrower or other Credit Party) and any other properties or assets
any time held or owing by that Lender or that holder to or for the credit or for
the account of either Borrower or any other Credit Party against and on account
of any of the Obligations which are not paid when due; provided that any Lender
exercising a right to set off shall notify Borrower Representative of such
exercise within a reasonable time thereafter. Any Lender or holder of any Note
exercising a right to set off or otherwise receiving any payment on account of
the Obligations in excess of its Pro Rata Share thereof shall purchase for cash
(and the other Lenders or holders shall sell) such participations in each such
other Lender's or holder's Pro Rata Share of the Obligations as would be
necessary to cause such Lender to share the amount so set off or otherwise
received with each other Lender or holder in accordance with their respective
Pro Rata Shares. Each Lender's obligation under this Section 9.8 shall be in
addition to and not limitation of its obligations to purchase a participation in
an amount equal to its Pro Rata Share of the Swing Line Loans under Section 1.1.
Each Credit Party that is a Borrower or Guarantor agrees, to the fullest extent
permitted by law, that (1) any Lender or holder may exercise its right to set
off with respect to amounts in excess of its Pro Rata Share of the Obligations
and may sell participations in such amount so set off to other Lenders
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and holders and (2) any Lender or holders so purchasing a (3) participation in
the Loans made or other Obligations held by other Lenders or holders may
exercise all rights of set-off, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender or holder were a
direct holder of the Loans and the other Obligations in the amount of such
participation. Notwithstanding the foregoing, if all or any portion of the
set-off amount or payment otherwise received is thereafter recovered from the
Lender that has exercised the right of set-off, the purchase of participations
by that Lender shall be rescinded and the purchase price restored without
interest.
9.9 ADVANCES; PAYMENTS; NON-FUNDING LENDERS; INFORMATION; ACTIONS IN CONCERT.
(1) ADVANCES; PAYMENTS.
(a) Revolving Lenders shall refund or participate in the Swing Line Loan in
accordance with clauses (c) and (d) of Section 1.1(2). If the Swing Line Lender
declines to make a Swing Line Loan or if Swing Line Availability is zero, Agent
shall notify Revolving Lenders, promptly after receipt of a Notice of Revolving
Credit Advance and in any event prior to 1:00 p.m. (Toronto time) on the date
such Notice of Revolving Credit Advance is received, by telecopy, telephone or
other similar form of transmission. Each Revolving Lender shall make the amount
of such Lender's Pro Rata Share of each Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent's account as set forth in
Annex H not later than 3:00 p.m. (Toronto time) on the requested funding date,
in the case of a Cdn Index Rate Loan or a US Index Rate Loan and not later than
11:00 a.m. (Toronto time) on the requested funding date in the case of a BA Rate
Loan or a LIBOR Loan. After receipt of such wire transfers (or, in the Agent's
sole discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Revolving Credit Advance to a Borrower
designated by Borrower Representative in the Notice of Revolving Credit Advance.
For greater certainty, if Agent makes a Revolving Credit Advance available to a
Borrower, notwithstanding that either Borrower fails to satisfy the conditions
precedent set forth in Section 2.2, each Revolving Lender shall make the amount
of its Pro Rata Share of such Revolving Credit Advance available to Agent as set
forth above in this Section 9.9(1)(a). All payments by each Revolving Lender
shall be made without setoff, counterclaim or deduction of any kind.
(b) On the second (2nd) Business Day of each calendar week or more frequently as
aggregate cumulative payments in excess of C$2,000,000 or the Equivalent Amount
thereof in another currency are received with respect to the Loans (other than
the Swing Line Loan) (each, a "SETTLEMENT DATE"), Agent will advise each Lender
by telephone, or telecopy of the amount of such Lender's Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan. Provided that such Lender has funded all payments or
Revolving Credit Advances required to be made by it and has purchased all
participations required to be purchased by it under this Agreement and the other
Loan Documents as of such Settlement Date, Agent will pay to each Lender such
Lender's Pro Rata Share of principal, interest and Fees paid by Borrowers since
the previous Settlement Date for the benefit of that Lender on the Loans held by
it. To the extent that any Lender (a "NON-FUNDING LENDER") has
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failed to fund all such payments and Revolving Credit Advances or failed to fund
the purchase of all such participations, Agent shall be entitled to set off the
funding short-fall against that Non- Funding Lender's Pro Rata Share of all
payments received from Borrowers. Such payments shall be made by wire transfer
to such Lender's account (as specified by such Lender in Annex H or the
applicable Assignment Agreement) not later than 2:00 p.m. (Toronto time) on the
next Business Day following each Settlement Date.
(2) AVAILABILITY OF LENDER'S PRO RATA SHARE. Notwithstanding that either
Borrower fails to satisfy the conditions precedent set forth in Section 2.2,
Agent may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date. If such Pro
Rata Share is not, in fact, paid to Agent by such Revolving Lender when due,
Agent will be entitled to recover such amount on demand from such Revolving
Lender without set-off, counterclaim or deduction of any kind. If any Revolving
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
demand, Agent shall promptly notify Borrower Representative and Borrowers shall
immediately repay such amount to Agent. Nothing in this Section 9.9(2) or
elsewhere in this Agreement or the other Loan Documents shall be deemed to
require Agent to advance funds on behalf of any Revolving Lender or to relieve
any Revolving Lender from its obligation to fulfill its Revolving Loan
Commitment hereunder or to prejudice any rights that Borrowers may have against
any Revolving Lender as a result of any default by such Revolving Lender
hereunder. Notwithstanding that either Borrower fails to satisfy the conditions
precedent set forth in Section 2.2, to the extent that Agent advances funds to
either Borrower on behalf of any Revolving Lender and is not reimbursed therefor
on the same Business Day as such Revolving Credit Advance is made, Agent shall
be entitled to retain for its account all interest accrued on such Revolving
Credit Advance until reimbursed by the applicable Revolving Lender.
(3) Return of Payments.
(a) If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from
Borrowers and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without set-off,
counterclaim or deduction of any kind.
(b) If Agent determines at any time that any amount received by Agent under this
Agreement must be returned to either Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, Agent will not
be required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to either Borrower or such other Person, without
set-off, counterclaim or deduction of any kind.
(4) NON-FUNDING LENDERS. The failure of any Non-Funding Lender to make any
Revolving Credit Advance or any payment required by it hereunder, or to purchase
any participation in any Swing Line Loan to be made or purchased by it on the
date specified therefor shall not relieve
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any other Revolving Lender (each such other Revolving Lender, an "OTHER LENDER")
of its obligations to make such Revolving Credit Advance or purchase such
participation on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make a Revolving Credit
Advance or to purchase a participation required hereunder. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "LENDER" or a "REVOLVING LENDER" (or be included in the calculation
of "REQUISITE LENDERS", or "SUPERMAJORITY REVOLVING LENDERS" hereunder) for any
voting or consent rights under or with respect to any Loan Document.
(5) DISSEMINATION OF INFORMATION. Agent will use reasonable efforts to provide
Lenders with any notice of Default or Event of Default received by Agent from,
or delivered by Agent to, any Credit Party, with notice of any Event of Default
of which Agent has actually become aware and with notice of any action taken by
Agent following any Event of Default; provided, however, that Agent shall not be
liable to any Lender for any failure to do so, except to the extent that such
failure is attributable to Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrowers are required to provide Financial Statements
and Collateral Reports to Lenders in accordance with Annexes E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(6) ACTIONS IN CONCERT. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
SECTION 10 -- SUCCESSORS AND ASSIGNS
10.1 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents shall
be binding on and shall inure to the benefit of each Credit Party, Agent,
Lenders and their respective successors and permitted assigns (including, in the
case of any Credit Party, a debtor-in- possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
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SECTION 11 -- MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2 below. Any letter of interest, commitment letter, fee
letter (other than the GE Capital Fee Letter) and/or confidentiality agreement
between any Credit Party and Agent or any Lender or any of their respective
affiliates, predating this Agreement and relating to a financing of
substantially similar form, purpose or effect shall be superseded by this
Agreement.
11.2 AMENDMENTS AND WAIVERS.
(1) Except for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any of
the Notes, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Agent and Borrowers, and by Requisite Lenders, Supermajority Revolving Lenders
or all affected Lenders, as applicable. Except as set forth in clauses (2) and
(3) below, all such amendments, modifications, terminations or waivers requiring
the consent of any Lenders shall require the written consent of Requisite
Lenders.
(2) No amendment, modification, termination or waiver of or consent with respect
to any provision of this Agreement which increases the percentage advance rates
set forth in the definition of the Borrowing Base, the Maska Canada Borrowing
Base or the Tropsport Borrowing Base, or which makes less restrictive the
nondiscretionary criteria for exclusion from Eligible Accounts and Eligible
Inventory set forth in Sections 1.6 and 1.7, shall be effective unless the same
shall be in writing and signed by Agent, Supermajority Revolving Lenders and
Borrowers.
(3) No amendment, modification, termination or waiver shall, unless in writing
and signed by Agent and each Lender directly affected thereby, do any of the
following: (a) increase the principal amount of any Lender's Revolving Loan
Commitment (which action shall be deemed to directly affect all Lenders); (b)
reduce the principal of, rate of interest on or Fees payable with respect to any
Loan or Letter of Credit Obligations of any affected Lender; (c) extend any
scheduled payment date or final maturity date of the principal amount of any
Loan of any affected Lender; (d) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender; (e) release any Guarantee
or, except as otherwise permitted herein or in the other Loan Documents,
release, or permit any Credit Party to sell or otherwise dispose of any
Collateral with a value exceeding C$5,000,000 or the Equivalent Amount thereof
in another currency in the aggregate (which action shall be deemed to directly
affect all Lenders); (f) change the percentage of the Revolving Loan Commitments
or of the aggregate unpaid principal amount of the Loans which shall be required
for Lenders or any of them to take any action hereunder; and (g) amend or waive
this Section 11.2 or the definitions of the terms "REQUISITE LENDERS", or
"SUPERMAJORITY REVOLVING LENDERS" insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the
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rights or duties of Agent under this Agreement or any other Loan Document shall
be effective unless in writing and signed by Agent, in addition to Lenders
required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or waiver
of any provision of any Note shall be effective without the written concurrence
of the holder of that Note. No notice to or demand on any Credit Party in any
case shall entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 11.2 shall be binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.
(4) If, in connection with any proposed amendment, modification, waiver or
termination (a "PROPOSED CHANGE"):
(a) requiring the consent of all affected Lenders, the consent of
Requisite Lenders is obtained, but the consent of other Lenders
whose consent is required is not obtained (any such Lender whose
consent is not obtained as described this clause (a) and in clauses
(b) and (c) below being referred to as a "NON-CONSENTING LENDER"),
or
(b) requiring the consent of Supermajority Revolving Lenders, the
consent of Requisite Lenders is obtained, but the consent of
Supermajority Revolving Lenders is not obtained, or
(c) requiring the consent of Requisite Lenders, the consent of Lenders
holding 51% or more of the aggregate Revolving Loan Commitments is
obtained, but the consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower
Representative's request, Agent, or a Person acceptable to Agent, shall have the
right with Agent's consent and in Agent's sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent's request, sell and
assign to Agent or such Person, all of the Revolving Loan Commitment of such
Non-Consenting Lender for an amount equal to the principal balance of all Loans
held by the Non-Consenting Lender and all accrued interest and Fees with respect
thereto through the date of sale, such purchase and sale to be consummated
pursuant to an executed Assignment Agreement.
(5) Upon indefeasible payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations under Section 1.13 or any
other substantially similar general indemnification obligations under any other
Loan Document), termination of the Revolving Loan Commitment and a release of
all claims against Agent and Lenders, and so long as no suits, actions
proceedings, or claims are pending or threatened against any Indemnified
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Person asserting any damages, losses or liabilities that are Indemnified
Liabilities, Agent (and, to the extent required, Lenders) shall deliver to
Borrowers termination statements, mortgage releases and other documents
necessary or appropriate to evidence the termination of the Liens securing
payment of the Obligations.
11.3 FEES AND EXPENSES. Borrowers shall reimburse Agent for all out-of-pocket
expenses incurred in connection with the preparation of the Loan Documents
(including the reasonable fees and expenses of all of its special loan counsel,
advisors, consultants and auditors retained in connection with the Loan
Documents and the Related Transactions and advice in connection therewith).
Borrowers shall reimburse Agent (and, with respect to Sections 11.3(3) and
11.3(4) below, all Lenders) for all reasonable fees, costs and expenses,
including the reasonable fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers) for advice,
assistance, or other representation in connection with:
(1) the forwarding to Borrowers or any other Person on behalf of
Borrowers by Agent of the proceeds of the Loans;
(2) any amendment, modification or waiver of, or consent with respect
to, any of the Loan Documents or Related Transactions Documents or
advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(3) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, either Borrower or any
other Person) in any way relating to the Collateral, any of the Loan
Documents or any other agreement to be executed or delivered in
connection therewith or herewith, whether as party, witness, or
otherwise, including any litigation, contest, dispute, suit, case,
proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against any or all of the
Borrowers or any other Person that may be obligated to Agent by
virtue of the Loan Documents; including any such litigation,
contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency
of one or more Events of Default; provided that in the case of
reimbursement of counsel for Lenders other than -------- Agent, such
reimbursement shall be limited to one counsel for all such Lenders;
(4) any attempt to enforce any remedies of Agent or any Lender against
any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan
Documents; including any such attempt to enforce any such remedies
in the course of any work-out or restructuring of the Loans during
the pendency of one or more Events of Default; provided that in the
case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;
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(5) any work-out or restructuring of the Loans during the pendency of
one or more Events of Default;
(6) efforts to (a) monitor the Loans or any of the other Obligations,
(b) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (c) verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise dispose of any of
the Collateral;
including, as to each of clauses (1) through (6) above, all reasonable legal and
other professional and service providers' fees arising from such services,
including those in connection with any appellate proceedings; and all expenses,
costs, charges and other fees incurred by such counsel and others in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section 11.3 shall be payable, on demand, by Borrowers to
Agent. Without limiting the generality of the foregoing, such expenses, costs,
charges and fees may include: fees, costs and expenses of accountants,
environmental advisors, appraisers, investment bankers, management and other
consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services; and expenses, costs, charges and fees payable by Agent and Lenders
under or in connection with any landlord agreement, bailee letter, mortgagee
agreement, the Intercreditor Agreement or Consent and Acknowledgement Respecting
Intellectual Property, including, in connection with enforcement of Agent's and
Lenders' rights thereunder.
11.4 NO WAIVER. Agent's or any Lender's failure, at any time or times, to
require strict performance by the Credit Parties of any provision of this
Agreement and any of the other Loan Documents shall not waive, affect or
diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of Section 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to Borrowers specifying
such suspension or waiver.
11.5 REMEDIES. Agent's and Lenders' rights and remedies under this Agreement
shall be cumulative and nonexclusive of any other rights and remedies which
Agent or any Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. Recourse to the Collateral shall
not be required. No single or partial exercise by Agent or Lender of any right
or remedy precludes or otherwise affects the exercise of any other right to
remedy to which that party may be entitled.
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11.6 SEVERABILITY. Wherever possible, each provision of this Agreement and the
other Loan Documents shall be interpreted in such a manner as to be effective
and valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
11.7 CONFLICT OF TERMS. Except as otherwise provided in this Agreement or any of
the other Loan Documents by specific reference to the applicable provisions of
this Agreement, if any provision contained in this Agreement is in conflict
with, or inconsistent with, any provision in any of the other Loan Documents,
the provision contained in this Agreement shall govern and control. For greater
certainty, any provision contained in this Agreement shall not be in conflict
with, or be inconsistent with, any provision in any of the other Loan Documents
if a provision is contained in that other Loan Document and not in this
Agreement.
11.8 CONFIDENTIALITY. Agent and each Lender agree to use commercially reasonable
efforts (equivalent to the efforts Agent or such Lender applies to maintaining
the confidentiality of its own confidential information) to maintain as
confidential all confidential information provided to them by the Credit Parties
and designated as confidential for a period of two (2) years following receipt
thereof, except that Agent and each Lender may disclose such information (a) to
Persons employed or engaged by Agent or such Lender in evaluating, approving,
structuring or administering the Loans and the Revolving Loan Commitments; (b)
to any bona fide assignee or participant or potential assignee or participant
that has agreed to comply with the covenant contained in this Section 11.8 (and
any such bona fide assignee or participant or potential assignee or participant
may disclose such information to Persons employed or engaged by them as
described in clause (a) above); (c) as required or requested by any Governmental
Authority or reasonably believed by Agent or such Lender to be compelled by any
court decree, subpoena or legal or administrative order or process; (d) as, on
the advice of Agent's or such Lender's counsel, required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Agent or such Lender is a party; or
(f) which ceases to be confidential through no fault of Agent or such Lender.
11.9 GOVERNING LAW. Except as otherwise expressly provided in any of the Loan
Documents, in all respects, including all matters of construction, validity and
performance, the Loan Documents and the Obligations shall be governed by, and
construed and enforced in accordance with, the laws of the Province of Ontario
applicable to contracts made and performed in that Province and the laws of
Canada applicable therein. EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE
COURTS OF THE PROVINCE OF ONTARIO SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENT AND
LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO
ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
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JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER. EACH CREDIT PARTY
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY
OBJECTION WHICH SUCH CREDIT PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET FORTH IN
ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT WITH CANADA POST, PROPER POSTAGE PREPAID.
11.10 NOTICES. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other parties, or whenever any of the parties desires to give or serve upon any
other parties any communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be deemed to have been validly served, given or
delivered (1) upon the earlier of actual receipt and three (3) Business Days
after deposit with Canada Post, registered or certified mail, return receipt
requested, with proper postage prepaid, (2) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
Canada Post as otherwise provided in this Section 11.10), (3) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid or
(4) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated on Annex I or to such other address (or facsimile number) as
may be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than Borrower Representative or Agent) designated on Annex I to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
11.11 SECTION TITLES. The Section titles and Table of Contents contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
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11.12 COUNTERPARTS. This Agreement may be executed in any number of separate
counterparts, each of which shall collectively and separately constitute one
agreement.
11.13 PRESS RELEASES. Each Credit Party executing this Agreement agrees that
neither it nor its Affiliates will in the future issue any press releases or
other public disclosure using the name of GE Capital Canada or its affiliates or
referring to this Agreement, the other Loan Documents or the Related
Transactions Documents without at least two (2) Business Days' prior notice to
GE Capital Canada and without the prior written consent of GE Capital Canada
unless (and only to the extent that) such Credit Party or Affiliate is required
to do so under law and then, in any event, such Credit Party or Affiliate will
consult with GE Capital Canada before issuing such press release or other public
disclosure. Each Credit Party consents to the publication by Agent or any Lender
of a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement. Agent or such Lender shall provide
a draft of any such tombstone or similar advertising material to each Credit
Party for review and comment prior to the publication thereof. Agent reserves
the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements with Borrowers' consent
which shall not be unreasonably withheld or delayed.
11.14 REINSTATEMENT. This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against any Credit
Party for liquidation or reorganization, should any Credit Party become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of any
Credit Party's assets, and shall continue to be effective or to be reinstated,
as the case may be, if at any time payment and performance of the Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the
Obligations, whether as a "voidable preference", "fraudulent conveyance", or
otherwise, all as though such payment or performance had not been made. In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.
11.15 ADVICE OF COUNSEL. Each of the parties represents to each other party
hereto that it has discussed this Agreement and, specifically, the provisions of
Section 11.9, with its counsel.
11.16 NO STRICT CONSTRUCTION. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favouring or disfavouring any party by virtue of the
authorship of any provisions of this Agreement.
11.17 DOLLAR REFERENCES. Unless otherwise specified, all references to dollar
amounts in this Agreement shall mean Canadian Dollars.
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11.18 JUDGMENT CURRENCY.
(1) If, for the purpose of obtaining or enforcing judgment against any Credit
Party in any court in any jurisdiction, it becomes necessary to convert into any
other currency (such other currency being hereinafter in this Section 11.18
referred to as the "JUDGMENT CURRENCY") an amount due under any Loan Document in
any currency (the "OBLIGATION CURRENCY") other than the Judgment Currency, the
conversion shall be made at the rate of exchange prevailing on the Business Day
immediately preceding the date of actual payment of the amount due, in the case
of any proceeding in the courts of the Province of Ontario or in the courts of
any other jurisdiction that will give effect to such conversion being made on
such date, or the date on which the judgment is given, in the case of any
proceeding in the courts of any other jurisdiction (the applicable date as of
which such conversion is made pursuant to this Section 11.18 being hereinafter
in this Section 11.18 referred to as the "JUDGMENT CONVERSION DATE").
(2) If, in the case of any proceeding in the court of any jurisdiction referred
to in Section 11.18(1), there is a change in the rate of exchange prevailing
between the Judgment Conversion Date and the date of actual receipt of the
amount due in immediately available funds, the applicable Credit Party shall pay
such additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date. Any
amount due from a Credit Party under Section 11.18(2) shall be due as a separate
debt and shall not be affected by judgment being obtained for any other amounts
due under or in respect of any of the Loan Documents.
(3) The term "rate of exchange" in this Section 11.18 means the rate of exchange
at which the Obligation Currency would be converted into the Judgment Currency
on the relevant date (or the Business Day preceding such date, if such date is
not a Business Day) at the 12:00 noon rate quoted on the Reuters Monitor Screen
(Page BOFC or such other Page as may replace such Page for the purposes of
displaying such exchange rates).
11.19 TIME OF DAY. Unless otherwise specified, any reference to a time of day or
date means local time or date in the City of Toronto, Province of Ontario.
11.20 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRED THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO
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RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH,
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTION RELATED
THERETO.
SECTION 12 -- CROSS-GUARANTEE
12.1 CROSS-GUARANTEE. Each Borrower hereby agrees that such Borrower is jointly
and severally liable for, and hereby irrevocably and unconditionally guarantees
to Agent and Lenders and their respective successors and assigns, the full and
prompt payment when due (whether at stated maturity, by acceleration or
otherwise) and at all times thereafter, and performance, of all Obligations owed
or hereafter owing to Agent and Lenders by each other Borrower. Each Borrower
agrees that its guarantee obligation hereunder is a continuing guarantee of
payment and performance and not of collection, that its obligations under this
Section 12 shall not be discharged until payment and performance, in full, of
the Obligations has occurred and this Agreement has been terminated, and that
its obligations under this Section 12 shall be primary, absolute and
unconditional, irrespective of, and unaffected by,
(1) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document
or any other agreement, document or instrument to which either
Borrower is or may become a party;
(2) the absence of any action to enforce this Agreement (including this
Section 12) or any other Loan Document or the waiver or consent by
Agent and Lenders with respect to any of the provisions thereof;
(3) the existence, value or condition of, or failure to perfect its Lien
against, any security for the Obligations or any action, or the
absence of any action, by Agent and Lenders in respect thereof
(including the release of any such security);
(4) the insolvency of any Credit Party; or
(5) any other action or circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor.
The obligations of each Borrower under Section 12 shall not be satisfied,
reduced, affected or discharged by any intermediate payment, settlement or
satisfaction of the whole or any part of the principal, interest, fees and other
money or amounts which may at any time be or become owing or payable under or by
virtue of or otherwise in connection with the Obligations or the Loan Documents.
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Each Borrower shall be regarded, and shall be in the same position, as
principal debtor with respect to the Obligations and any amounts expressed to be
payable from each Borrower on the footing of this guarantee shall be recoverable
from such Borrower as a primary obligor and principal debtor in respect thereof.
Each Borrower agrees that any notice or directive given at any time to Agent
that is inconsistent with the waiver in the immediately preceding sentence shall
be null and void and may be ignored by Agent, and, in addition, may not be
pleaded or introduced as evidence in any litigation relating to this guarantee
for the reason that such pleading or introduction would be at variance with the
written terms of this guarantee, unless Agent has specifically agreed otherwise
in writing.
12.2 WAIVERS BY BORROWERS. Each Borrower expressly waives all rights it may have
now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Agent or Lenders to marshall assets or to
proceed in respect of the Obligations guaranteed hereunder against any other
Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Borrower. It is agreed among each Borrower, Agent and
Lenders that the foregoing waivers in this Section 12.2 and Section 12.1 are of
the essence of the transaction contemplated by this Agreement and the other Loan
Documents and that, but for the provisions of this Section 12 and such waivers,
Agent and Lenders would decline to enter into this Agreement.
12.3 BENEFIT OF GUARANTEE. Each Borrower agrees that the provisions of this
Section 12 are for the benefit of Agent and Lenders and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between any other Borrower and Agent or Lenders, the
obligations of such other Borrower under the Loan Documents.
12.4 SUBORDINATION OF SUBROGATION, ETC. Notwithstanding anything to the contrary
in this Agreement or in any other Loan Document, each Borrower hereby expressly
and irrevocably subordinates to payment of the Obligations any and all rights at
law or in equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash and this Agreement has been terminated. Each Borrower
acknowledges and agrees that this subordination is intended to benefit Agent and
Lenders and shall not limit or otherwise affect such Borrower's liability
hereunder or the enforceability of this Section 12, and that Agent, Lenders and
their respective successors and assigns are intended third party beneficiaries
of the waivers and agreements set forth in this Section 12.4.
12.5 LIABILITY CUMULATIVE. The liability of Borrowers under this Section 12 is
in addition to and shall be cumulative with all liabilities of each Borrower to
Agent and Lenders under this Agreement and the other Loan Documents to which
such Borrower is a party or in respect of any Obligations or obligation of the
other Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
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12.6 INDEMNIFICATION AND PAYMENT. As an original and independent obligation
under this Agreement, each Borrower shall:
(1) indemnify each of Agent and Lenders and keep indemnified against any
cost, loss, expense or liability of whatever kind resulting from the
failure by the other Borrower to make due and punctual payment of
any of the Obligations or resulting from any of the Obligations
being or becoming void, voidable, unenforceable or ineffective
against such other Borrower (including, but without limitation, all
legal and other costs, charges and expenses incurred by the Agent
and Lenders in connection with preserving or enforcing, or
attempting to preserve or enforce, their rights under this
Agreement); and
(2) pay on demand the amount of such cost, loss, expense or liability,
incurred in good faith, whether or not any of the Agent and Lenders
have attempted to enforce any rights against such other Borrower or
any other Person.
12.7 OBLIGATIONS NOT AFFECTED. The obligations of each Borrower under this
Section 12 shall not be affected or impaired by any act, omission, matter or
thing whatsoever, occurring before, upon or after any demand for payment
hereunder (and whether or not known to such Borrower or any of the Agent and
Lenders) which, but for this provision, might constitute a whole or partial
defence to a claim against such Borrower hereunder or might operate to release
or otherwise exonerate such Borrower from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of Agent or any
Lenders or otherwise, and such Borrower hereby irrevocably waives any defence it
may now or hereafter have in any way relating to any of the foregoing,
including, without limitation:
(1) any limitation of status or power, disability, incapacity or other
circumstance relating to such Borrower, or any other Credit Party,
including any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding-up or other
proceeding involving or affecting any Credit Parties or any other
Person;
(2) any irregularity, defect, unenforceability or invalidity in respect
of any indebtedness or other obligation of any Credit Party or any
other Person under the Loan Documents or any other document or
instrument;
(3) any failure of any Credit Party, whether or not without fault on
their part, to perform or comply with any of the provisions of this
Agreement or the Loan Documents or to give notice thereof to such
Borrower;
(4) the taking or enforcing or exercising or the refusal or neglect to
take or enforce or exercise any right or remedy from or against any
Credit Party or any other Person or their respective assets or the
release or discharge of any such right or remedies;
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(5) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to
any Credit Party or any other Person;
(6) any amendment, restatement, variation, modification, supplement or
replacement of the Agreement, the Loan Documents or any other
document or instrument;
(7) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of any Credit Party or any
other Person or, any merger or amalgamation of any Credit Party or
any other with any Person or Persons;
(8) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction or by any present or future action of
any Governmental Authority or court amending, varying, reducing or
otherwise affecting, or purporting to amend, vary, reduce or
otherwise affect, any of the Obligations of such Borrower under this
Agreement;
(9) the existence of any claim, set-off or other rights that such
Borrower may have at any time against the other Borrower, Agent and
Lenders or any other Person, or which Borrowers may have at any time
against Agent or Lenders, whether in connection with this Agreement,
the Loan Documents or otherwise; and
(10) any other circumstance (including, without limitation, any existence
of or reliance on any representation by Agent, but excluding
complete, irrevocable payment) that might otherwise constitute a
legal or equitable discharge or defence of each Borrower under this
Agreement or Loan Documents, including in respect of their guarantee
hereunder.
12.8 DEALING WITH OTHERS. Agent and Lenders, without releasing, discharging,
limiting or otherwise affecting in whole or in part each Borrower's obligations
and liabilities hereunder and without the consent of or notice to such Borrower
may:
(1) grant time, renewals, extensions, compromises, concessions, waivers,
releases, discharges and other indulgences to any Credit Party or
any other Person;
(2) amend, vary, modify, supplement or replace any Loan Document or any
other related document or instrument to which such Borrower is not a
party;
(3) take or abstain from taking security or collateral from any Credit
Party or from perfecting security or collateral of any Credit Party;
(4) release, discharge, compromise, realize, enforce or otherwise deal
with or do any act or thing in respect of (with or without
consideration) any and all Collateral, mortgages or other security
given by any Credit Party or any third party with
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respect to any of the Obligations or matters contemplated by this
Agreement or the other Loan Documents;
(5) accept compromises or arrangements from any Credit Party;
(6) apply all money at any time received from any Credit Party or from
any collateral upon such part of the Obligations as they may see fit
or change any such application in whole or in part from time to time
as they may see fit; and
(7) otherwise deal with, or waive or modify their right to deal with any
other Credit Party and all other Persons and securities as they may
see fit.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.
SPORT MASKA INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
TROPSPORT ACQUISITIONS INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
GENERAL ELECTRIC CAPITAL
CANADA INC., as Agent and Lender
By:
--------------------------------
Name: Christopher Cox
Title: Duly Authorized Signatory
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The following Persons are signatories to this Agreement in their
capacity as Credit Parties and not as Borrowers.
SLM INTERNATIONAL, INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SLM TRADEMARK ACQUISITION
CANADA CORPORATION
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SPORTS HOLDINGS CORP.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
MASKA U.S., INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
SHC HOCKEY INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
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SLM TRADEMARK ACQUISITION
CORP.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
WAP HOLDINGS INC.
By:
--------------------------------
Name: Russell J. David
Title: Senior Vice-President, Finance
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ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless otherwise
provided elsewhere in the Loan Documents) the following respective meanings and
all section references in the following definitions shall refer to Sections of
the Agreement:
(1) ACCOUNT DEBTOR shall mean any Person who may become obligated to any Credit
Party under, with respect to, or on account of, an Account.
(2) ACCOUNTING CHANGES shall have the meaning given to it in Annex D.
(3) ACCOUNTS shall mean all "accounts," as such term is defined in the PPSA, now
owned or hereafter acquired by any Credit Party and, in any event, including (a)
all accounts receivable, other receivables, book debts, claims and other forms
of obligations (other than forms of obligations evidenced by chattel paper,
securities or Instruments) now owned or hereafter received or acquired by or
belonging or owing to any Credit Party, whether arising out of goods sold or
services rendered by it or from any other transaction (including any such
obligations which may be characterized as an account or contract right under the
PPSA), (b) all of each Credit Party's rights in, to and under all purchase
orders or receipts now owned or hereafter acquired by it for goods or services,
(c) all of each Credit Party's rights to any goods represented by any of the
foregoing (including unpaid sellers' rights of rescission, replevin, reclamation
and stoppage in transit and rights to returned, reclaimed or repossessed goods),
(d) all monies due or to become due to any Credit Party, under all purchase
orders and contracts for the sale of goods or the performance of services or
both by such Credit Party or in connection with any other transaction (whether
or not yet earned by performance on the part of such Credit Party) now or
hereafter in existence, including the right to receive the proceeds of said
purchase orders and contracts, and (e) all collateral security and guarantees of
any kind, now or hereafter in existence, given by any Person with respect to any
of the foregoing.
(4) ACCOUNTS LIQUIDATION PERIOD shall have the meaning given to it in the
Intercreditor Agreement.
(5) ACQUISITION shall mean the purchase by Maska Canada of all of the issued and
outstanding capital Stock of Tropsport.
(6) AFFECTED LENDER shall have the meaning given to it in Section 1.16(4).
(7) AFFILIATE shall mean, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, five percent (5%) or more of the Stock having
ordinary voting power in the election of directors of
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such Person, (b) each Person that controls, is controlled by or is under common
control with such Person, (c) each of such Person's officers, directors, joint
venturers and partners and (d) the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of such Person. For the purposes
of this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; provided, however, that the term "AFFILIATE" shall specifically
exclude Agent and each Lender.
(8) AGENT shall mean GE Capital Canada or its successor appointed pursuant to
Section 9.7.
(9) AGGREGATE BORROWING BASE shall mean, as of any date of determination before
the Permitted Amalgamation, an amount equal to the sum of the Maska Canada
Borrowing Base and the Tropsport Borrowing Base and, as of any date of
determination after the Permitted Amalgamation of Borrowers becomes effective,
if effected, shall mean the Borrowing Base.
(10) AGREEMENT shall mean the Credit Agreement by and among Borrowers, the other
Credit Parties named therein, GE Capital Canada, as Agent and Lender and the
other Lenders signatory from time to time thereto.
(11) APPENDICES shall have the meaning given to it in the Recitals to the
Agreement.
(12) APPLICABLE BA RATE MARGIN shall mean the per annum interest rate from time
to time in effect and payable in addition to the BA Rate applicable to the
Revolving Loan, as determined by reference to Section 1.5(1).
(13) APPLICABLE CDN INDEX MARGIN shall mean the per annum interest rate margin
from time to time in effect and payable in addition to the Cdn Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(1).
(14) APPLICABLE LIBOR MARGIN shall mean the per annum interest rate from time to
time in effect and payable in addition to the LIBOR Rate applicable to the
Revolving Loan, as determined by reference to Section 1.5(1).
(15) APPLICABLE MARGINS means collectively the Applicable Cdn Index Margin, the
Applicable US Index Margin, the Applicable BA Rate Margin and the Applicable
LIBOR Margin.
(16) APPLICABLE US INDEX MARGIN shall mean the per annum interest rate margin
from time to time in effect and payable in addition to the US Index Rate
applicable to the Revolving Loan, as determined by reference to Section 1.5(1).
(17) ASSIGNMENT AGREEMENT shall have the meaning given to it in Section 9.1(1).
(18) BA PERIOD shall mean with respect to any BA Rate Loan bearing interest at a
rate based on the BA Rate, a period of 30, 60 or 90 days commencing on a
Business Day selected by Borrower Representative in its irrevocable Notice of
Revolving Credit Advance or Notice of
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Conversion/Continuation - BA Rate with respect to such BA Rate Loan delivered to
Agent in accordance with Section 1.1(1) or 1.5(5) (as applicable), provided that
the foregoing provision relating to BA Periods is subject to the following:
(a) any BA Period that would otherwise extend beyond the relevant
Commitment Termination Date shall end on the Business Day
immediately preceding such Commitment Termination Date;
(b) Borrower Representative shall select BA Periods so as not to require
a payment or prepayment of any BA Rate Loan during a BA Period for
such Loan; and
(c) Borrower Representative shall select BA Periods so there shall be no
more than 3 (three) separate BA Rate Loans in existence at any one
time.
(19) BA RATE shall mean, in respect of any BA Period applicable to a BA Rate
Loan, the rate per annum determined by Agent by reference to the average rate
quoted on the Reuters Monitor Screen (Page CDOR, or such other Page as may
replace such Page on such Screen for the purpose of displaying Canadian
interbank bid rates for Canadian dollar bankers' acceptances) applicable to
Canadian dollar bankers' acceptances with a term comparable to such BA Period as
of 10:00 a.m. (Toronto time) one Business Day before the first day of such BA
Period. If for any reason the Reuters Monitor Screen rates are unavailable, BA
Rate means the rate of interest determined by Agent which is equal to the
arithmetic mean (rounded upwards to the nearest basis point) of the rates quoted
by The Bank of Nova Scotia, Royal Bank of Canada and Canadian Imperial Bank of
Commerce in respect of Canadian Dollar bankers' acceptances with a term
comparable to such BA Period as of 10:00 a.m. (Toronto time) one Business Day
before the first day of such BA Period. For greater certainty, no adjustment
shall be made to account for the difference between the number of days in a year
on which the rates referred to in this definition are based and the number of
days in a year on the basis of which interest is calculated in the Agreement.
(20) BA RATE LOAN shall mean a Loan denominated in Canadian Dollars which bears
interest at a rate based on the BA Rate.
(21) BANK RATE shall mean, at any date, the annual rate of interest at which the
Bank of Canada is prepared to make advances, as effective on such date, and as
made public in accordance with Section 21 of the Bank of Canada Act (Canada).
(22) BORROWER shall have the meaning given thereto in the recitals to the
Agreement and, to the extent that Maska Canada and Tropsport have amalgamated
pursuant to a Permitted Amalgamation, the terms "BORROWER", "BORROWERS" and
"BORROWER REPRESENTATIVE" used with reference to the period on and following the
effective time of such Permitted Amalgamation, shall mean the Continuing
Borrower.
(23) BORROWER REPRESENTATIVE shall mean Maska Canada in its capacity as Borrower
Representative pursuant to the provisions of Section 1.1(3).
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(24) BORROWING AVAILABILITY shall have the meaning given to it in Section
1.1(1)(a).
(25) BORROWING BASE shall mean, as the context may require, the Maska Canada
Borrowing Base and the Tropsport Borrowing Base or any such Borrowing Base; on
and following the effective time of the Permitted Amalgamation of Borrowers,
"BORROWING BASE" and "AGGREGATE BORROWING BASE" shall mean, as of any date of
determination by Agent, from time to time, an amount equal to the sum, expressed
in each of Canadian Dollars and US Dollars, at such time of:
(a) eighty percent (80%) of the book value of Continuing Borrower's
Eligible Accounts, less any Reserves established by Agent at such
time in its reasonable credit judgment; and
(b) fifty-five percent (55%) of the book value of Continuing Borrower's
Eligible Inventory valued on a first-in, first-out basis (at the
lower of cost or market), less any Reserves established by Agent at
such time in its reasonable credit judgment;
in each case, such sums in Canadian Dollars and in US Dollars shall be
determined in accordance with the currency conversion method set forth in
Sections 1.6 and 1.7 and the exchange rate used by such Borrower in making such
calculations shall be set forth on the relevant Borrowing Base Certificate.
(26) BORROWING BASE CERTIFICATE shall mean a certificate to be executed and
delivered from time to time by each Borrower in the form attached to the
Agreement as Exhibit 4.1(2).
(27) BUSINESS DAY shall mean any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the cities of Toronto
or New York and in reference to LIBOR Loans shall mean any such day that is also
a LIBOR Business Day.
(28) CAISSE SECURED PARTIES shall mean Term Lenders and Montreal Trust Company,
as trustee for the Caisse de depot et placement du Quebec.
(29) CAISSE SENIOR COLLATERAL shall mean all assets of the Credit Parties and
their Subsidiaries which are subject to the prior ranking Liens in favour of the
Caisse Secured Parties in accordance with the terms of the Intercreditor
Agreement.
(30) CANADIAN BENEFIT PLANS shall mean all material employee benefit plans of
any nature or kind whatsoever that are not Canadian Pension Plans and are
maintained or contributed to by any Credit Party having employees in Canada.
(31) CANADIAN DOLLAR COLLECTION ACCOUNT shall mean that certain account of
Agent, account number 1011519 with the account name GECCI_COMM_FIN at Royal Bank
of Canada in Toronto, Ontario, transit number 00002, or such other account as
Agent shall specify.
(32) CANADIAN DOLLARS or DOLLARS or $ or C$ shall mean lawful currency of
Canada.
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(33) CANADIAN PENSION PLANS shall mean each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
any Credit Party for its employees or former employees.
(34) CANADIAN SUBSIDIARY GUARANTOR shall mean SLM Trademark Acquisition Canada
Corporation, a New Brunswick corporation.
(35) CAPITAL EXPENDITURES shall mean, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP, less any
amount of property insurance proceeds received by Agent in respect of loss or
damage to property of Borrower, to which no other Person has a claim, which are
applied to reduce the Obligations in accordance with Section 1.3(4), and the
amount of which has been expended on expenditures that constitute Capital
Expenditures.
(36) CAPITAL LEASE shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
(37) CAPITAL LEASE OBLIGATION shall mean, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
(38) CARRY OVER AMOUNT shall have the meaning given to it in Annex D.
(39) CASH COLLATERAL ACCOUNTS shall have the meaning given to it in Annex B.
(40) CASH EQUIVALENTS shall mean (a) marketable direct obligations issued or
unconditionally guaranteed by Canada, any agency thereof, the United States of
America or any agency thereof maturing within one year from the date of
acquisition thereof, (b) commercial paper maturing no more than one year from
the date of creation thereof and currently having the highest rating obtainable
from either Standard & Poor's Ratings Group or Moody's Investors Service, Inc.,
(c) certificates of deposit, maturing no more than one year from the date of
creation thereof, issued by commercial banks incorporated under the laws of
Canada or the United States of America, each having combined capital, surplus
and undivided profits of not less than C$300,000,000 or the Equivalent Amount
thereof in US Dollars and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency (an "A Rated Bank"), (d) time deposits,
maturing no more than 30 days from the date of creation thereof with A Rated
Banks, and (e) mutual funds that invest solely in one or more of the investments
described in clauses (a) through (d) above.
(41) CASH MANAGEMENT SYSTEMS shall have the meaning given to it in Section 1.8.
(42) CCM shall mean CCM Holdings (1983) Inc., a Canada corporation.
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(43) CCM SHAREHOLDERS AGREEMENT shall mean the shareholders agreement with
respect to CCM, dated April 8, 1983, between Gestion Pro-Velo Inc. and Maska
Canada (subject to an agreement of purchase and sale whereby Canadian Subsidiary
Guarantor acquired all of Maska Canada's Stock of CCM and agreed to be bound by
all Maska Canada's obligations under such shareholder's agreement).
(44) CDN INDEX RATE shall mean, at any date, the greater of (1) the annual rate
of interest determined by Agent which is equal to the highest annual rate of
interest announced from time to time by any of The Bank of Nova Scotia, Royal
Bank of Canada and Canadian Imperial Bank of Commerce, as being its reference
rate in effect on such date (or if such date is not a Business Day, on the
Business Day immediately preceding such date) for determining interest rates on
Canadian Dollar denominated commercial loans made by it in Canada (that is,
prime rate), in each case regardless of whether any of such banks actually
charges such rate of interest in connection with extensions of credit in
Canadian Dollars to debtors; and (2) the BA Rate in respect of a BA Period of 30
days commencing on such date, plus, 1.75% per annum. Each change in any interest
rate provided for in the Agreement based upon the Cdn Index Rate shall take
effect at the time of such change in the Cdn Index Rate. For greater certainty,
no adjustment shall be made to account for the difference between the number of
days in a year on which the rates referred to in this definition are based and
the number of days in a year on the basis of which interest is calculated in the
Agreement.
(45) CDN INDEX RATE LOAN shall mean a Loan or portion thereof bearing interest
by reference to the Cdn Index Rate.
(46) CHANGE OF CONTROL shall mean any event, transaction or occurrence as a
result of which (a) Ultimate Parent Stockholders shall cease to own and control
a percentage of all of the issued and outstanding capital Stock of all classes
of Ultimate Parent on a fully diluted basis greater than the aggregate
percentage of such Stock held by any other Person and any Affiliates of such
other Person, or (b) (A) so long as the board of directors of Ultimate Parent
consists of five members, there shall cease to be two elected representatives of
Ultimate Parent Stockholders on the board of directors of Ultimate Parent or
Ultimate Parent Stockholders shall cease to have the right to nominate and
ensure the election of a third representative on the board of directors of
Ultimate Parent, or (B) if the number of directors on the board of Ultimate
Parent is more or less than five, Ultimate Parent Stockholders shall cease to
have, or be entitled to have, proportional representation on the board of
Ultimate Parent equivalent to the proportional representation set out in clause
(A).
(47) CHARGES shall mean all Taxes assessed, levied or imposed against a Credit
Party or upon (a) the Collateral, (b) the Obligations, (c) the employees,
payroll, income or gross receipts of any Credit Party, (d) any Credit Party's
ownership or use of any properties or other assets, or (e) any other aspect of
any Credit Party's business or existence of any Liens in respect of such Taxes.
(48) CHASE FACILITY shall mean, collectively, a credit facility in the aggregate
amount of up to US$74,000,000 made available to Ultimate Parent, as borrower,
under an agreement dated
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April 1, 1997 between such borrower, the credit parties named therein, the
lenders named therein and The Chase Manhattan Bank, as agent for the lenders and
a credit facility in the aggregate amount of up to US$35,000,000 made available
to Maska Canada, as borrower, under an agreement dated April 1, 1997 between
such borrower and The Chase Manhattan Bank of Canada, as lender, each as
amended, modified, supplemented or restated from time to time.
(49) CHASE LENDERS shall mean all the lenders under the Chase Facility.
(50) CHATTEL PAPER shall mean any "chattel paper," as such term is defined in
the PPSA, now owned or hereafter acquired by any Credit Party, wherever located.
(51) CLOSING CHECKLIST shall mean the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex D.
(52) CLOSING DATE shall mean the date of this Agreement first written above.
(53) CODE shall mean the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of New York; provided, however, in
the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Agent's or any Lender's security interest
in any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term "CODE" shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.
(54) COLLATERAL shall mean the property covered by the Security Agreements, the
Hypothecs, the Pledge Agreements, the Mortgages and the other Collateral
Documents and any other property, real or personal, moveable or immoveable,
tangible or intangible, now existing or hereafter acquired, that may at any time
be or become subject to a security interest or Lien in favour of Agent, on
behalf of itself and Lenders, or Agent and Lenders, as appropriate, to secure
the Obligations.
(55) COLLATERAL DOCUMENTS shall mean the Security Agreements, the Hypothecs, the
General Assignments of Debts, the Guarantees, the Mortgages, the Pledges, the
Intellectual Property Security Agreements and all similar agreements entered
into guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations, the Intercreditor Agreement, the Consents and
Acknowledgements Respecting Intellectual Property, landlord agreements, bailee
letters and mortgagee non-disturbance agreements required under Section 5.9 and
the blocked accounts agreements contemplated by Annex C.
(56) COLLATERAL REPORTS shall mean the reports with respect to the Collateral
referred to in Annex F.
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(57) COLLECTION ACCOUNTS shall mean the Canadian Dollar Collection Account and
the US Dollar Collection Account and "COLLECTION ACCOUNT" shall mean either of
them.
(58) COMMITMENT TERMINATION DATE shall mean the earliest of (a) the third
anniversary of the Closing Date, (b) (i) the date that is sixty (60) days prior
to the date of termination of the Term Loan, if the Term Loan terminates on a
date on or before the second anniversary of the Closing Date, or (ii) the date
that is one hundred and twenty (120) days prior to the date of termination of
the Term Loan, if the Term Loan terminates on a date after the second
anniversary of the Closing Date, (c) the date of termination of Lenders'
obligations to make Loans and/or incur Letter of Credit Obligations or permit
existing Loans to remain outstanding pursuant to Section 8.2(2), and (d) the
date of indefeasible prepayment in full by Borrowers of the Loans and the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to Annex B,
and the permanent reduction of the Revolving Loan Commitment and the Swing Line
Commitment to zero dollars ($0).
(59) COMPLIANCE CERTIFICATE shall have the meaning given to it in Annex E.
(60) CONFIDENTIAL INFORMATION means the trade secrets, confidential information
and confidential know-how in which any Credit Party now or hereafter has an
interest. Confidential Information includes, without limitation, information of
the following types with respect to each Credit Party:
(a) all unpatented inventions,
(b) all customer and supplier lists for the business,
(c) all unpublished studies and data, prototypes, drawings, design and
construction specifications and production, operating and quality
control manuals used in the business,
(d) all marketing strategies and business plans,
(e) all current or proposed business opportunities, and
(f) all documents, materials and media embodying other items of
Confidential Information.
(61) CONSENTS AND ACKNOWLEDGEMENTS RESPECTING INTELLECTUAL PROPERTY shall mean
the consents and acknowledgements or consent agreements, as applicable, made in
favour of Agent, on behalf of itself and Lenders, by each licensor of
Intellectual Property to Borrowers or any other Credit Party.
(62) CONTINUING BORROWER shall have the meaning given to it in Section 6.1.
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(63) CONTINUING CREDIT PARTY shall have the meaning given to it in Section 6.1.
(64) CONTROL LETTER means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house with respect to commodity
accounts and commodity contracts held by any Credit Party, whereby, among other
things, the issuer, securities intermediary or futures commission merchant
disclaims any security interest in the applicable financial assets, acknowledges
the Lien of Agent, on behalf of itself and Lenders, and the Liens of Agent and
Lenders, if appropriate, on such financial assets, and agrees to follow the
instructions or entitlement orders of Agent without further consent by the
affected Credit Party.
(65) COPYRIGHT LICENSE shall mean any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright.
(66) COPYRIGHTS shall mean all of the following now owned or used or hereafter
acquired or used by any Credit Party: (a) all copyrights and general intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the Canadian Copyright Office or
in any similar office or agency in any other country or any political
subdivision thereof, and (b) all restorations, extensions or renewals thereof.
(67) CREDIT PARTIES shall mean Ultimate Parent, each Borrower, the US Subsidiary
Guarantors, and the Canadian Subsidiary Guarantor (and includes, for greater
certainty, each Continuing Credit Party).
(68) DEFAULT shall mean any event which, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
(69) DEFAULT RATE shall have the meaning given to it in Section 1.5(4).
(70) DESIGN LICENSE shall mean all rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any Design.
(71) DESIGNS shall means all industrial designs, design patents and other
designs that any Credit Party now or hereafter owns or uses, including all
registrations and recordings thereof and all applications in connection
therewith including all registrations, recordings and applications that have
been or shall be made or filed in the Canadian Industrial Design Office or any
similar office in any country in the world and all records thereof and all
reissues, extensions or renewals thereof, and all common law and other rights in
the foregoing.
(72) DISCLOSURE SCHEDULES shall mean the Schedules prepared by Borrower and
denominated as Disclosure Schedules 1.4 through 6.7 in the Table of Contents to
the Agreement.
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(73) EBITDA shall mean, with respect to any Person for any fiscal period, an
amount equal to (a) consolidated net income of such Person for such period,
minus (b) the sum of (i) income and capital tax credits, (ii) interest income,
(iii) gain from extraordinary items for such period, (iv) any aggregate net gain
(but not any aggregate net loss) during such period arising from the sale,
exchange or other disposition of capital assets by such Person (including any
fixed assets, whether tangible or intangible, all inventory sold in conjunction
with the disposition of fixed assets and all securities), and (v) any other
non-cash gains which have been added in determining consolidated net income, in
each case to the extent included in the calculation of consolidated net income
of such Person for such period in accordance with GAAP, but without duplication,
plus (c) the sum of (i) any provision for income taxes and capital taxes , (ii)
Interest Expense, (iii) loss from extraordinary items for such period and
non-recurring restructuring charges in connection with the Reorganization not to
exceed, in the aggregate (for Ultimate Parent and its Subsidiaries), the
following amounts for each Fiscal Year specified: (A) US$2,250,000 for the
Fiscal Year ending December 31, 1999, (B) US$345,000 for the Fiscal Year ending
December 31, 2000, and (C) US$173,000 for the Fiscal Year ending December 31,
2001, (iv) the amount of non-cash charges (including depreciation and
amortization, including amortization of transaction costs in connection with the
Reorganization) for such period, (v) amortized debt discount for such period,
and (vi) the amount of any deduction to consolidated net income as the result of
any grant to any members of the management of such Person of any Stock, in each
case to the extent included in the calculation of consolidated net income of
such Person for such period in accordance with GAAP, but without duplication.
For purposes of this definition, the following items shall be excluded in
determining consolidated net income of a Person: (1) the income (or deficit) of
any other Person accrued prior to the date it became a Subsidiary of, or was
merged or consolidated into, such Person or any of such Person's Subsidiaries;
(2) the income (or deficit) of any other Person (other than a Subsidiary) in
which such Person has an ownership interest, except to the extent any such
income has actually been received by such Person in the form of cash dividends
or distributions; (3) the undistributed earnings of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or similar
distributions by such Subsidiary is not at the time permitted by the terms of
any contractual obligation or requirement of law applicable to such
Subsidiary;(4) any write-up of any asset; (5) any net gain from the collection
of the proceeds of life insurance policies; (6) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (7) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets (except in
relation to SHC and its Subsidiaries with respect to the fourth Fiscal Quarter
of 1998), and (8) any deferred credit representing the excess of equity in any
Subsidiary of such Person at the date of acquisition of such Subsidiary over the
cost to such Person of the investment in such Subsidiary.
(74) ELIGIBLE ACCOUNTS shall have the meaning given to it in Section 1.6.
(75) ELIGIBLE INVENTORY shall have the meaning given to it in Section 1.7.
(76) ENVIRONMENTAL LAWS shall mean all applicable federal, provincial, local and
foreign laws, statutes, ordinances, codes, rules, standards, orders-in-council
and regulations, now or hereafter
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in effect, and in each case as amended or supplemented from time to time, and
any applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).
(77) ENVIRONMENTAL LIABILITIES shall mean, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions and interest incurred as a result of
or related to any claim, suit, action, administrative order, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws, Environmental
Permits, or in connection with any Release or threatened Release or presence of
a Hazardous Material whether on, at, in, under, from or about or in the vicinity
of any real or personal property.
(78) ENVIRONMENTAL PERMITS shall mean all permits, licenses, written
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.
(79) EQUIPMENT shall mean all "equipment", as such term is defined in the PPSA,
now owned or hereafter acquired by any Credit Party, wherever located and, in
any event, including all such Credit Party's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment with software and peripheral equipment (other than software
constituting part of the Accounts), and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, all whether now owned or hereafter acquired, and wherever
situated, together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all manuals, drawings, instructions, warranties and rights with
respect thereto, and all products and proceeds thereof and condemnation awards
and insurance proceeds with respect thereto.
(80) EQUIVALENT AMOUNT shall mean, on any date of determination, with respect to
obligations or valuations denominated in one currency (the "FIRST CURRENCY"),
the amount of another currency (the "SECOND CURRENCY") which would result from
the conversion of the relevant amount of the first currency into the second
currency at the 12:00 noon rate quoted on the Reuters Monitor Screen (Page BOFC
or such other Page as may replace such Page for the purpose of displaying such
exchange rates) on such date or, if such date is not a Business Day, on
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the Business Day immediately preceding such date of determination, or at such
other rate as may have been agreed in writing between Borrower and Agent.
(81) ERISA shall mean the Employee Retirement Income Security Act of 1974 (or
any successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
(82) ERISA AFFILIATE shall mean, with respect to any Credit Party, any trade or
business (whether or not incorporated) which, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
(83) ERISA EVENT shall mean, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d) the filing of a notice of intent to terminate a
Title IV Plan or the treatment of a plan amendment as a termination under
Section 4041 of ERISA; (e) the institution of proceedings to terminate a Title
IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party
or ERISA Affiliate to make when due required contributions to a Multiemployer
Plan or Title IV Plan unless such failure is cured within 30 days; (g) any other
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; (i) the loss of a Qualified Plan's qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.
(84) ESCROW AGREEMENT shall mean the escrow agreement dated November 3, 1998
among Agent, US Agent, Borrowers, SHC Hockey, Ultimate Parent, US Acquisition
Sub and the escrow agent named therein.
(85) ESOP shall mean a Plan which is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
(86) EUROPEAN SUBSIDIARIES shall mean all Subsidiaries of Ultimate Parent formed
or continued under the laws of any country other than Canada or the United
States, as shown on Disclosure Schedule 3.8.
(87) EVENT OF DEFAULT shall have the meaning given to it in Section 8.1.
(88) EXCESS THRESHOLD AMOUNT shall have the meaning given to it in Section
1.3(2)(a).
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(89) FEDERAL FUNDS RATE shall mean, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent.
(90) FEES shall mean any and all fees payable to Agent or any Lender pursuant to
the Agreement or any of the other Loan Documents.
(91) FINANCIAL COVENANTS shall have the meaning given to it in Section 6.10.
(92) FINANCIAL STATEMENTS shall mean the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Ultimate Parent and
SHC delivered in accordance with Section 3.4(1) of the Agreement and the
consolidated and consolidating income statements, statements of cash flows and
balance sheets of Ultimate Parent delivered in accordance with Annex E to the
Agreement.
(93) FISCAL MONTH shall mean each of twelve consecutive periods in each Fiscal
Year consisting of four or five consecutive weekly periods (each commencing on a
Sunday and ending on a Saturday) the exact number of such weekly periods being
established by Ultimate Parent prior to the commencement of such Fiscal Year.
(94) FISCAL QUARTER shall mean any of the four quarterly accounting periods of
Credit Parties, in each Fiscal Year consisting of three consecutive Fiscal
Months; and where reference is made in this Agreement to a Fiscal Quarter ending
on a particular date, reference shall be deemed to be made to the Fiscal Quarter
ending on or about such date.
(95) FISCAL YEAR shall mean any of the annual accounting periods of Credit
Parties consisting of twelve (12) Fiscal Months and ending on or about December
31; where reference is made in this Agreement to a Fiscal Year ending December
31, reference shall be deemed to be made to the Fiscal Year ending on or about
such date.
(96) FIXED CHARGE COVERAGE RATIO shall mean, with respect to any Person for any
fiscal period, the ratio of EBITDA less Capital Expenditures (after deducting
from Capital Expenditures the amount of all proceeds from any disposition of
assets to which no other Person has a claim, which have been applied to reduce
the Obligations in accordance with Section 1.3(2)(b) during such fiscal period
and the amount of which has been expended on Capital Expenditures during such
fiscal period) to Fixed Charges.
(97) FIXED CHARGES shall mean, with respect to any Person for any fiscal period,
(a) the aggregate of all Interest Expense paid or accrued during such period,
plus (b) scheduled payments of principal with respect to Indebtedness during
such period and any prepayment of principal with respect to the Term Loan during
such period, plus (c) cash payments of Taxes during such period.
(98) FIXTURES shall mean all "fixtures" including trace fixtures, facilities and
equipment however affixed or attached to real property or building or other
structures or real property.
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(99) FUNDED DEBT shall mean, with respect to any Person, all Indebtedness for
borrowed money evidenced by notes, bonds, debentures, or similar evidences of
Indebtedness and which by its terms matures more than one year from, or is
directly or indirectly renewable or extendible at such Person's option under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof,
and specifically including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible beyond one year
at the option of the debtor, and also including, in the case of Credit Parties,
the Obligations.
(100) GAAP shall mean generally accepted accounting principles in the United
States of America, consistently applied as such term is further defined in Annex
G to the Agreement.
(101) GE CAPITAL shall mean General Electric Capital Corporation.
(102) GE CAPITAL CANADA shall mean General Electric Capital Canada Inc.
(103) GE CAPITAL FEE LETTER shall have the meaning given to it in Section
1.9(1).
(104) GENERAL ASSIGNMENTS OF DEBTS shall mean each of the general assignments of
debts entered into by each Credit Party that is a signatory thereto in favour of
Agent for the benefit of Agent and Lenders.
(105) GOVERNMENTAL AUTHORITY shall mean any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
(106) GUARANTEED INDEBTEDNESS shall mean, as to any Person, any obligation of
such Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such Person (a) to purchase
or repurchase any such primary obligation, (b) to advance or supply funds (A)
for the purchase or payment of any such primary obligation or (B) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the primary
obligor, (c) 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 (d) to
indemnify the owner of such primary obligation against loss in respect thereof.
The amount of any Guaranteed Indebtedness at any time shall be deemed to be an
amount equal to the lesser at such time of (i) the stated or determinable amount
of the primary obligation in respect of which such Guaranteed Indebtedness is
made and (ii) the maximum amount for which such Person may be liable pursuant to
the terms of the instrument embodying such Guaranteed Indebtedness; or, if not
stated or determinable, the maximum reasonably anticipated liability (assuming
full performance) in respect thereof.
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(107) GUARANTEES shall mean, collectively, the cross-guarantees of each Borrower
contemplated in Section 12, the Ultimate Parent Guarantee, each Subsidiary
Guarantee and any other guarantee executed by any Guarantor in favour of Agent
and Lenders in respect of the Obligations.
(108) GUARANTORS shall mean Ultimate Parent, the Canadian Subsidiary Guarantor,
each of the US Subsidiary Guarantors, and each other Person, if any, which
executes a guarantee or other similar agreement in favour of Agent in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.
(109) HAZARDOUS MATERIAL shall mean any substance, material or waste which is
regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste", "hazardous waste", "hazardous material", "hazardous substance",
"dangerous good", "extremely hazardous waste", "restricted hazardous waste",
"pollutant", "contaminant", "hazardous constituent", "special waste", "toxic
substance" or other similar term or phrase under any Environmental Laws, (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
(110) HKBC FACILITY shall mean, collectively, credit facilities in the aggregate
amount of up to C$37,450,000 made available to Tropsport, as borrower, under an
agreement dated August 5, 1998 between such borrower, the lenders named therein
and Hongkong Bank of Canada, as agent for the lenders, as amended, modified,
supplemented or restated from time to time.
(111) HKBC LENDERS shall mean the lenders under the HKBC Facility.
(112) HYPOTHECS shall mean each of the hypothecs entered into between each of
the Agent, the Lender or Lenders and each Credit Party that is a signatory
thereto.
(113) INACTIVE SUBSIDIARIES shall mean 2867923 Canada Inc., a Canada
corporation, Karhu Canada Inc., a Canada corporation, J.W.
Verwaltungsgesellschaft Nr.5 mbH, a West German corporation, Solte mbH, a West
German corporation, Maska H.K. Limited, a Hong Kong corporation, Smedley (Hong
Kong) Ltd., a Hong Kong corporation and Buddy L St. Thomas Inc., a U.S. Virgin
Islands corporation.
(114) INDEBTEDNESS of any Person shall mean without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than six (6) months unless being contested
in good faith, (b) all reimbursement and other obligations with respect to
letters of credit, bankers' acceptances and surety bonds, whether or not
matured, (c) all obligations evidenced by notes, bonds, debentures or 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 and the present value (discounted
at the US Index Rate (in the case of
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such obligations in US Dollars) or at the Cdn Index Rate (in the case of such
obligations in Canadian Dollars), as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.
(115) INDEMNIFIED LIABILITIES shall have the meaning given to it in Section
1.13.
(116) INDEMNIFIED PERSON shall have the meaning given to it in Section 1.13(1).
(117) INSOLVENCY LAWS shall mean any of the Bankruptcy and Insolvency Act
(Canada), the Companies' Creditors Arrangement Act (Canada) and Title 11 of the
United States Code entitled "Bankruptcy", each as now and hereafter in effect,
any successors to such statutes and any other applicable insolvency or other
similar law of any jurisdiction including, without limitation, any law of any
jurisdiction permitting a debtor to obtain a stay or a compromise of the claims
of its creditors against it.
(118) INSTRUMENTS shall mean any "instrument", as such term is defined in the
PPSA, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all notes and other, without limitation, evidences of indebtedness,
other than instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.
(119) INTELLECTUAL PROPERTY shall mean any and all Confidential Information,
Copyrights, Designs, Licenses, Patents, Software and Trademarks.
(120) INTELLECTUAL PROPERTY SECURITY AGREEMENTS shall mean each of the
intellectual property security agreements entered into between Agent and each
Credit Party that is a signatory thereto.
(121) INTERCOMPANY NOTES shall have the meaning given to it in Section 6.3.
(122) INTERCREDITOR AGREEMENT shall mean the intercreditor agreement between the
Agent, the US Agent, the Term Lenders and the Credit Parties, in form and
substance satisfactory to Agent and Lenders, under which, among other things,
are set out the relative priorities of the Liens of the Agent, the Lenders, the
US Agent, the US Lenders and the Term Lenders with respect to the Collateral, as
amended, supplemented, modified and restated from time to time.
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(123) INTEREST COVERAGE RATIO shall mean, with respect to any Person for any
fiscal period, the ratio of EBITDA to Interest Expense.
(124) INTEREST EXPENSE shall mean, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including, in
any event, interest expense with respect to any Funded Debt of such Person, but
shall exclude the write-off of any unamortized financing costs previously
capitalized in accordance with GAAP.
(125) INTEREST PAYMENT DATE means (a) as to any Cdn Index Rate Loan or US Index
Rate Loan, the first Business Day of each month to occur while such Loan is
outstanding, (b) as to any LIBOR Loan, the last day of the applicable LIBOR
Period and, as to any BA Rate Loan, the last day of the applicable BA Period and
provided that, in addition to the foregoing, each of (x) the date upon which all
of the Revolving Loan Commitments have been terminated and the Loans have been
paid in full and (y) the Commitment Termination Date shall be deemed to be an
"INTEREST PAYMENT DATE" with respect to any interest which is then accrued under
the Agreement.
(126) INVENTORY shall mean any "inventory", as such term is defined in the PPSA,
now or hereafter owned or acquired by any Credit Party, wherever located, and in
any event including inventory, merchandise, goods and other personal property
which are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or which
constitute raw materials, work in process or materials used or consumed or to be
used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
other supplies.
(127) IRC shall mean the Internal Revenue Code of 1986, as amended, and any
successor thereto.
(128) IRS shall mean the Internal Revenue Service, or any successor thereto.
(129) ITA shall mean the Income Tax Act (Canada) as the same may, from time to
time be in effect.
(130) JUDGMENT CONVERSION DATE shall have the meaning given to it in Section
11.18(1).
(131) JUDGMENT CURRENCY shall have the meaning given to it in Section 11.18(1).
(132) L/C ISSUER shall have the meaning given to such term in Annex B.
(133) L/C SUBLIMIT shall have the meaning given to such term in Annex B.
(134) LENDERS shall mean GE Capital Canada, the other Lenders named on the
signature page of the Agreement, and, if any such Lender shall decide to assign
all or any portion of the Obligations, such term shall include such assignee.
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(135) LETTER OF CREDIT FEE has the meaning given to it in Annex B.
(136) LETTER OF CREDIT OBLIGATIONS shall mean all outstanding obligations
incurred by Agent and Lenders at the request of Borrower Representative, whether
direct or indirect, contingent or otherwise, due or not due, in connection with
the issuance of a reimbursement agreement or guarantee by Agent or purchase of a
participation as set forth in Annex B with respect to any Letter of Credit. The
amount of such Letter of Credit Obligations shall equal the maximum amount which
may be payable by Agent or Lenders thereupon or pursuant thereto.
(137) LETTERS OF CREDIT shall mean commercial or standby letters of credit
issued for the account of Borrower by any L/C Issuer, and bankers' acceptances
issued by Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.
(138) LIBOR BUSINESS DAY shall mean a Business Day on which banks in the city of
London are generally open for interbank or foreign exchange transactions.
(139) LIBOR LOAN shall mean a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
(140) LIBOR PERIOD shall mean, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower Representative pursuant
to the Agreement and ending one, two or three months thereafter, as selected by
Borrower Representative's irrevocable notice delivered to Agent in accordance
with Section 1.1(1) or 1.5(6) (as applicable) provided that the foregoing
provision relating to LIBOR Periods is subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not a LIBOR
Business Day, such LIBOR Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension
would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding
LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end two (2) LIBOR Business Days prior to such
date;
(c) any LIBOR Period pertaining to a LIBOR Loan that begins on the last
LIBOR 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 LIBOR Period) shall end on the last LIBOR Business Day of a
calendar month;
(d) Borrower Representative shall select LIBOR Periods so as not to
require a payment or prepayment of any LIBOR Loan during a LIBOR
Period for such Loan; and
(e) Borrower Representative shall select LIBOR Periods so that there
shall be no more than three (3) separate LIBOR Loans in existence at
any one time.
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(141) LIBOR RATE shall mean for each LIBOR Period, a rate of interest determined
by Agent equal to the offered rate for deposits in United States Dollars for the
applicable LIBOR Period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on the second full LIBOR Business Day next preceding the first day
of each LIBOR Period (unless such date is not a Business Day, in which event the
next succeeding Business Day will be used). If such interest rates shall cease
to be available from Telerate News Service, the LIBOR Rate shall be determined
from such financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower Representative.
(142) LICENSE shall mean any Copyright License, Design License, Patent License,
Software License, Trademark License or other license of rights or interests now
held or hereafter acquired by any Credit Party, and also any license wherein a
Credit Party has granted to a Person rights or an option to acquire rights to
use any Confidential Information, Copyright, Design, Patent, Software, Trademark
or other intellectual property owned by such Credit Party or licenced to such
Credit Party.
(143) LIEN shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement of
any kind or nature whatsoever (including any lease or title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
perfecting a security interest under the PPSA or comparable law of any
jurisdiction).
(144) LIQUIDATION PERIOD shall have the meaning given to it in the Intercreditor
Agreement.
(145) LITIGATION shall have the meaning given to it in Section 3.12.
(146) LOAN ACCOUNT shall have the meaning given to it in Section 1.12.
(147) LOAN DOCUMENTS shall mean the Agreement, the Notes, the Collateral
Documents and all other agreements, instruments, documents, certificates and
acknowledgment identified in the Closing Checklist executed and delivered to, or
in favour of, Agent and/or Lenders and including all other pledges, powers of
attorney, consents, assignments, contracts, notices, and all other written
matter whether heretofore, now or hereafter executed by or on behalf of any
Credit Party, or any employee of any Credit Party, or any other Person and
delivered to Agent or any Lender in connection with the Agreement or the
transactions contemplated hereby. Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to such Agreement as the same may be in
effect at any and all times such reference becomes operative.
(148) LOANS shall mean the Revolving Loan and the Swing Line Loan.
(149) LOCK BOX shall have the meaning given to it in Annex C.
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(150) MASKA ACTIVATION NOTICE shall have the meaning given to it in Annex C.
(151) MASKA BLOCKED ACCOUNTS shall have the meaning given to it in Annex C.
(152) MASKA CANADA means Sport Maska Inc., a New Brunswick corporation.
(153) MASKA CANADA BORROWING BASE shall mean, as of any date of determination by
Agent, from time to time, an amount equal to the sum, expressed in each of
Canadian Dollars and US Dollars, at such time of:
(a) eighty percent (80%) of the book value of Maska Canada's Eligible
Accounts, less any Reserves established by Agent at such time in its
reasonable credit judgment; and
(b) fifty-five percent (55%) of the book value of Maska Canada's
Eligible Inventory valued on a first-in, first-out basis (at the
lower of cost or market), less any Reserves established by Agent at
such time in its reasonable credit judgment;
in each case, such sums in Canadian Dollars and in US Dollars shall be
determined in accordance with the currency conversion method set forth in
Sections 1.6 and 1.7 and the exchange rate used by such Borrower in making such
calculations shall be set forth on the relevant Borrowing Base Certificate.
(154) MASKA DISBURSEMENT ACCOUNTS shall have the meaning given to it in Annex C.
(155) MASKA OPERATING ACCOUNTS shall have the meaning given to it in Annex C.
(156) MASKA PERMITTED DEPOSITS shall have the meaning given to it in Annex C.
(157) MASKA RELATED PERSON shall have the meaning given to it in Annex C.
(158) MASKA US shall mean Maska U.S., Inc., a Vermont corporation.
(159) MATERIAL ADVERSE EFFECT shall mean a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of
either Borrower and its Subsidiaries considered as a whole, or the other Credit
Parties, considered as a whole, (b) either Borrower's ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of the
Agreement, or any of the other Credit Parties' ability to honour their
Obligations, (c) the Collateral or Agent's or any Lender's Liens on the
Collateral or the priority of such Liens, or (d) Agent's or any Lender's rights
and remedies under the Agreement and the other Loan Documents. Without limiting
the foregoing, any event or occurrence adverse to one or more Credit Parties
which results or could reasonably be expected to result in costs and/or
liabilities in excess of the lesser of C$5,000,000 or the Equivalent Amount
thereof in another currency and 10% of Borrowing Availability as of any date of
determination shall be deemed to have had Material Adverse Effect.
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(160) MAXIMUM AMOUNT shall mean, at any particular time, an amount determined in
US Dollars equal to the Revolving Loan Commitment of all Lenders.
(161) MORTGAGED PROPERTIES shall have the meaning given to it in Annex D.
(162) MORTGAGES shall mean each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Credit Party to Agent with
respect to the Mortgaged Properties, all in form and substance satisfactory to
Agent, including, without limitation, acknowledgment of charges, standard charge
terms, Assignment of Rents and Hypothecs charging real property.
(163) MULTIEMPLOYER PLAN shall mean a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making,
is obligated to make, has made or been obligated to make, contributions on
behalf of participants who are or were employed by any of them.
(164) NET BORROWING AVAILABILITY shall mean as of any date of determination, as
to both Borrowers, the lesser of (i) the Maximum Amount and (ii) the Aggregate
Borrowing Base, in each case less the sum of the aggregate Revolving Loan and
Swing Line Loan then outstanding.
(165) NON-CONSENTING LENDER shall have the meaning given to it in Section
11.2(4)(a).
(166) NON-FUNDING LENDER shall have the meaning given to it in Section
9.9(1)(b).
(167) NOTES shall mean the Revolving Notes and the Swing Line Notes,
collectively.
(168) NOTICE OF CONVERSION/CONTINUATION-BA RATE shall have the meaning given to
it in Section 1.5(5).
(169) NOTICE OF CONVERSION/CONTINUATION-LIBOR shall have the meaning given to it
in Section 1.5(6).
(170) NOTICE OF REVOLVING CREDIT ADVANCE shall have the meaning given to it in
Section 1.1(1).
(171) OBLIGATION CURRENCY shall have the meaning given to it in Section
11.18(1).
(172) OBLIGATIONS shall mean all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest (including
all interest which accrues after the commencement of any case or proceeding in
bankruptcy after the insolvency of, or for the reorganization of any Credit
Party, whether or not allowed in such proceeding), Fees, Charges,
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expenses, attorneys' fees and any other sum chargeable to any Credit Party under
the Agreement or any of the other Loan Documents.
(173) OFFICES shall have the meaning given to it in the Intercreditor Agreement.
(174) OPERATING CASH FLOW RATIO shall mean, with respect to any Person for any
fiscal period, the ratio of EBITDA minus Capital Expenditures to Interest
Expense.
(175) OTHER LENDER shall have the meaning given to it in Section 9.9(4).
(176) PATENT LICENSE shall mean rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
(177) PATENTS shall mean all of the following which any Credit Party now or
hereafter uses, or in which any Credit Party now holds or hereafter acquires any
interest: (a) all letters patent of invention and all applications for letters
patent and all registrations and recordings thereof, including registrations,
recordings and applications in the Canadian Patent and Trademark Office or in
any similar office or agency of Canada in any other country, and (b) all
reissues, continuations, continuations-in-part, divisions or extensions thereof.
(178) PBGC shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
(179) PERMITTED AMALGAMATION shall have the meaning given to it in Section 6.1.
(180) PERMITTED ENCUMBRANCES shall mean the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or, otherwise, to the extent that non-payment is permitted by Section 5.2(2);
(b) pledges or deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA);(c) pledges or deposits of
money securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics'
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate;(e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business that are unregistered and secure amounts that are
not yet due and payable, so long as such Liens attach only to Inventory; (f)
deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings
to which any Credit Party is a party; (g) any attachment or judgment lien not
constituting an Event of Default under Section 8.1(10); (h) zoning restrictions,
easements, licenses, or other restrictions on the use of any Real Estate or
other minor irregularities in title (including leasehold title) thereto, so long
as the same do not materially impair the use, value, or marketability of such
Real Estate; (i) presently existing or hereinafter created Liens in favour of
Agent and Lenders; and (j) Liens expressly permitted under clauses (2), (3), (4)
and (5) of Section 6.7 of the Agreement; and (k) to the extent not included in
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clauses (a), (d) or (e) above, Prior Claims that are unregistered and that
secure amounts that are not yet due and payable.
(181) PERSON shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, other entity or
government (whether federal, provincial, state, county, city, municipal, local,
foreign, or otherwise, including any instrumentality, division, agency, body or
department thereof).
(182) PHOENIX shall mean Phoenix Home Life Mutual Insurance Company.
(183) PHOENIX INVESTMENT shall mean 12,500 shares of 13% paid-in-kind preferred
Stock of Ultimate Parent and warrants to purchase 159,127 shares of common Stock
of Ultimate Parent to be purchased by Phoenix pursuant to the Phoenix Investment
Agreement.
(184) PHOENIX INVESTMENT AGREEMENT shall mean the agreement dated on or before
the Closing Date between Ultimate Parent and Phoenix providing for the purchase
by Phoenix of the Phoenix Investment.
(185) PLAN shall mean, at any time, an employee benefit plan, as defined in
Section 3.3 of ERISA, which any Credit Party maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any Credit Party.
(186) PLEDGE AGREEMENTS shall mean the pledge agreements entered into between
Agent, on behalf of itself and Lenders, and each Credit Party that is a
signatory thereto.
(187) PPSA shall mean the Personal Property Security Act (Ontario) and the
Regulations thereunder, as from time to time in effect, provided, however, if
attachment, perfection or priority of Agent's or Lenders' security interests in
any Collateral are governed by the personal property security laws of any
jurisdiction other than Ontario, PPSA shall means those personal property
security laws in such other jurisdiction for the purposes of the provisions
hereof relating to such attachment, perfection or priority and for the
definitions related to such provisions.
(188) PRIOR CLAIMS shall mean all Liens created by applicable law (in contrast
with Liens voluntarily granted) which rank or are capable of ranking prior to or
pari passu with Agent's and Lenders' security interests (or the applicable
equivalent thereof) against all or part of the Collateral, including for amounts
owing for wages, employee deductions, goods and services taxes, sales taxes,
employer health taxes, municipal taxes, workers' compensation, pension fund
obligations and overdue rents.
(189) PRIOR LENDER OBLIGATIONS shall mean all the obligations of each Credit
Party and each of its Subsidiaries, or any of their predecessors, under the
Chase Facility and the HKBC Facility.
(190) PRIOR LENDERS shall mean the HKBC Lenders and the Chase Lenders.
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(191) PRO FORMA means the unaudited consolidated and consolidating balance sheet
of Ultimate Parent and its Subsidiaries as of the Closing Date after giving pro
forma effect to the Related Transactions.
(192) PRO RATA SHARE shall mean with respect to all matters relating to any
Lender (a) with respect to the Revolving Loan (including the Swing Line Loan as
a subset of the Swing Line Lender's Revolving Loan), the percentage obtained by
dividing (i) the Revolving Loan Commitment (including the Swing Line Commitment
as a subset of the Swing Line Lender's Revolving Loan Commitment), by (ii) the
aggregate Revolving Loan Commitments, as such percentages may be adjusted by
assignments permitted pursuant to Section 9.1, and (b) with respect to all Loans
on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the aggregate outstanding principal balance of the Loans held by
that Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders.
(193) PROCEEDS shall mean "proceeds", as such term is defined in the PPSA and,
in any event, shall include (a) any and all proceeds of any insurance,
indemnity, warranty or guarantee payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or (ii) for past, present or
future infringement or dilution of any Copyright, Copyright License, Trademark
or Trademark License, or for injury to the goodwill associated with any
Trademark or Trademark License, (d) any recoveries by any Credit Party against
third parties with respect to any litigation or dispute concerning any of the
Collateral, and (e) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral, upon disposition or
otherwise.
(194) PROJECTIONS means Ultimate Parent's forecasted consolidated: (a) balance
sheet; (b) profit and loss statement; and (c) cash flow statement, all
consistent with the historical Financial Statements of Ultimate Parent and SHC
with the exception of the profit and loss statement which is consolidating
through EBITDA, together with appropriate supporting details and a statement of
underlying assumptions.
(195) PROPOSED CHANGE shall have the meaning given to it in Section 11.2(4).
(196) PUBLIC OFFERING shall mean a firm underwritten public offering of common
stock (a) registered on form S-1, S-2 or S-3 under the Securities Act of 1933,
as amended, by a nationally recognized investment banking firm and after giving
effect to which the issuer shall be qualified for listing on the NASDAQ National
Market, the American Stock Exchange or the New York Stock Exchange or (b) in
respect of which a preliminary prospectus and prospectus have been filed in
accordance with the Securities Act (Ontario) and receipts therefor obtained from
the Director thereunder and after which the issuer shall be qualified for
listing on either the Montreal or Toronto stock exchanges.
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(197) QUALIFIED PLAN shall mean a Plan which is intended to be tax-qualified
under Section 401(a) of the IRC.
(198) REAL ESTATE shall have the meaning given to it in Section 3.6.
(199) REFINANCING shall mean the repayment in full by Credit Parties of the
Prior Lender Obligations on the Closing Date.
(200) REFUNDED SWING LINE LOAN shall have the meaning given to it in Section
1.1(2)(c).
(201) RELATED TRANSACTIONS means each borrowing under the Revolving Loan and the
US Facility on the Closing Date, the Term Loan, the Phoenix Investment issuance,
the Reorganization, the Refinancing, the payment of all fees, costs and expenses
associated with all of the foregoing and the execution and delivery of all of
the Related Transactions Documents.
(202) RELATED TRANSACTIONS DOCUMENTS shall mean the Loan Documents, the US
Facility Agreement, the Reorganization Agreement, the Term Loan Agreement and
the Phoenix Investment Agreement.
(203) RELEASE shall mean any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
(204) REORGANIZATION shall mean, collectively, the Acquisition and the US
Acquisition.
(205) REORGANIZATION AGREEMENT shall mean the Agreement and Plan of
Reorganization dated October 6, 1998 between Ultimate Parent, Maska Canada, US
Acquisition Sub, and US Acquired Co.
(206) REPLACEMENT LENDER shall have the meaning given to it in Section 1.16(4).
(207) REQUISITE LENDERS shall mean (a) Lenders having more than fifty-one
percent (51%) of the Revolving Loan Commitments of all Lenders, or (b) if the
Revolving Loan Commitments have been terminated, more than fifty-one percent
(51%) of the aggregate outstanding amount of the Loans.
(208) RESERVES shall mean, with respect to the Borrowing Base of each Borrower
(a) reserves established by Agent, exercising its reasonable credit judgment,
from time to time against Eligible Inventory pursuant to Section 5.9, (b)
reserves established pursuant to Section 5.2(2) or 5.4(3), and (c) such other
reserves against Eligible Accounts, Eligible Inventory or Borrowing Availability
of Borrowers which Agent may, in its reasonable credit judgment, establish from
time to time including, without limitation, a dilution reserve which, as of the
Closing Date, Agent has established as 10% of Eligible Accounts, to be adjusted
up or down based on the
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performance of the Borrowers' Accounts, in the reasonable credit judgment of
Agent. Without limiting the generality of the foregoing, Reserves established to
ensure the payment of accrued Interest Expense or Indebtedness and on account of
Agent's obligations under landlords' agreements, bailee letters, the
Intercreditor Agreement and Consents and Acknowledgements Respecting
Intellectual Property shall be deemed to be a reasonable exercise of Agent's
credit judgment.
(209) RESTRICTED PAYMENT shall mean, with respect to any Person, (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of such Person's Stock, (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Person's Stock
or any other payment or distribution made in respect thereof, either directly or
indirectly, (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges (other than closing fees payable on the Closing
Date) on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, the Term Loan; (d) any payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Person now or hereafter outstanding; (e)
any payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of, any shares of such
Person's Stock or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission; (f) any
payment, loan, contribution, or other transfer of funds or other property to any
Stockholder of such Person other than payment of compensation in the ordinary
course to stockholders who are employees of such Person and reimbursement of
reasonable out-of-pocket expenses of stockholders of such Person in regard to
their participation in the management, business and affairs of the Credit
Parties; and (g) any payment of management fees (or other fees of a similar
nature) by such Person to any Stockholder of such Person or their Affiliates.
(210) RETIREE WELFARE PLAN shall mean, at any time, a Plan that is a "welfare
plan" as defined in Section 3(2) of ERISA, that provides for continuing coverage
or benefits for any participant or any beneficiary of a participant after such
participant's termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC and at the sole expense of the
participant or the beneficiary of the participant.
(211) REVOLVING CREDIT ADVANCE shall have the meaning given to it in Section
1.1(1)(a).
(212) REVOLVING LENDERS shall mean, as of any date of determination, Lenders
having a Revolving Loan Commitment.
(213) REVOLVING LOAN shall mean, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to both Borrowers plus (ii) the
aggregate amount of Letter of Credit Obligations incurred on behalf of both
Borrowers (in each case, unless express reference is made to the Revolving Loan
outstanding to a particular Borrower). For the purposes of all calculations to
be made under this Agreement with respect to the Revolving Loan, where
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such calculation is to be made in US Dollars, reference shall be made to the US
Dollar Amount of the Revolving Loan. Unless the context otherwise requires,
references to the outstanding principal balance of the Revolving Loan shall
include the outstanding balance of Letter of Credit Obligations.
(214) REVOLVING LOAN COMMITMENT shall mean (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make Revolving Credit Advances
(including without duplication Swing Line Advances as a subset of the Swing Line
Lender's Revolving Loan Commitment) and/or incur Letter of Credit Obligations as
set forth on Annex J to the Agreement or in the most recent Assignment Agreement
executed by such Revolving Lender and (b) as to all Revolving Lenders, the
aggregate commitment of all Revolving Lenders to make Revolving Credit Advances
(including without duplication Swing Line Advances as a subset of the Swing Line
Lender's Revolving Loan Commitment) and/or incur Letter of Credit Obligations,
which aggregate commitment shall be Thirty Five Million US Dollars
(US$35,000,000) on the Closing Date, for each of clauses (a) and (b), as such
amounts may be cancelled or adjusted, if at all, from time to time in accordance
with the Agreement.
(215) REVOLVING NOTE shall have the meaning given to it in Section 1.1(1)(b).
(216) SECURITY AGREEMENTS shall mean each of the Security Agreements entered
into between Agent, on behalf of itself and Lenders, and each Credit Party that
is a signatory thereto.
(217) SETTLEMENT DATE shall have the meaning given to it in Section 9.9(1)(b).
(218) SHC shall mean Sports Holdings Corp., a Delaware corporation and, with
reference to any time before the effective time of the US Acquisition, shall
mean US Acquired Co.
(219) SHC HOCKEY shall mean SHC Hockey Inc., a Vermont corporation.
(220) SLM TRADEMARK US shall mean SLM Trademark Acquisition Corp., a Delaware
corporation.
(221) SOFTWARE means all computer programs and databases and portions thereof
now owned or used or hereafter acquired or used by any Credit Party in whatever
form and on whatever medium those programs or databases or portions thereof are
expressed, fixed, embodied or stored from time to time, and the copyright
therein including both the object code and source code versions of each such
program and portions thereof and all corrections, updates, enhancements,
translations, modifications, adaptations and new versions thereof together with
both the media upon or in which such software, databases and portions thereof
are expressed, fixed, embodied or stored (such as disks, diskettes, tapes and
semiconductor chips) and all flow charts, manuals, instructions, documentation
and other material relating thereto.
(222) SOFTWARE LICENSE shall mean all rights under any written agreement now
owned or hereafter acquired by any Credit Party granting any right to use, have
access to or obtain possession of, any Software.
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(223) SOLVENT shall mean, (1) with respect to any Person that is subject to
Insolvency Laws of Canada, that on a particular date (a) the property of such
Person is sufficient, if disposed of at a fairly conducted sale under legal
process, to enable payment of all its obligations, due and accruing due, (b) the
property of such Person is, at a fair valuation, greater than the total amount
of liabilities, including contingent liabilities, of such Person; (c) such
Person has not ceased paying its current obligations in the ordinary course of
business as they generally become due; and (d) such Person is not for any reason
unable to meet its obligations as they generally become due, and, (2) with
respect to any Person that is subject to Insolvency Laws of the United States of
America, that on a particular date (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including contingent
liabilities, of such Person; (b) the present fair saleable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured; (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities (such as litigation, guarantees and pension
plan liabilities) at any time shall be computed as the amount which, in light of
all the facts and circumstances existing at the time, represents the amount
which can reasonably be expected to become an actual or matured liability.
(224) SPRINGING MASKA BLOCKED ACCOUNT shall have the meaning given to it in
Annex C.
(225) SPRINGING TROPSPORT BLOCKED ACCOUNT shall have the meaning given to it in
Annex C.
(226) STOCK shall mean all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership, limited partnership or equivalent entity whether
voting or nonvoting or participating or non-participating.
(227) SUBSIDIARY shall mean, with respect to any Person, (a) any corporation of
which an aggregate of more than fifty percent (50%) of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person and/or one or more Subsidiaries of
such Person, or with respect to which any such Person has the right to vote or
designate the vote of fifty percent (50%) or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than fifty percent
(50%) or of which any such Person is a general partner or may exercise the
powers of a general partner.
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(228) SUBSIDIARY GUARANTEE shall mean each Subsidiary Guarantee of even date
herewith executed by the Canadian Subsidiary Guarantor and each of the US
Subsidiary Guarantors.
(229) SUPERMAJORITY REVOLVING LENDERS shall mean (a) Lenders having sixty-six
and two-thirds percent (662/3%) or more of the Revolving Loan Commitments of all
Lenders, or (b) if the Revolving Loan Commitments have been terminated,
sixty-six and two-thirds percent (662/3%) or more of the aggregate outstanding
amount of the Revolving Loan.
(230) SWING LINE ADVANCE has the meaning given to it in Section 1.1(2)(a).
(231) SWING LINE AVAILABILITY has the meaning given to it in Section 1.1(2)(a).
(232) SWING LINE COMMITMENT shall mean, as to the Swing Line Lender, the
commitment of the Swing Line Lender to make Swing Line Loans as set forth on
Annex J to the Agreement, which commitment constitutes a subfacility of the
Revolving Loan Commitment of the Swing Line Lender.
(233) SWING LINE LENDER shall mean GE Capital Canada.
(234) SWING LINE LOAN shall mean, at any time, the aggregate amount of Swing
Line Advances outstanding to both Borrowers (unless express reference is made to
the Swing Line Loan outstanding to a particular Borrower). For the purposes of
all calculations to be made under this Agreement with respect to the Swing Line
Loan, where such calculation is to be made in US Dollars, reference shall be
made to the US Dollar Amount of the Swing Line Loan.
(235) SWING LINE NOTE has the meaning given to it in Section 1.1(2)(b).
(236) TAX AND TAXES includes all present and future taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings and other charges of any
nature (including income, corporate, capital (including large corporations), net
worth, sales, consumption, use, transfer, goods and services, value-added,
stamp, registration, franchise, withholding, payroll, employment, health,
education, employment insurance, pension, excise, business, school, property,
occupation, customs, anti-dumping and countervail taxes, surtaxes, duties,
levies, imposts, rates, fees, assessments, withholdings and other charges)
imposed by any Governmental Authority, together with any fines, interest,
penalties or other additions on, to, in lieu of, for non-collection of or in
respect of those taxes, surtaxes, duties, levies, imposts, rates, fees,
assessments, withholdings and other charges.
(237) TERM LENDERS shall mean the agent and lenders party to the Term Loan
Agreement.
(238) TERM LOAN shall mean a loan in an amount not to exceed the Equivalent
Amount in Canadian Dollars of US$40,000,000 made available to Maska Canada, as
borrower, by the Term Lenders and a loan in an amount not to exceed the
Equivalent Amount in Canadian Dollars of US$47,500,000 made available to
Ultimate Parent, as borrower, by the Term Lenders.
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(239) TERM LOAN AGREEMENT shall mean the loan agreement dated on or before the
Closing Date, between Ultimate Parent and Maska Canada, as borrowers, Caisse de
depot et placement du Quebec, as agent and lender and the other lenders party
thereto with respect to the Term Loan, as amended, modified, supplemented or
restated from time to time.
(240) TERM LOAN LIENS shall have the meaning given to it in Section 6.7.
(241) TERMINATION DATE shall mean the date on which the Loans have been
indefeasibly repaid in full and all other Obligations under the Agreement and
the other Loan Documents have been completely discharged and Letter of Credit
Obligations have been cash collateralized, cancelled or backed by stand-by
letters of credit in accordance with Annex B, and none of Borrowers shall have
any further right to borrow any monies under the Agreement.
(242) THIRD PARTY INTERACTIVES shall mean all Persons with whom any Credit Party
exchanges data electronically in the ordinary course of business, including,
without limitation, customers, suppliers, third-party vendors, subcontractors,
processors-converters, shippers and warehousemen.
(243) TITLE IV PLAN shall mean an employee pension benefit plan, as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan), which is covered by
Title IV of ERISA, and which any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.
(244) TRADEMARK LICENSE shall mean rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any
Trademark.
(245) TRADEMARKS shall mean all of the following now owned or used or hereafter
acquired or used by any Credit Party: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the Canadian Trademarks Office or in any similar office in any
country or any political subdivision thereof; (b) all extensions or renewals
thereof; and (c) all goodwill associated with or symbolized by any of the
foregoing.
(246) TROPSPORT means Tropsport Acquisitions Inc., a Canada Corporation.
(247) TROPSPORT ACTIVATION NOTICE shall have the meaning given to it in Annex C.
(248) TROPSPORT BLOCKED ACCOUNTS shall have the meaning given to it in Annex C.
(249) TROPSPORT BORROWING BASE shall mean, as of any date of determination by
Agent, from time to time, an amount equal to the sum, expressed in each of
Canadian Dollars and US Dollars, at such time of:
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(a) eighty percent (80%) of the book value of Tropsport's Eligible
Accounts, less any Reserves established by Agent at such time in its
reasonable credit judgment; and
(b) fifty-five percent (55%) of the book value of Tropsport's Eligible
Inventory valued on a first-in, first-out basis (at the lower of
cost or market), less any Reserves established by Agent at such time
in its reasonable credit judgment;
in each case, such sums in Canadian Dollars and in US Dollars shall be
determined in accordance with the currency conversion method set forth in
Sections 1.6 and 1.7 and the exchange rate used by such Borrower in making such
calculations shall be set forth on the relevant Borrowing Base Certificate.
(250) TROPSPORT DISBURSEMENT ACCOUNTS shall have the meaning given to it in
Annex C.
(251) TROPSPORT OPERATING ACCOUNT shall have the meaning given to it in Annex C.
(252) TROPSPORT RELATED PERSON shall have the meaning given to it in Annex C.
(253) ULTIMATE PARENT shall have the meaning given to it in the recitals to the
Agreement.
(254) ULTIMATE PARENT GUARANTEE shall mean the guarantee of even date herewith
executed by Ultimate Parent in favour of Agent and Lenders.
(255) ULTIMATE PARENT STOCKHOLDERS shall mean Wellspring Capital Management LLC
and its Affiliates.
(256) UNFUNDED PENSION LIABILITY shall mean, at any time, the aggregate amount,
if any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.
(257) US ACQUIRED CO. shall mean Sports Holding Corp., a Delaware corporation,
as it existed prior to the US Acquisition becoming effective.
(258) US ACQUISITION shall mean the transactions, or series of transactions,
whereby US Acquisition Sub is merged with and into US Acquired Co. under the
laws of Delaware forming SHC to continue as the surviving corporation and as a
wholly-owned Subsidiary of Ultimate Parent.
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(259) US ACQUISITION SUB shall mean SLM Acquisition Corp., a Delaware
corporation created by Ultimate Parent and a wholly-owned Subsidiary of Ultimate
Parent formed for the sole purpose of giving effect to the US Acquisition on or
before the Closing Date.
(260) US AGENT shall mean GE Capital, in its capacity as agent on behalf of the
US Lenders under the US Facility.
(261) US BORROWERS shall mean Maska US and SHC Hockey.
(262) US DOLLAR AMOUNT shall mean, for any amount on any particular date, the
aggregate of:
(a) the portion, if any, of the amount denominated in US Dollars; and
(b) the Equivalent Amount in US Dollars (determined on such date unless
otherwise specified herein) of the portion, if any, of the amount
denominated in another currency.
(263) US DOLLAR COLLECTION ACCOUNT shall mean that certain account of Agent,
account number 4002739 with account name GECCI_COM_FIN at Royal Bank of Canada
in Toronto, Ontario, transit number 00002, or such other account as Agent shall
specify.
(264) US DOLLAR SUBLIMIT shall have the meaning given to it in Section
1.1(1)(a).
(265) US DOLLARS OR US$ shall mean lawful currency of the United States of
America.
(266) US FACILITY shall mean the revolving term credit facility in the amount of
US$35,000,000 made available to the US Borrowers by the US Lenders.
(267) US FACILITY AGREEMENT shall mean a credit agreement with respect to the US
Facility entered into on or before the Closing Date between US Borrowers, as
borrowers, the other credit parties thereto, the lenders party thereto and GE
Capital, as agent, on behalf of such lenders, as amended, supplemented, modified
and restated from time to time.
(268) US FACILITY LIENS shall have the meaning given to it in Section 6.7.
(269) US INDEX RATE shall mean, for any day, a floating rate equal to the higher
of (a) the annual rate of interest determined by Agent which is equal to the
highest annual rate of interest announced from time to time by any of The Bank
of Nova Scotia, Royal Bank of Canada and Canadian Imperial Bank of Commerce, as
being its reference rate in effect on such date (or if such date is not a
Business Day, on the Business Day immediately preceding such date) for
determining interest rates on US Dollar denominated commercial loans made by it
in Canada, in each case regardless of whether any of such banks actually charges
such rate of interest in connection with extensions of credit in US Dollars to
debtors; and (b) the Federal Funds Rate plus fifty (50) basis points per annum.
Each change in any interest rate provided for in the
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Agreement based upon the US Index Rate shall take effect at the time of such
change in the US Index Rate.
(270) US INDEX RATE LOAN shall mean a Loan or portion thereof bearing interest
by reference to the US Index Rate.
(271) US LENDERS shall mean the lenders under the US Facility Agreement.
(272) US SUBSIDIARY GUARANTORS shall mean SHC, WAP, US Borrowers and SLM
Trademark US.
(273) WAP shall mean WAP Holdings Inc., a Delaware Corporation.
(274) YEAR 2000 ASSESSMENT shall mean a comprehensive written assessment of the
nature and extent of each Credit Party's Year 2000 Problems and Year 2000
Date-Sensitive Systems/Components, including, without limitation, Year 2000
Problems regarding data exchanges with Third Party Interactives.
(275) YEAR 2000 CORRECTIVE ACTIONS shall mean, as to each Credit Party, all
actions necessary to remediate such Person's Year 2000 Problems, including,
without limitation, computer code enhancements and revisions, upgrades and
replacements of Year 2000 Date-Sensitive Systems/Components, and coordination of
such enhancements, revisions, upgrades and replacements with Third Party
Interactives.
(276) YEAR 2000 CORRECTIVE PLAN shall mean, with respect to each Credit Party, a
comprehensive plan to remediate all of its Year 2000 Problems on or before
September 30, 1999, including, without limitation by (i) computer code
enhancements or revisions, (ii) upgrades or replacements of Year 2000
Date-Sensitive Systems/Components, (iii) test and validation procedures, (iv) an
implementation time line and budget and (v) designation of specific employees
who will be responsible for planning, coordinating and implementing each phase
or subpart of the Year 2000 Corrective Plan.
(277) YEAR 2000 DATE-SENSITIVE SYSTEM/COMPONENT shall mean, as to any Person,
any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other net-work related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communication processors, security
systems, alarms, elevators and HVAC systems.
(278) YEAR 2000 IMPLEMENTATION TESTING shall mean, as to each Credit Party, (a)
the performance of test and validation procedures regarding Year 2000 Corrective
Actions on a unit basis and on a systemwide basis, (b) the performance of test
and validation procedures regarding
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data exchanges among the Credit Parties' Year 2000 Date-Sensitive
Systems/Components and data exchanges with Third Party Interactives, and (c) the
design and implementation of additional Corrective Actions, the need for which
has been demonstrated by test and validation procedures.
(279) YEAR 2000 PROBLEMS shall mean, with respect to each Credit Party,
limitations on the capacity or readiness of any such Credit Party's Year 2000
Date-Sensitive Systems/Components to accurately accept, create, manipulate,
sort, sequence, calculate, compare or output calendar date information with
respect to calendar year 1999 or any subsequent calendar year beginning on or
after January 1, 2000 (including leap year computations), including, without
limitation, exchanges of information among Year 2000 Date-Sensitive
Systems/Components of the Credit Parties and exchanges of information among the
Credit Parties and Year 2000 Date-Sensitive Systems/Components of Third Party
Interactives and functionality of peripheral interfaces, firmware and embedded
microchips.
Unless otherwise specified, references in the Agreement or any of the
Appendices to a Section, subsection or clause refer to such Section, subsection
or clause as contained in the Agreement. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole,
including all Annexes, Exhibits and Schedules, as the same may from time to time
be amended, restated, modified or supplemented, and not to any particular
section, subsection or clause contained in the Agreement or any such Annex,
Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to Persons include their respective successors and assigns (to the
extent and only to the extent permitted by the Loan Documents) or, in the case
of governmental Persons, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations. Whenever
any provision in any Loan Document refers to the knowledge (or an analogous
phrase) of any Credit Party, such words are intended to signify that such Credit
Party has actual knowledge or awareness of a particular fact or circumstance or
that such Credit Party, if it had exercised reasonable diligence, would have
known or been aware of such fact or circumstance.
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ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(1) ISSUANCE. Subject to the terms and conditions of the Agreement, Agent and
Revolving Lenders agree to incur, from time to time prior to the Commitment
Termination Date, upon the request of Borrower Representative on behalf of
either Borrower and for such Borrower's account, Letter of Credit Obligations by
causing Letters of Credit to be issued (by a bank or other legally authorized
Person selected by or acceptable to Agent in its sole discretion (each, an "L/C
ISSUER")) for such Borrower's account in Canadian Dollars or US Dollars and
guaranteed by Agent; provided, however, that if the L/C Issuer is a Revolving
Lender, then the Letter of Credit issued by such Revolving Lender shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the terms
and conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (2)(b) below. The
aggregate US Dollar Amount of all Letter of Credit Obligations shall not at any
time exceed the lesser of (i) Ten Million US Dollars (US$10,000,000) (the "L/C
SUBLIMIT"), and (ii) the Maximum Amount less the aggregate outstanding principal
balance of the Revolving Credit Advances and the Swing Line Loan, and (iii) the
Aggregate Borrowing Base less the aggregate outstanding principal balance of the
Revolving Credit Advances and the Swing Line Loan. Moreover, the aggregate
amount of any Letter of Credit Obligations incurred on behalf of either Borrower
shall not at any time exceed the Aggregate Borrowing Base less the aggregate
principal balance of the Revolving Credit Advances and the Swing Line Loan to
both Borrowers. No such Letter of Credit shall have an expiry date which is more
than one year following the date of issuance thereof, and neither Agent nor
Revolving Lenders shall be under any obligation to incur Letter of Credit
Obligations in respect of, or purchase risk participations in, any Letter of
Credit having an expiry date which is later than the Commitment Termination
Date.
(2) REVOLVING CREDIT ADVANCES AUTOMATIC; PARTICIPATIONS.
(a) In the event that Agent or any Revolving Lender shall make any payment on or
pursuant to any Letter of Credit Obligation, such payment shall then be deemed
automatically to constitute a Revolving Credit Advance to the applicable
Borrower by way of a Cdn Index Rate Loan with respect to Letter of Credit
Obligations for which payment was made in Canadian Dollars and a Revolving
Credit Advance by way of a US Index Rate Loan with respect to Letter of Credit
Obligations for which payment was made in US Dollars under Section 1.1(1) of the
Agreement regardless of whether a Default or Event of Default shall have
occurred and be continuing and notwithstanding either Borrower's failure to
satisfy the conditions precedent set forth in Section 2, and each Revolving
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement. The failure of any Revolving Lender to make available to Agent
for Agent's own account its Pro Rata Share of any such Revolving Credit Advance
or payment by Agent under or in respect of a Letter of Credit shall not relieve
any other Revolving Lender of its
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obligation hereunder to make available to Agent its Pro Rata Share thereof, but
no Revolving Lender shall be responsible for the failure of any other Revolving
Lender to make available such other Revolving Lender's Pro Rata Share of any
such payment.
(b) If it shall be illegal or unlawful for either Borrower to incur Revolving
Credit Advances as contemplated by paragraph 2(a) above because of an Event of
Default described in Section 8.1(8) or 8.1(9) or otherwise or if it shall be
illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Revolving Lender, then (i) immediately and without further
action whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation equal to such Revolving Lender's Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to such
Letter of Credit on the date of such issuance. Each Revolving Lender shall fund
its participation in all payments or disbursements made under the Letters of
Credit in the same manner as provided in the Agreement with respect to Revolving
Credit Advances.
(3) CASH COLLATERAL. If Borrowers are required to provide cash collateral for
any Letter of Credit Obligations pursuant to the Agreement prior to the
Commitment Termination Date, the Borrowers will pay to Agent for the benefit of
Revolving Lenders cash or Cash Equivalents acceptable to Agent in an amount
equal to 105% of the maximum amount then available to be drawn under each
applicable Letter of Credit outstanding for the benefit of either Borrower. Such
funds or Cash Equivalents shall be held by Agent in a cash collateral account
for Canadian Dollars or a cash collateral account for US Dollars, as applicable
(the "CASH COLLATERAL ACCOUNTS"), maintained at a bank or financial institution
acceptable to Agent which is not a non-resident of Canada for the purposes of
the ITA. The Cash Collateral Accounts shall be in the name of the applicable
Borrower and shall be pledged to, and subject to the control of, Agent, for the
benefit of Agent and Lenders, in a manner satisfactory to Agent. Each Borrower
hereby pledges and grants to Agent, on behalf of itself and Lenders, a security
interest in, and hypothecates in the amount of C$110,000,000 in favour of the
Agent and Lenders, all such funds and Cash Equivalents held in the Cash
Collateral Accounts from time to time and all proceeds thereof, as security for
the payment of all amounts due in respect of the Letter of Credit Obligations
and other Obligations, whether or not then due. The Agreement, including this
Annex B, shall constitute a security agreement or hypothec, as the case may be,
under applicable law.
If any Letter of Credit Obligations, whether or not then due and payable,
shall for any reason be outstanding on the Commitment Termination Date,
Borrowers shall either (i) provide cash collateral therefor in the manner
described above, or (ii) cause all such Letters of Credit and
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guarantees thereof to be cancelled and returned, or (iii) deliver a stand-by
letter (or letters) of credit in guarantee of such Letter of Credit Obligations,
which stand-by letter (or letters) of credit shall be of like tenor and duration
(plus thirty (30) additional days) as, and in an amount equal to 105% of the
aggregate maximum amount then available to be drawn under, the Letters of Credit
to which such outstanding Letter of Credit Obligations relate and shall be
issued by a Person, and shall be subject to such terms and conditions, as are
satisfactory to Agent in its sole discretion.
From time to time after funds are deposited in the Cash Collateral
Accounts by either Borrower, whether before or after the Commitment Termination
Date, Agent may apply such funds or Cash Equivalents then held in the Cash
Collateral Accounts to the payment of any amounts, in such order as Agent may
elect, as shall be or shall become due and payable by such Borrower to Lenders
with respect to such Letter of Credit Obligations of such Borrower and, upon the
satisfaction in full of all Letter of Credit Obligations of such Borrower, to
any other Obligations of either Borrower then due and payable; provided that,
where such funds are deposited in the Cash Collateral Accounts pursuant to the
first sentence of Section 1.3(2)(a) and such excess has been eliminated, then
only prior to the Commitment Termination Date and so long as no Default or Event
of Default has occurred or is continuing, Agent shall pay such funds to
Borrowers upon the written request of Borrower Representative.
No Borrower nor any Person claiming on behalf of or through either
Borrower shall have any right to withdraw any of the funds or Cash Equivalents
held in the Cash Collateral Accounts, except that upon the termination of all
Letter of Credit Obligations and the payment of all amounts payable by Borrowers
to Lenders in respect thereof, any funds remaining in the Cash Collateral
Accounts shall be applied to other Obligations when due and owing and upon
payment in full of such Obligations, any remaining amount shall be paid to
Borrowers or as otherwise required by law.
(4) FEES AND EXPENSES. Borrowers agree to pay to Agent for the benefit of
Revolving Lenders, as compensation to such Lenders for Letter of Credit
Obligations incurred hereunder, (x) all costs and expenses incurred by Agent or
any Lender on account of such Letter of Credit Obligations, and (y) for each
month during which any Letter of Credit Obligation shall remain outstanding, a
fee (the "LETTER OF CREDIT FEE") in US Dollars or Canadian Dollars (according to
the currency in which the applicable Letter of Credit is denominated) in an
amount equal to one and one half percent (1.50%) per annum multiplied by the
maximum available from time to time to be drawn under the applicable Letter of
Credit. Such fee shall be paid to Agent for the benefit of Revolving Lenders in
arrears, on the first day of each month and shall be calculated on the basis of
the actual number of days elapsed in the previous month on which the Letter of
Credit Obligations were outstanding and a year of 360 days. In addition,
Borrowers shall pay to any L/C Issuer, on demand, such fees (including all per
annum fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
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(5) REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS. Borrower
Representative shall give Agent at least three (3) Business Days prior written
notice requesting the incurrence of any Letter of Credit Obligation, specifying
the date such Letter of Credit Obligation is to be incurred, identifying the
beneficiary and the Borrower to which such Letter of Credit Obligation relates
and describing the nature of the transactions proposed to be supported thereby.
The notice shall be accompanied by the form of the Letter of Credit (which shall
be acceptable to the L/C Issuer) to be guaranteed and, to the extent not
previously delivered to Agent, copies of all agreements between either Borrower
and the L/C Issuer pertaining to the issuance of Letters of Credit.
Notwithstanding anything contained herein to the contrary, Letter of Credit
applications by Borrower Representative and approvals by Agent and the L/C
Issuer may be made and transmitted pursuant to electronic codes and security
measures mutually agreed upon and established by and among Borrower
Representative, Agent and the L/C Issuer.
(6) OBLIGATION ABSOLUTE. The obligation of Borrowers to reimburse Agent and
Revolving Lenders for payments made with respect to any Letter of Credit
Obligation shall be absolute, unconditional and irrevocable, without necessity
of presentment, demand, protest or other formalities, and the obligations of
each Revolving Lender to make payments to Agent with respect to Letters of
Credit shall be unconditional and irrevocable. Such obligations of Borrowers and
Revolving Lenders shall be paid strictly in accordance with the terms hereof
under all circumstances including the following circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
the Agreement or the other Loan Documents or any other agreement;
(b) the existence of any claim, set-off, defense or other right which
either Borrower or any of its Affiliates or any Lender may at any
time have against a beneficiary or any transferee of any Letter of
Credit (or any Persons or entities for whom any such transferee may
be acting), Agent, any Lender, or any other Person, whether in
connection with the Agreement, the Letter of Credit, the
transactions contemplated herein or therein or any unrelated
transaction (including any underlying transaction between either
Borrower or any of its Affiliates and the beneficiary for which the
Letter of Credit was procured);
(c) any draft, demand, certificate or any 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;
(d) payment by Agent (except as otherwise expressly provided in
paragraph (7)(b)(C) below) or any L/C Issuer under any Letter of
Credit or guarantee thereof against presentation of a demand, draft
or certificate or other document which does not comply with the
terms of such Letter of Credit or such guarantee;
(e) any other circumstance or happening whatsoever, which is similar to
any of the foregoing; or
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(f) the fact that a Default or an Event of Default shall have occurred
and be continuing.
(7) INDEMNIFICATION; NATURE OF LENDERS' DUTIES.
(a) In addition to amounts payable as elsewhere provided in the
Agreement, Borrowers hereby agree to pay and to protect, indemnify,
and save harmless Agent and each Lender from and against any and all
claims, demands, liabilities, damages, losses, out-of-pocket costs,
charges and expenses (including legal fees) which Agent or any
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or guarantee
thereof, or (B) the failure of Agent or any Lender seeking
indemnification or of any L/C Issuer to honor a demand for payment
under any Letter of Credit or guarantee thereof as a result of any
act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority, in
each case other than to the extent solely as a result of the gross
negligence or willful misconduct of Agent or such Lender.
(b) As between Agent and any Lender and Borrowers, Borrowers assume all
risks of the acts and omissions of, or misuse of any Letter of
Credit by beneficiaries of any Letter of Credit. In furtherance and
not in limitation of the foregoing, to the fullest extent permitted
by law neither Agent nor any Lender shall be responsible: (A) for
the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the validity
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part,
which may prove to be invalid or ineffective for any reason; (C) for
failure of the beneficiary of any Letter of Credit to comply fully
with conditions required in order to demand payment under such
Letter of Credit; provided that, in the case of any payment by Agent
or any L/C Issuer that is a -------- Revolving Lender under any
Letter of Credit or guarantee thereof, Agent or such L/C Issuer
shall be severally and not jointly liable to the extent such payment
was made by such Person solely as a result of its gross negligence
or willful misconduct in determining that the demand for payment
under such Letter of Credit or guarantee thereof complies on its
face with any applicable requirements for a demand for payment under
such Letter of Credit or guarantee thereof; (D) for errors,
omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) for errors (other than gross
negligence) in interpretation of technical terms; (F) for any loss
or delay (unless occasioned by gross negligence) in the transmission
or otherwise of any document required in order to make a payment
under any Letter of Credit or guarantee thereof or of the proceeds
thereof; (G) for
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the credit of the proceeds of any drawing under any Letter of Credit
or guarantee thereof; and (H) for any consequences arising from
causes beyond the control of Agent or any Lender. None of the above
shall affect, impair, or prevent the vesting of any of Agent's or
any Lender's rights or powers hereunder or under the Agreement.
(c) Nothing contained in this Agreement shall be deemed to (A) limit or
to expand any waivers, covenants or indemnities made by Borrowers in
favour of any L/C Issuer in any letter of credit application,
reimbursement agreement or similar document, instrument or agreement
between Borrowers and such L/C Issuer; or (B) limit in any respects
any rights which either Borrower may have against any L/C Issuer
that is not a Revolving Lender.
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ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEMS
PART A: TROPSPORT
Tropsport shall establish and maintain the Cash Management Systems
described below:
(1) From and including the Closing Date until the Termination Date,
Tropsport shall deposit or cause to be deposited promptly, and in
any event no later than the first business day following receipt
thereof (except post-dated cheques which may be held by Tropsport in
accordance with the tri-party blocked account agreement referred to
in paragraph (4) below prior to such deposit), all cash, cheques,
drafts, wire transfers, money orders, notes or other similar items
of payment relating to or constituting payments made in respect of
any and all Collateral owned by Tropsport into a Canadian Dollar and
a US Dollar depository account in Tropsport's name (the "TROPSPORT
BLOCKED ACCOUNT" and the "SPRINGING TROPSPORT BLOCKED ACCOUNT",
respectively) at Hongkong Bank of Canada, in the identical form in
which such payment was made.
(2) Notwithstanding any other provision of this Annex C, (a) until the
delivery by Agent to Hongkong Bank of Canada of a Tropsport
Activation Notice, Tropsport may transfer at any time and from time
to time amounts on deposit in the Springing Tropsport Blocked
Account to the US Dollar operating account (number 370399-002)
maintained by Tropsport at Hongkong Bank of Canada and (b) until
Agent delivers notice to Tropsport to the contrary, which may be
given at any time in Agent's discretion, any payment made by SHC
Hockey Inc. to Tropsport may be made by transfer to the US Dollar
operating account (number 370399-002) maintained by Tropsport at
Hongkong Bank of Canada, provided that upon such notice from Agent
to Tropsport, Tropsport shall cause all such payments to be made,
and SHC Hockey Inc. shall make all such payments, directly to the
Springing Tropsport Blocked Account.
(3) From and including the Closing Date until the Termination Date,
Tropsport shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the US Dollar operating
account (number 370399-002) maintained by Tropsport at Hongkong Bank
of Canada other than (a) those transfers and deposits expressly
permitted pursuant to paragraph (2) above and (b) deposits and
transfers of Revolving Credit Advances made to Tropsport by Agent
pursuant to Section 1.1.
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(4) On or before the Closing Date (or such later date as Agent shall
consent to in writing), Tropsport shall have entered into a
tri-party blocked account agreement with Agent, for the benefit of
itself and Lenders, and Hongkong Bank of Canada in form and
substance acceptable to Agent, which shall become operative on or
prior to the Closing Date. Such blocked account agreement shall
provide, among other things, that (i) Hongkong Bank of Canada has no
rights of set-off or recoupment or any other claim against any
account maintained by Tropsport at Hongkong Bank of Canada other
than for payment of its customary service fees and other charges
directly related to the administration of such accounts, for the
amount of any required adjustments due to clerical error or
calculation errors directly related to such accounts, for the
reimbursement of returned cheques for which credit had been given to
any such account and in accordance with any court order, notice of
garnishment binding on such bank or any other applicable law binding
on Hongkong Bank of Canada, (ii) from and after the Closing Date
Hongkong Bank of Canada agrees to forward immediately all amounts in
the Tropsport Blocked Account to the appropriate Collection Account
and to commence the process of daily sweeps from the Tropsport
Blocked Account into the appropriate Collection Account, and (iii)
upon notice (a "TROPSPORT ACTIVATION NOTICE") from Agent to Hongkong
Bank of Canada, Hongkong Bank of Canada agrees to forward
immediately all amounts on deposit in the Springing Tropsport
Blocked Account to the appropriate Collection Account and to
commence the process of daily sweeps from the Springing Tropsport
Blocked Account to the appropriate Collection Account. Agent shall
deliver to Tropsport a copy of any Tropsport Activation Notice which
is delivered to Hongkong Bank of Canada. Tropsport shall not
accumulate or maintain cash in disbursement accounts (including
payroll accounts) as of any date of determination in excess of
cheques outstanding against such accounts as of that date and
amounts necessary to meet minimum balance requirements.
(5) So long as no Default or Event of Default has occurred and is
continuing, Tropsport may amend Disclosure Schedule 3.18 to add or
replace a bank at which Tropsport maintains an account in its name,
including depository, operating or disbursement accounts; provided,
however, that (i) Agent shall have consented in writing in advance
to the opening of such account with the relevant bank, subject to
such conditions as Agent may impose (which may, without limitation,
include that operating accounts shall be blocked) and (ii) in the
case of adding or replacing a depository account, prior to the time
of the opening of such depository account, Tropsport and such bank
shall have executed and delivered to Agent a tri-party blocked
account agreement, in form and substance satisfactory to Agent. For
the purposes of this Annex C, each depository account and each
blocked operating account opened pursuant to the preceding sentence,
shall be a "TROPSPORT BLOCKED ACCOUNT" or a "SPRINGING TROPSPORT
BLOCKED ACCOUNT", each non-blocked operating account opened pursuant
to the preceding sentence shall be a "TROPSPORT OPERATING ACCOUNT"
and each disbursement account
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opened pursuant to the preceding sentence shall be a "TROPSPORT
DISBURSEMENT ACCOUNT". Tropsport shall close any of its accounts
(and establish replacement accounts in accordance with the foregoing
sentence) promptly and in any event within thirty (30) days of
notice from Agent that the creditworthiness of any bank holding an
account is no longer acceptable in Agent's reasonable judgment, or
as promptly as practicable and in any event within sixty (60) days
of notice from Agent that the operating performance, funds transfer
and/or availability procedures or performance with respect to
accounts of the bank holding such accounts or Agent's liability
under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent's reasonable judgment.
(6) Tropsport may maintain disbursement accounts (each a "TROPSPORT
DISBURSEMENT ACCOUNT" and collectively, the "TROPSPORT DISBURSEMENT
ACCOUNTS") and operating accounts (each a "TROPSPORT OPERATING
ACCOUNT" and collectively, the "TROPSPORT OPERATING ACCOUNTS") at a
bank acceptable to Agent into which Agent shall, from time to time,
deposit proceeds of Revolving Credit Advances made to Tropsport
pursuant to Section 1.1 for use by Tropsport solely in accordance
with the provisions of Section 1.4.
(7) The Tropsport Blocked Account, the Springing Tropsport Blocked
Account, the Tropsport Disbursement Accounts, the Tropsport
Operating Accounts and any other accounts maintained by Tropsport at
any bank shall be cash collateral accounts, with all cash, cheques
and other similar items of payment in such accounts securing payment
of the Loans and all other Obligations, and in which Tropsport shall
have granted a Lien to Agent, on behalf of itself and Lenders, or to
Agent or Lenders, as appropriate, pursuant to a Security Agreement
and a Hypothec executed by Tropsport.
(8) Tropsport shall and shall cause its Affiliates, officers, employees,
agents, directors or other Persons acting for or on behalf of
Tropsport (each a "TROPSPORT RELATED PERSON") to (i) hold in trust
for Agent, for the benefit of itself and Lenders, all cheques, cash
and other items of payment received by Tropsport or any Tropsport
Related Person for the benefit of Tropsport, and (ii) deposit,
within one (1) Business Day after receipt by Tropsport or any such
Tropsport Related Person thereof (except post-dated cheques which
may be held by Tropsport in accordance with the tri-party blocked
account agreement referred to in paragraph (4) above prior to such
deposit), all cheques, cash or other items or payment, into the
Tropsport Blocked Account. Tropsport and each Tropsport Related
Person thereof acknowledges and agrees that all cash, cheques or
items of payment constituting proceeds of Collateral are the
property of Agent and Lenders. Subject to paragraph (2) above, all
proceeds of the sale or other disposition of any Collateral owned by
Tropsport, shall be deposited directly into the Tropsport Blocked
Account.
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(9) At any time from and including the Closing Date until the
Termination Date, Agent may, in its discretion, deliver a Tropsport
Activation Notice to Hongkong Bank of Canada. Upon the delivery by
Agent to Hongkong Bank of Canada of a Tropsport Activation Notice,
all amounts on deposit in the Springing Tropsport Blocked Account
shall be forwarded by Hongkong Bank of Canada to the appropriate
Collection Account and Hongkong Bank of Canada shall commence the
process of daily sweeps from the Springing Tropsport Blocked Account
to the appropriate Collection Account.
(10) Prior to the delivery by Agent to Hongkong Bank of Canada of a
Tropsport Activation Notice, Tropsport shall transfer, or cause to
be transferred, on any day all amounts on deposit in the Springing
Tropsport Blocked Account to the appropriate Collection Account if
the aggregate amount in such account, on such day, exceeds
US$200,000.
(11) Tropsport agrees that any amount paid or returned by Agent to
Hongkong Bank of Canada, pursuant to the tri-party blocked account
agreement referred to in (2) above, including, without limitation,
amounts paid in respect of fees and expenses thereunder and
chargebacks, shall become Obligations owing by Tropsport to Agent,
which shall be secured by all of the Collateral of Tropsport.
PART B: MASKA CANADA
Maska Canada shall establish and maintain the Cash Management Systems
described below:
(1) On or before the Closing Date and until the Termination Date, Maska
Canada shall establish lock boxes (each, a "LOCK BOX" and
collectively, the "LOCK BOXES") at The Chase Manhattan Bank and
National Bank of Canada and shall request in writing and otherwise
take such reasonable steps to ensure that all Account Debtors
forward payment directly to such Lock Boxes except (i) the proceeds
of Maska Canada's cafeteria operations at its Mount Forest facility
which are deposited by Maska Canada into the Canadian Dollar
operating account (number 3830308321) maintained by Maska Canada in
the name of its #1 Apparel Division at The Toronto-Dominion Bank,
(ii) payments in respect of sales by Maska Canada to its employees
or customers by way of Visa credit card (none of which shall exceed
$10,000) which are paid by the obligor into the Canadian Dollar
operating account (number 3830308321) maintained by Maska Canada in
the name of its #1 Apparel Division at The Toronto-Dominion Bank or
(iii) payments in respect of sales by Maska Canada to its employees
or customers by way of Visa credit card, which are paid by the
obligor into the Canadian Dollar depository account (number
03-556-10) maintained by Maska Canada at Caisse Populaire Desjardins
(collectively, "MASKA PERMITTED DEPOSITS").
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(2) From and including the Closing Date until the Termination Date,
Maska Canada shall deposit or cause to be deposited promptly and, in
any event, no later than the first business day after the date of
receipt thereof (except post-dated cheques which may be held by
Maska Canada in accordance with the tri-party blocked account
agreements referred to in paragraph (9) below prior to such
deposit), all cash, cheques, drafts, wire transfers, money orders,
notes or other similar items of payment relating to or constituting
payment made in respect of any and all Collateral owned by Maska
Canada (whether or not otherwise delivered to a Lock Box), except
Maska Permitted Deposits, into Canadian Dollar depository accounts
in Maska Canada's name or in the name of its #1 Apparel Division
(each a "MASKA BLOCKED ACCOUNT" and, collectively, the "MASKA
BLOCKED ACCOUNTS") at National Bank of Canada and US Dollar
depository accounts in Maska Canada's name or in the name of its #1
Apparel Division (each a "SPRINGING MASKA BLOCKED ACCOUNT" and,
collectively, the "SPRINGING MASKA BLOCKED ACCOUNTS") at The Chase
Manhattan Bank and National Bank of Canada, in the identical form in
which such payment was made.
(3) Notwithstanding any other provision of this Annex C, (i) until the
delivery by Agent to Maska Canada and The Chase Manhattan Bank or
National Bank of Canada, as applicable, of a Maska Activation
Notice, Maska Canada may transfer at any time and from time to time
(A) amounts on deposit in the Springing Maska Blocked Account
maintained at National Bank of Canada to the US Dollar operating
account (number 00-946-60) maintained by Maska Canada at National
Bank of Canada and (B) amounts on deposit in the Springing Maska
Blocked Account maintained at The Chase Manhattan Bank to the US
Dollar operating account (number 00-946-60) maintained by Maska
Canada at National Bank of Canada, the US Dollar operating accounts
(numbers 114-636508 and 00-011-60) maintained by Maska Canada in the
name of its #1 Apparel Division at The Chase Manhattan Bank and
National Bank of Canada, respectively, or the US Dollar operating
account (number 114-636516) maintained by Maska Canada at The Chase
Manhattan Bank and (ii) until Agent delivers notice to Maska Canada
to the contrary, which may be given at any time in Agent's
discretion, payments made by Maska U.S., Inc. to Maska Canada may be
made to the US Dollar operating account (number 00-946-60)
maintained by Maska Canada at National Bank of Canada, provided that
upon such notice from Agent to Maska Canada, Maska Canada shall
cause all such payments to be made directly to the Springing Maska
Blocked Account (account number 04-760-67) maintained at National
Bank of Canada.
(4) From and including the Closing Date until the Termination Date,
Maska Canada shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the US Dollar operating
account (number 00-946-60) maintained by Maska Canada at National
Bank of Canada other than (a) those transfers and deposits expressly
permitted pursuant to paragraph (3) above and (b) deposits and
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transfers of Revolving Credit Advances made to Maska Canada by Agent
pursuant to Section 1.1.
(5) From and including the Closing Date until the Termination Date,
Maska Canada shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the Canadian Dollar
operating account (number 01-265-20) maintained by Maska Canada at
National Bank of Canada other than (a) transfers from the US Dollar
operating account (number 00-946-60) maintained by Maska Canada at
National Bank of Canada and (b) deposits and transfers of Revolving
Credit Advances made to Maska Canada by Agent pursuant to Section
1.1.
(6) From and including the Closing Date until the Termination Date,
Maska Canada shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the US Dollar operating
accounts (numbers 114-636516 and 114- 636508) maintained by Maska
Canada in its own name and in the name of its #1 Apparel Division,
respectively, at The Chase Manhattan Bank other than (a) those
transfers and deposits expressly permitted pursuant to paragraph (3)
above and (b) transfers from the US Dollar operating account (number
00-946-60) maintained by Maska Canada at National Bank of Canada.
(7) From and including the Closing Date until the Termination Date,
Maska Canada shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the Canadian Dollar
disbursement account (number 01-287-27) or the Canadian Dollar
operating account (number 00-117-27) maintained by Maska Canada in
its name and the name of its #1 Apparel Division, respectively, at
National Bank of Canada other than transfers from the Canadian
Dollar operating account (number 01-265-20) maintained by Maska
Canada at National Bank of Canada.
(8) From and including the Closing Date until the Termination Date,
Maska Canada shall not deposit or transfer any funds, or cause any
funds to be deposited or transferred, into the US Dollar operating
account (number 00-011-60) maintained by Maska Canada in the name of
its #1 Apparel Division at National Bank of Canada other than
transfers from the US operating account (number 00-946-60)
maintained by Maska Canada at National Bank of Canada.
(9) On or before the Closing Date (or such later date as Agent shall
consent to in writing), Maska Canada shall have entered into a
tri-party blocked account agreements with Agent, for the benefit of
itself and Lenders, and each of The Chase Manhattan Bank and
National Bank of Canada in form and substance acceptable to Agent,
which shall become operative on or prior to the Closing Date. Each
such blocked account agreement shall provide, among other things,
that (i) the applicable bank has no rights of set-off or recoupment
or any other claim against the Maska Blocked Accounts or the
Springing Maska Blocked
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Accounts, other than for payment of its customary service fees and
other charges directly related to the administration of the accounts
maintained by Maska Canada at such bank and the Lock Boxes, for the
amount of any required adjustments due to clerical error or
calculation errors directly related to such accounts, for
reimbursement of returned cheques for which credit had been given to
any such account and in accordance with any court order, notice of
garnishment binding on the applicable bank or any other applicable
law binding on such bank, and (ii) upon notice (a "MASKA ACTIVATION
NOTICE") from Agent to the applicable bank, such bank agrees to
forward immediately all amounts on deposit in the Springing Maska
Blocked Account maintained by Maska Canada at such bank to the
appropriate Collection Account and to commence the process of daily
sweeps from the applicable Springing Maska Blocked Account. In
addition, the blocked account agreement between Maska Canada, Agent,
for the benefit of itself and Lenders, and National Bank of Canada,
shall provide that from and after the Closing Date National Bank of
Canada agrees to forward immediately all amounts on deposit in each
Maska Blocked Account to the appropriate Collection Account and to
commence the process of daily sweeps from such Maska Blocked
Accounts into the appropriate Collection Account. Agent shall
deliver to Maska Canada a copy of any Maska Activation Notice which
is delivered to The Chase Manhattan Bank or National Bank of Canada.
Maska Canada shall not accumulate or maintain cash in disbursement
accounts (including payroll accounts) as of any date of
determination in excess of cheques outstanding against such accounts
as of that date and amounts necessary to meet minimum balance
requirements.
(10) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend Disclosure Schedule 3.18 to add or
replace a bank at which Maska Canada maintains an account in its
name, including depository accounts, operating accounts or
disbursement accounts or at which Maska Canada maintains a Lock Box;
provided, however, that (i) Agent shall have consented in writing in
advance to the opening of such account or lock box with the relevant
bank, and subject to such conditions as Agent may impose (which may,
without limitation, include that operating accounts shall be
blocked) and (ii) in the case of adding or replacing a depository
account, or a lock box, prior to the time of the opening of such
account or lock box, Maska Canada and such bank shall have executed
and delivered to Agent a tri-party blocked account agreement, in
form and substance satisfactory to Agent. For the purpose of this
Annex C, each depository account and each blocked operating account
opened pursuant to the preceding sentence shall be a "MASKA BLOCKED
ACCOUNT" or a "SPRINGING MASKA BLOCKED ACCOUNT", each disbursement
account opened pursuant to the preceding sentence shall be a "MASKA
DISBURSEMENT ACCOUNT", each non-blocked operating account opened
pursuant to the preceding sentence shall be a "MASKA OPERATING
ACCOUNT" and each lock box opened pursuant to the preceding sentence
shall be a "LOCK BOX". Maska Canada shall close any of its accounts
(and establish replacement accounts in accordance with the foregoing
sentence) promptly and in
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any event within thirty (30) days of notice from Agent that the
creditworthiness of any bank holding an account is no longer
acceptable in Agent's reasonable judgment, or as promptly as
practicable and in any event within sixty (60) days of notice from
Agent that the operating performance, funds transfer and/or
availability procedures or performance with respect to accounts or
lock boxes of the bank holding such accounts or Agent's liability
under any tri-party blocked account agreement with such bank is no
longer acceptable in Agent's reasonable judgment.
(11) Maska Canada may maintain, in its name, disbursement accounts (each
a "MASKA DISBURSEMENT ACCOUNT" and collectively, the "MASKA
DISBURSEMENT ACCOUNTS") and operating accounts (each a "MASKA
OPERATING ACCOUNT" and, collectively, the "MASKA OPERATING
ACCOUNTS") at a bank acceptable to Agent into which Agent shall,
from time to time, deposit proceeds of Revolving Credit Advances
made to Maska Canada pursuant to Section 1.1 for use by Maska Canada
solely in accordance with the provisions of Section 1.4.
(12) The Lock Boxes, the Maska Blocked Accounts, the Springing Maska
Blocked Accounts, the Maska Disbursement Accounts, the Maska
Operating Accounts and any other accounts maintained by Maska Canada
at any bank shall be cash collateral accounts, with all cash,
cheques and other similar items of payment in such accounts securing
payment of the Loans and all other Obligations, and in which Maska
Canada shall have granted a Lien to Agent, on behalf of itself and
Lenders, or to Agent and Lenders as appropriate, pursuant to a
Security Agreement and a Hypothec executed by Maska Canada.
(13) Maska Canada shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or on
behalf of Maska Canada (each a "MASKA RELATED PERSON") to (i) hold
in trust for Agent, for the benefit of itself and Lenders, all
cheques, cash and other items of payment received by Maska Canada or
any Maska Related Person for the benefit of Maska Canada, and (ii)
deposit, within one (1) Business Day after receipt by Maska Canada
or any such Maska Related Person thereof (except post-dated cheques
which may be held by Maska Canada in accordance with the tri-party
blocked account agreements referred to in paragraph (9) above prior
to such deposit), all cheques, cash or other items or payment, into
the Maska Blocked Accounts. Maska Canada and each Maska Related
Person acknowledges and agrees that all cash, cheques or items of
payment constituting proceeds of Collateral are the property of
Agent and Lenders. Subject to paragraph (3) above, all proceeds of
the sale or other disposition of any Collateral owned by Maska
Canada, shall be deposited directly into the Maska Blocked Accounts.
(14) Maska Canada agrees that any amount paid or returned by the Agent to
National Bank of Canada or The Chase Manhattan Bank pursuant to the
tri-party blocked
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account agreements referred to in (3) above, including, without
limitation, amounts paid in respect of fees and expenses thereunder
and chargebacks, shall become Obligations owing by Maska Canada to
the Agent, which shall be secured by all of the Collateral of Maska
Canada.
(15) At any time from and including the Closing Date until the
Termination Date, Agent may, in its discretion, deliver a Maska
Activation Notice to National Bank of Canada or The Chase Manhattan
Bank, as applicable. Upon the delivery by Agent to National Bank of
Canada or The Chase Manhattan Bank, as applicable, of a Maska
Activation Notice, all amounts on deposit in the applicable
Springing Maska Blocked Account shall be forwarded by National Bank
of Canada or The Chase Manhattan Bank, as applicable, to the
appropriate Collection Account and National Bank of Canada or The
Chase Manhattan Bank, as applicable, shall commence the process of
daily sweeps from the applicable Springing Maska Blocked Account to
the appropriate Collection Account.
(16) Prior to the delivery by Agent to National Bank of Canada or The
Chase Manhattan Bank, as applicable, of a Maska Activation Notice,
Maska Canada shall transfer, or cause to be transferred, all amounts
on deposit in the Springing Maska Blocked Account (number 04-760-67)
maintained by Maska Canada at National Bank of Canada or the
Springing Maska Blocked Account (number 801- 502012) maintained by
Maska Canada in the name of its #1 Apparel Division at The Chase
Manhattan Bank to the appropriate Collection Account upon the
aggregate amount on deposit in either such account, at any time,
exceeding US$200,000.
(17) From and including the Closing Date until the Termination Date,
Maska Canada shall not transfer any funds on deposit in the Canadian
Dollar depository account (number 03-556-10) maintained by Maska
Canada at Caisse Populaire Desjardins other than funds which are
transferred to the Maska Blocked Account (number 01-877-23)
maintained by Maska Canada at National Bank of Canada. Maska Canada
shall transfer, or cause to be transferred, (i) upon the occurrence
of an Event of Default, all amounts on deposit in the Canadian
Dollar depository account (number 03-556-10) maintained by Maska
Canada at Caisse Populaire Desjardins or (ii) upon the amount on
deposit in such account, at any time, exceeding $50,000, the amount
of such excess, in each case, to the Maska Blocked Account (number
01-877-23) maintained by Maska Canada at National Bank of Canada.
(18) Maska Canada shall transfer, or cause to be transferred, (i) upon
the occurrence of an Event of Default, all amounts on deposit in the
Canadian Dollar operating account (number 3830308321) maintained by
Maska Canada in the name of its #1 Apparel Division at the
Toronto-Dominion Bank or (ii) upon the total amount on deposit in
such account, at any time, exceeding $150,000, the amount of such
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excess, in each case, to the Maska Blocked Account (number
01-878-20) maintained by Maska Canada in the name of its #1 Apparel
Division at National Bank of Canada.
(19) On or prior to the date which is thirty (30) days following the
Closing Date, Maska Canada shall have closed each of (i) the
Canadian Dollar and US Dollar lock box accounts (numbers 731852-500
and 740994-505, respectively) which it maintains in its name at The
Chase Manhattan Bank of Canada and (ii) the Canadian Dollar and US
Dollar lock box accounts (numbers 731860-500 and 741000-505,
respectively) which it maintains at The Chase Manhattan Bank of
Canada in the name of its #1 Apparel Division. From and including
the Closing Date until the date upon which the accounts referred to
in this paragraph (19) are closed (i) Maska Canada shall not make or
permit to be made any deposit into any such account and (ii) at no
time shall the amount on deposit in any such account exceed US$5,000
or C$5,000, as applicable. On or prior to the date which is
thirty-one (31) days following the Closing Date, Maska Canada shall
confirm in writing to Agent that each of the accounts referred to in
this paragraph (19) has been closed and, if requested by Agent,
provide evidence to Agent of such closure reasonably satisfactory to
Agent.
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ANNEX D (SECTION 2.1(1))
TO
CREDIT AGREEMENT
SCHEDULE OF ADDITIONAL CLOSING DOCUMENTS
In addition to, and not in limitation of, the conditions described in
Section 2.1 of the Agreement, pursuant to Section 2.1(1), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning given to it in Annex A to the Agreement):
(1) APPENDICES. All Appendices to the Agreement, in form and substance
satisfactory to Agent.
(2) REVOLVING NOTES AND SWING LINE NOTES. Duly executed originals of the US$
Revolving Notes and the C$ Revolving Notes for each Lender, and the US$ Swing
Line Notes and the C$ Swing Line Notes for the Swing Line Lender, given by each
Borrower and dated the Closing Date.
(3) SECURITY AGREEMENTS. Duly executed originals of the Security Agreements
given by each Borrower, Canadian Subsidiary Guarantor, Ultimate Parent and each
US Subsidiary Guarantor, and all instruments, documents, powers of attorney and
agreements executed pursuant thereto.
(4) HYPOTHECS. Duly executed originals of the Hypothecs given by each Borrower,
Canadian Subsidiary Guarantor, Ultimate Parent and each US Subsidiary Guarantor,
and all instruments, documents and agreements executed pursuant thereto.
(5) GENERAL ASSIGNMENTS OF DEBTS. Duly executed originals of the General
Assignments of Debts given by each Borrower and all affidavits of bona fides,
affidavits of execution, instruments, documents and agreements executed pursuant
thereto.
(6) PLEDGE AGREEMENTS. Duly executed originals of the Pledge Agreement given by
Maska Canada, accompanied by a Stock transfer power executed in blank.
(7) INSURANCE. Satisfactory evidence that the insurance policies required by
Section 5.4 are in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured and mortgage clauses or
endorsements, as requested by Agent, in favour of Agent, on behalf of Agent and
Lenders, or in favour of Agent and Lenders (in the case of insurance policies
covering Collateral and operations located in the Province of Quebec).
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(8) SECURITY INTEREST AND PPSA FILINGS.
(a) Evidence satisfactory to Agent that Agent (for the benefit of itself and
Lenders) and Agent and Lenders, as appropriate, have a valid and perfected first
priority security interest (or the applicable equivalent thereto) in the
Collateral (subject to publication, registration or filing, as appropriate, of,
or in respect of, the Hypothecs of SHC, WAP and (with respect to immoveable
property only) Tropsport, to be registered in the Province of Quebec, the
General Assignments of Debts of each of the Borrowers to be registered in
Newfoundland and Northwest Territories, UCC-1 financing statements for filing in
the applicable States of the United States, and filings of certain of the
Collateral Documents in the applicable intellectual property offices in Ottawa,
Ontario and Washington, D.C.), subject, as to priority, only to Permitted
Encumbrances, including (A) such documents (including financing statements under
the PPSA, as required, and other applicable documents under the laws of any
jurisdiction with respect to the perfection of Liens) as Agent may request in
order to perfect its security interests (or the applicable equivalent thereto)
in the Collateral and (B) copies of PPSA search reports listing all effective
financing statements (or the applicable equivalent thereto) that name any Credit
Party as debtor, together with copies of such financing statements (or the
applicable equivalent thereto), none of which shall cover the Collateral, except
for those relating to the Prior Lender Obligations (all of which shall be
released, discharged or terminated on the Closing Date) and the obligations
under the US Facility and the Term Loan.
(b) Evidence satisfactory to Agent, including copies, of all financing
statements (or the applicable equivalent thereto) filed in favour of each
applicable Credit Party with respect to each location, if any, at which
Inventory may be consigned.
(c) Control Letters, as required by Section 6.2(4).
(9) PAYOFF LETTER; FINANCING CHANGE STATEMENTS. Copies of duly executed payoff
letters, in form and substance satisfactory to Agent, by and between all parties
(or their duly authorized agents) to the HKBC Facility loan documents and the
Chase Facility loan documents evidencing repayment in full of all Prior Lender
Obligations, together with (a) financing change statements (or the applicable
equivalent thereof), discharges, releases or other appropriate termination
statements, in form and substance satisfactory to Agent, manually signed by the
Prior Lenders releasing all Liens of Prior Lenders upon any and all of the
personal and real property of each Credit Party, and (b) termination of all
blocked account agreements, bank agency agreements or other similar agreements
or arrangements in favour of Prior Lenders or relating to the Prior Lender
Obligations.
(10) INTELLECTUAL PROPERTY SECURITY AGREEMENTS. Duly executed originals of
Intellectual Property Security Agreements given by Maska US, SHC Hockey and each
other Credit Party which owns Intellectual Property registered in the United
States of America, all in form and substance satisfactory to Agent, together
with all instruments, documents and agreements executed pursuant thereto.
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(11) CONSENTS AND ACKNOWLEDGMENTS RESPECTING INTELLECTUAL PROPERTY. Duly
executed originals of Consents and Acknowledgments Respecting Intellectual
Property, each dated on or before the Closing Date and signed by certain
licensors of Intellectual Property to Borrowers and each Credit Party as
follows: CCM and Gestion Pro-Velo Inc., KFH Sports Oy, Jofa AB, NHL Enterprises
Canada, L.P. and NHL Enterprises, L.P.
(12) ULTIMATE PARENT GUARANTEE. Duly executed originals of the Ultimate Parent
Guarantee and all documents, instruments and agreements executed pursuant
thereto.
(13) SUBSIDIARY GUARANTEES. Subsidiary Guarantees executed by each US Subsidiary
Guarantor and Canadian Subsidiary Guarantor in favour of Agent and Lenders and
all documents, instruments and agreements executed pursuant thereto.
(14) INITIAL BORROWING BASE CERTIFICATE. Duly executed originals of an initial
Borrowing Base Certificate from Borrowers, dated the Closing Date, reflecting
information concerning Eligible Accounts and Eligible Inventory of each Borrower
as of a date not before November 7, 1998.
(14) INITIAL NOTICE OF REVOLVING CREDIT ADVANCE. Duly executed originals of a
Notice of Revolving Credit Advance, dated the Closing Date, with respect to the
initial Revolving Credit Advance to be requested by Borrower Representative on
the Closing Date.
(15) LETTER OF DIRECTION. Duly executed originals of a letter of direction from
Borrower Representative addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the
initial Revolving Credit Advance.
(16) CASH MANAGEMENT SYSTEM; BLOCKED ACCOUNT AGREEMENTS. Evidence satisfactory
to Agent that, as of the Closing Date, Cash Management Systems complying with
Annex C to the Agreement have been established and are currently being
maintained in the manner set forth in such Annex C, together with copies of duly
executed tri-party blocked account and lock box agreements satisfactory to
Agent, with the banks as required by Annex C.
(17) STATUS. For each Credit Party, such Person's certificates of status,
compliance or good standing, as applicable, evidencing such Person's
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Closing Date and certified by the
applicable authorized Governmental Authority.
(18) CERTIFICATES OF INCORPORATION. For each of Ultimate Parent and the US
Subsidiary Guarantors, its certificate of incorporation and all amendments
thereto, certified by the applicable Governmental Authority.
(19) CONSTATING DOCUMENTS, BYLAWS AND RESOLUTIONS. For each Credit Party, (a)
constating documents and all amendments thereto and bylaws, together with all
amendments thereto (only in the case of Borrowers and Canadian Subsidiary
Guarantor), and (b) resolutions of such
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Person's Board of Directors and, if applicable, shareholders, approving and
authorizing the execution, delivery and performance of the Loan Documents to
which such Person is a party and the transactions to be consummated in
connection therewith, and (c) copies of all third party approvals as required
under Section 2.1(3), each certified as of the Closing Date by such Person's
corporate secretary or an assistant secretary of such Person as being in full
force and effect without any modification or amendment.
(20) INCUMBENCY CERTIFICATES. For each Credit Party, signature and incumbency
certificates of the officers of each such Person executing any of the Loan
Documents, certified as of the Closing Date by such Person's corporate secretary
or an assistant secretary of such Person as being true, accurate, correct and
complete.
(21) OPINIONS OF COUNSEL. Duly executed originals of opinions of Goodman,
Phillips & Vineberg, Quebec and Ontario counsel for the Credit Parties, and
Skadden, Arps, Slate, Meagher & Flom, L.L.P., special New York counsel for the
Credit Parties, together with any local counsel opinions requested by Agent,
each in form and substance satisfactory to Agent and its counsel, dated the
Closing Date, and addressed to Agent, on behalf of Agent and Lenders, and
including in each such opinion an express statement to the effect that Agent and
Lenders are authorized to rely on such opinion.
(22) FEE LETTER. Duly executed originals of the GE Capital Fee Letter.
(23) NO MATERIAL CHANGE. The Agent shall have received a certificate dated as of
the Closing Date executed by the Chief Executive Officer and/or Senior
Vice-President, Finance of Ultimate Parent stating that, as of the Closing Date,
since December 31, 1997:
(a) no litigation has occurred or is pending or threatened which
(A) is reasonably likely to have a material adverse effect on the
financial condition, business, operating properties or
prospects of either Borrower, individually, or Ultimate Parent
and its Subsidiaries, taken as a whole, or SHC and its
Subsidiaries, taken as a whole, or either Borrower's ability
to repay the Obligations, or
(B) challenges any of the transactions contemplated hereby or any
of the other Loan Documents or any Related Transaction;
(b) there has been no material adverse change, or development involving
a prospective material adverse change, individually or in the
aggregate, in the business, financial or other condition of either
Borrower or Ultimate Parent and its Subsidiaries taken as a whole or
SHC and its Subsidiaries taken as a whole, the industries in which
either Borrower operates, or the Collateral or in the prospects or
projections of either Borrower or Ultimate Parent and its
Subsidiaries taken as a whole or SHC and its Subsidiaries taken as a
whole;
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(c) there has been no material increase in the liabilities, liquidated
or contingent, (excluding the Term Loan and the US Facility) of
Ultimate Parent or any of its Subsidiaries, and no material decrease
has occurred in the assets of Ultimate Parent or any of its
Subsidiaries; and
(d) no Restricted Payments have been made.
(24) WAIVERS. Agent, on behalf of Lenders, shall have received landlord waivers
and consents, bailee letters and mortgagee agreements in form and substance
satisfactory to Agent, in each case as required pursuant to Section 5.9.
(25) MORTGAGES. Mortgages covering all of the Real Estate owned by Borrowers
(the "MORTGAGED PROPERTIES") together with: (a) title opinions in respect of the
Mortgaged Properties and opinions with respect to registration of the Mortgages
as set out in clause (b) from counsel for Credit Parties in each province in
which any Mortgaged Property is located, all in form and substance, and from
counsel, satisfactory to Agent, and, to the extent received by Term Lenders,
current as-built surveys, evidence of zoning compliance and compliance with all
other legal requirements, including that all certificates of occupancy, building
permits and other licences, certificates, approvals and consents have been
obtained, in each case satisfactory in form and substance to Agent, acting
reasonably; and (b) evidence that counterparts of the Mortgages have been
registered in all places to the extent necessary or desirable, in the judgment
of Agent, to create a valid and enforceable first priority Lien (subject to
Permitted Encumbrances) on each Mortgaged Property in favour of Agent for the
benefit of itself and Lenders (or in favour of Agent and Lenders as may be
required or desired under local law).
(26) INTERCREDITOR AGREEMENT. Agent and Lenders shall have received duly
executed originals of the Intercreditor Agreement.
(27) ENVIRONMENTAL REPORTS. Agent shall have received such environmental review
and audit reports, including Phase II reports, with respect to the Real Estate
of any Credit Party as Agent shall have requested, and Agent shall be satisfied,
in its sole discretion, with the contents of all such environmental reports.
Agent shall have received letters executed by the environmental firms preparing
such environmental reports, in form and substance satisfactory to Agent,
authorizing Agent and Lenders to rely on such reports.
(28) COLLATERAL AUDIT; INVENTORY APPRAISALS. Agent shall have received results
of a collateral audit with respect to each Borrower, in form and substance
satisfactory to Agent. Agent shall have received Inventory appraisals in form
and substance satisfactory to Agent, reflecting Inventory values at levels
acceptable to Agent, and performed by appraisers acceptable to Agent.
(29) APPRAISALS. Agent shall have received copies of all appraisals received by
Term Lenders as to all Equipment and as to each of the Mortgaged Properties,
each of which shall be in form and substance satisfactory to Agent, acting
reasonably.
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(30) AUDITED FINANCIALS; FINANCIAL CONDITION. Agent shall have received Ultimate
Parent's and SHC's final Financial Statements for the Fiscal Years ended
December 31, 1997 and December 31, 1996, audited by Ernst & Young. Each of
Ultimate Parent and SHC shall have provided Agent with its current operating
statements, a consolidated and consolidating balance sheet and statement of cash
flows, the Pro Forma, Projections, and a Borrowing Base Certificate with respect
to each Borrower certified by such Borrower's Senior Vice-President, Finance, in
each case in form and substance satisfactory to Agent, acting reasonably, and
Agent shall be satisfied, in its sole discretion, with all of the foregoing.
Agent shall have further received a certificate of the Chief Executive Officer
and/or the Senior Vice-President, Finance of Ultimate Parent, based on such Pro
Forma and Projections, to the effect that (a) Ultimate Parent and its
Subsidiaries will be Solvent upon the consummation of the transactions
contemplated herein; (b) the Pro Forma fairly presents the consolidated
financial condition of Ultimate Parent and its Subsidiaries as of the date
thereof after giving effect to the transactions contemplated by the Loan
Documents; and (c) the Projections are based upon estimates and assumptions
stated therein, all of which Ultimate Parent believes to be reasonable and fair
in light of current conditions and current facts known to Ultimate Parent and,
as of the Closing Date, reflect Ultimate Parent's good faith and reasonable
estimates of its future financial performance and of the other information
projected therein for the period set forth therein, it being recognized by
Lenders that such Projections, as they relate to future events, are not to be
viewed as facts or an assurance of performance and that actual results during
the period or periods covered by such Projections may differ from the forecasted
or projected results set forth therein.
(31) CERTIFIED COPIES OF RELATED TRANSACTION DOCUMENTS. Agent shall have
received a certificate of officer of Ultimate Parent to which is attached
complete copies of the Reorganization Agreement, Certificate of Merger of
Ultimate Parent and any other documents delivered under the Reorganization
Agreement that Agent requests be attached thereto, and the Term Loan Agreement
and all security executed in connection therewith.
(32) CERTIFIED COPY OF TROPSPORT SHARE REGISTER. Certificate of Officers of
Borrowers attaching copy of share register of Tropsport showing Maska Canada as
owner of all issued and outstanding Stock of Tropsport.
(33) CERTIFICATE AS TO RELATED TRANSACTIONS. Certificate of Officer of Ultimate
Parent as to the completion of the Related Transactions, including as to the
matters described in Section 2.1(7) of this Agreement.
(34) ESCROW AGREEMENT. Duly executed originals of the Escrow Agreement and all
documents, instruments and agreements executed pursuant thereto.
(35) OTHER DOCUMENTS. Such other certificates, documents and agreements
respecting any Credit Party as Agent may, in its sole discretion, request.
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ANNEX E (SECTION 4.1(1))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrowers and Ultimate Parent, as applicable, shall deliver or cause to be
delivered to Agent or to Agent and Lenders, as indicated, the following:
(1) MONTHLY FINANCIALS. To Agent and Lenders, within thirty (30) days after the
end of each Fiscal Month (other than a Fiscal Month during which a Fiscal
Quarter ends), financial information regarding Ultimate Parent and its
Subsidiaries, certified by the Senior Vice-President, Finance of Ultimate
Parent, consisting of consolidated and consolidating (a) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of income
and cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Month; (b) unaudited statements of income and cash flows for such Fiscal
Month, setting forth in comparative form the figures for the corresponding
period in the prior year and the figures contained in the Projections for such
Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (c) a summary of the outstanding balances of all intercompany
indebtedness of all Credit Parties. Such financial information shall be
accompanied by the certification of the Senior Vice-President, Finance of
Ultimate Parent that (i) such financial information presents fairly in
accordance with GAAP (subject to normal year-end adjustments) the financial
position and results of operations of Ultimate Parent and its Subsidiaries, on a
consolidated and consolidating basis, in each case as at the end of such month
and for the period then ended and (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default;
(2) QUARTERLY FINANCIALS. To Agent and Lenders, within forty-five (45) days
after the end of each Fiscal Quarter, financial information regarding Ultimate
Parent and its Subsidiaries, certified by the Senior Vice-President, Finance of
Ultimate Parent, including consolidated and consolidating (a) unaudited balance
sheets as of the close of such Fiscal Quarter and the related statements of
income and cash flow for that portion of the Fiscal Year ending as of the close
of such Fiscal Quarter and (b) unaudited statements of income and cash flows for
such Fiscal Quarter, in each case setting forth in comparative form the figures
for the corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments). Such financial information shall be accompanied
by (A) a statement in reasonable detail (each, a "COMPLIANCE CERTIFICATE")
certified by the Senior Vice-President, Finance of Ultimate Parent showing the
calculations used in determining compliance with each of the financial covenants
set forth on Annex G which is tested on a quarterly basis and showing, for each
Fiscal Quarter ending on or after September 30, 1999, the calculations used in
determining the Applicable Margins set forth in Section 1.5(1) and
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(B) the certification of the Senior Vice-President, Finance of Ultimate Parent
that (i) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position, results of
operations and statements of cash flows of Ultimate Parent and its Subsidiaries,
on both a consolidated and consolidating basis, as at the end of such Fiscal
Quarter and for the period then ended, (ii) any other information presented is
true, correct and complete in all material respects and that there was no
Default or Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing the nature
thereof and all efforts undertaken to cure such Default or Event of Default. In
addition, Ultimate Parent shall deliver to Agent and Lenders, within forty-five
(45) days after the end of each Fiscal Quarter, a management discussion and
analysis which includes a comparison to budget for that Fiscal Quarter and a
comparison of performance for that Fiscal Quarter to the corresponding period in
the prior year;
(3) OPERATING PLAN. To Agent and Lenders, as soon as available, but not later
than thirty (30) days after the end of each Fiscal Year, an annual operating
plan for Ultimate Parent and its Subsidiaries, approved by the Board of
Directors of Ultimate Parent, for the following year, which will include a
statement of all of the material assumptions on which such plan is based, will
include monthly balance sheets and a monthly budget for the following year and
will integrate sales, gross profits, operating expenses, operating profit, cash
flow projections and Borrowing Availability projections all prepared on the same
basis and in similar detail as that on which operating results are reported (and
in the case of cash flow projections, representing management's good faith
estimates of future financial performance based on historical performance), and
including plans for personnel, Capital Expenditures and facilities;
(4) ANNUAL AUDITED FINANCIALS. To Agent and Lenders, within ninety (90) days
after the end of each Fiscal Year, audited Financial Statements for Ultimate
Parent and its Subsidiaries on a consolidated and (unaudited) consolidating
basis, consisting of balance sheets and statements of income and retained
earnings and cash flows, setting forth in comparative form in each case the
figures for the previous Fiscal Year and the figures contained in the
Projections for such Fiscal Year, which Financial Statements shall be prepared
in accordance with GAAP, certified without qualification, by an independent
certified public accounting firm of national standing or otherwise acceptable to
Agent. Such Financial Statements shall be accompanied by (a) a statement
prepared in reasonable detail showing the calculations used in determining
compliance with each of the financial covenants set forth on Annex G, (b) a
report from such accounting firm to the effect that, in connection with their
audit examination, nothing has come to their attention to cause them to believe
that a Default or Event of Default has occurred (or specifying those Defaults
and Events of Default that they became aware of), it being understood that such
audit examination extended only to accounting matters and that no special
investigation was made with respect to the existence of Defaults or Events of
Default, (c) the annual letters to such accountants in connection with their
audit examination detailing contingent liabilities and material litigation
matters, and (d) the certification of the Chief Executive Officer or Senior
Vice-President, Finance of Ultimate Parent that all such Financial Statements
present fairly in accordance with GAAP the financial position, results of
operations and statements of cash flows of Ultimate Parent and its Subsidiaries
on a consolidated and consolidating basis, as at the end of
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such year and for the period then ended, and that there was no Default or Event
of Default in existence as of such time or, if a Default or Event of Default
shall have occurred and be continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default;
(5) MANAGEMENT LETTERS. To Agent and Lenders, within five (5) Business Days
after receipt thereof by any Credit Party, copies of all management letters,
exception reports or similar letters or reports received by such Credit Party
from its independent chartered or certified public accountants;
(6) DEFAULT NOTICES. To Agent and Lenders, as soon as practicable, and in any
event within five (5) Business Days after an executive officer of any Credit
Party has actual knowledge of the existence of any Default, Event of Default or
other event which has had a Material Adverse Effect, telephonic or telecopied
notice specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day;
(7) SECURITIES FILINGS AND PRESS RELEASES. To Agent and Lenders, promptly upon
their becoming available, copies of: (a) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (b) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange, commission or governmental or regulatory authority; and (c)
all press releases and other statements made available by any Credit Party to
the public concerning material changes or developments in the business of any
such Person;
(8) SUPPLEMENTAL SCHEDULES. To Agent, supplemental disclosures, if any, required
by Section 5.6 of the Agreement;
(9) LITIGATION. To Agent in writing, promptly upon learning thereof, notice of
any Litigation commenced or threatened against any Credit Party that (a) seeks
damages in excess of C$500,000 or the Equivalent Amount thereof in another
currency, (b) seeks injunctive relief, (c) is asserted or instituted against any
Plan, its fiduciaries or its assets or against any Credit Party or ERISA
Affiliate in connection with any Plan, (d) alleges criminal misconduct by any
Credit Party, (e) alleges the violation of any law regarding, or seeks remedies
in connection with, any Environmental Liabilities except to the extent that such
alleged violation or remedy sought could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, or (f) involves any
product recall;
(10) INSURANCE NOTICES. To Agent, disclosure of losses or casualties required by
Section 5.4 of the Agreement;
(11) LEASE DEFAULT NOTICES. To Agent, copies of (i) on the date of receipt by
any Credit Party, any and all default notices received under or with respect to
any leased location or public warehouse where Collateral is located, (ii)
promptly, such other notices or documents as Agent may request in its reasonable
discretion, and (iii) three (3) Business Days before the due date for
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each monthly rent payment, a certificate of the Senior Vice-President, Finance
or Controller of each Borrower, in form and substance satisfactory to Agent,
acting reasonably, certifying that all rent payable with respect to such month,
under any lease, for any location at which Inventory or books and records
(including hardware and software) relating to the Collateral are located, has
been paid;
(12) LEASE AMENDMENTS. To Agent, copies of all amendments to leases of Real
Estate of which any Credit Party is a lessee and on or at which Collateral is
located if, as a result of such amendment, any terms and conditions of such
lease are less favourable to, or more onerous to, such Credit Party;
(13) CCM SHAREHOLDERS' AGREEMENT. To Agent, copies of all amendments to, and
waivers or other modifications of, the CCM Shareholders Agreement; and
(14) OTHER DOCUMENTS. To Agent and Lenders, such other financial and other
information respecting any Credit Party's business or financial condition as
Agent or any Lender shall, from time to time, reasonably request.
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ANNEX F (SECTION 4.1(2))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrowers shall deliver or cause to be delivered the following:
(1) To Agent, upon its request, and in no event less frequently than
twice monthly, on the third Business Day of the second week of each
Fiscal Month and the third business day of the last week of each
Fiscal Month, commencing with the week of November 25, 1998,
(together with a copy of all or a part of such delivery requested by
any Lender in writing after the Closing Date) a Borrowing Base
Certificate with respect to each Borrower, in each case accompanied
by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion.
(2) To Agent, upon its request, and in no event less frequently than the
third Business Day of each week, a certificate executed by each
Borrower attaching an accounts receivable roll-forward report, in
each case, accompanied by supporting detail and documentation as may
be requested by Agent in its reasonable discretion.
(3) To Agent, upon its request, and in no event less frequently than
five (5) Business Days after the end of each Fiscal Quarter or more
frequently, if requested by Agent (together with a copy of all or
any part of such delivery requested by any Lender in writing after
the Closing Date), each of the following:
(a) with respect to each Borrower, a summary of Inventory by
location and type with a supporting perpetual Inventory
report, in each case accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion; and
(b) with respect to each Borrower, a monthly trial balance showing
Accounts outstanding aged from due date as follows: future
date, current, 1 to 30 days, 31 to 60 days, 61 to 90 days and
91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable
discretion.
(4) To Agent, on a weekly basis or at such more frequent intervals as
Agent may request from time to time (together with a copy of all or
any part of such delivery requested by any Lender in writing after
the Closing Date), collateral reports with respect to each Borrower,
including all additions and reductions (cash and non-cash) with
respect to Accounts and Inventory of such Borrower, in each case
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accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(5) To Agent, at the time of delivery of each of the monthly Financial
Statements delivered pursuant to Annex E, a reconciliation of the
Accounts trial balance and month-end Inventory reports of each
Borrower to such Borrower's general ledger and monthly Financial
Statements delivered pursuant to such Annex E, in each case
accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion;
(6) To Agent, at the time of delivery of each of the monthly or annual
Financial Statements delivered pursuant to Annex E, (a) a listing of
government contracts, if any, of each Borrower subject to any of the
requirements or procedures applicable to assignments of accounts
under the Financial Administration Act (Canada), as amended, or any
similar provincial, local or foreign law; and (b) a list of any
applications for the registration of any Intellectual Property with
the Canadian Industrial Design Office, Canadian Patent Office,
Canadian Intellectual Property Office, Canadian Copyright Office or
any similar office or agency which any Credit Party thereof has
filed in the prior Fiscal Quarter;
(7) Each Borrower, at its own expense, shall deliver to Agent a summary,
in form and substance satisfactory to Agent, acting reasonably, of
the results of each physical verification, if any, which such
Borrower or any of its Subsidiaries may in their discretion have
made, or caused any other Person to have made on their behalf, of
all or any portion of their Inventory (and, if a Default or an Event
of Default shall have occurred and be continuing, each Borrower
shall, upon the request of Agent, conduct, and deliver the full
results of, such physical verifications as Agent may require); and
(8) Each Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time after the
occurrence and during the continuance of a Default or an Event of
Default, such appraisals to be conducted by an appraiser, and in
form and substance, satisfactory to Agent.
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ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Ultimate Parent shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:
(1) MAXIMUM CAPITAL EXPENDITURES. Ultimate Parent and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:
Maximum Capital
Period Expenditures per Period
------ -----------------------
Fiscal Year ending December 31, 1998 US$7,000,000
Fiscal Year ending December 31, 1999 US$6,000,000
Fiscal Year ending December 31, 2000; and US$5,000,000
each Fiscal Year ending after December 31, 2000 US$5,000,000
; provided, however, that the amount of permitted Capital Expenditures
referenced above will be increased in any period by the positive amount equal to
the lesser of (a) 50% of the amount of permitted Capital Expenditures for the
immediately prior period, and (b) the amount (if any), equal to the difference
obtained by taking the Capital Expenditures limit specified above for the
immediately prior period minus the actual amount of any Capital Expenditures
expended during such prior period (the "CARRY OVER AMOUNT"), and for purposes of
measuring compliance herewith, the Carry Over Amount shall be deemed to be the
first amount spent on Capital Expenditures in that succeeding year.
(2) MINIMUM FIXED CHARGE COVERAGE RATIO. Ultimate Parent and its Subsidiaries
shall have on a consolidated basis at the end of each Fiscal Quarter set forth
below for the indicated period then ended, a Fixed Charge Coverage Ratio of not
less than the following:
1.0 to 1.0 for one (1) Fiscal Quarter ending December 31, 1998;
0.7 to 1.0 for two (2) consecutive Fiscal Quarters ending March 31, 1999;
1.0 to 1.0 for three (3) consecutive Fiscal Quarters ending June 30, 1999;
1.0 to 1.0 for four (4) consecutive Fiscal Quarters ending September 30,
1999; and
1.0 to 1.0 for each period of Four (4) consecutive Fiscal Quarters ending
on the last day of each Fiscal Quarter ending after September 30, 1999.
(3) MINIMUM INTEREST COVERAGE RATIO. Ultimate Parent and its Subsidiaries shall
have on a consolidated basis at the end of each Fiscal Quarter set forth below
for the indicated period then ended, an Interest Coverage Ratio not less than
the following:
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1.75 to 1.0 for one (1) Fiscal Quarter ending December 31, 1998;
1.25 to 1.0 for the two (2) consecutive Fiscal Quarters ending March 31,
1999;
1.75 to 1.0 for the three (3) consecutive Fiscal Quarters ending June 30,
1999;
1.75 to 1.0 for the four (4) consecutive Fiscal Quarters ending September
30, 1999;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending December
31, 1999;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending March 31,
2000;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending June 30,
2000;
2.0 to 1.0 for the four (4) consecutive Fiscal Quarters ending September
30, 2000; and
2.25 to 1.0 for each period of four (4) consecutive Fiscal Quarters ending
on the last day of each Fiscal Quarter ending after September 30, 2001.
(4) MINIMUM EXCESS AVAILABILITY. Notwithstanding anything to the contrary in
this Agreement, Borrowers, collectively, shall at all times maintain Net
Borrowing Availability of at least US$1,750,000 and US Borrowers, collectively,
shall at all times maintain Net Borrowing Availability (as defined under the US
Facility Agreement) under the US Facility of at least US$1,750,000.
Unless otherwise specifically provided herein, any accounting term used in
the Agreement shall have the meaning customarily given such term in accordance
with GAAP, and all financial computations hereunder shall be computed in
accordance with GAAP consistently applied; provided that, to the extent not
required under GAAP, for the purposes of financial reporting in connection with
computation of the Financial Covenants and the Applicable Margin calculation
required under Section 1.5(1) of this Agreement, amounts expressed in Canadian
Dollars shall be converted to the Equivalent Amount of US Dollars, as determined
on the date of delivery of the relevant financial report. That certain items or
computations are explicitly modified by the phrase "in accordance with GAAP"
shall in no way be construed to limit the foregoing. If any Accounting Changes
(as defined below) occur and such changes result in a change in the calculation
of the financial covenants, standards or terms used in the Agreement or any
other Loan Document, then Borrowers, Agent and Lenders agree to enter into
negotiations in order to amend such provisions of the Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Ultimate Parent and its Subsidiaries' financial
condition shall be the same after such Accounting Changes as if such Accounting
Changes had not been made; provided, however, that the agreement of Requisite
Lenders to any required amendments of such provisions shall be sufficient to
bind all Lenders. "ACCOUNTING CHANGES" means (A) 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 successor thereto or any agency with similar
functions); and (B) changes in accounting principles concurred in by Borrowers'
and Ultimate Parent's independent chartered or certified public accountants. If
Agent, Borrowers and Requisite Lenders agree upon the required amendments, then
after appropriate amendments have been executed and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in the Agreement or in any other Loan Document shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If
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Agent, Borrowers and Requisite Lenders cannot agree upon the required amendments
within thirty (30) days following the date of implementation of any Accounting
Change, then all Financial Statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change.
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ANNEX H (SECTION 1.1(3))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
GE Capital Canada:
Royal Bank of Canada
200 Bay Street
14th Floor, South Tower
Toronto, Ontario M5J 2J5
Bank: 003
Transit: 00002
Canadian Dollar Account: 101-151-9
U.S. Dollar Account: 400-273-9
Accounts Name: GECCI COM FIN
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ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital Canada, at
General Electric Capital Canada Inc.
123 Front Street
Suite 1400
Toronto, Ontario
M5J 2M2
Attention: Vice President, Commercial Finance
Telecopier No.: (416) 842-1750
Telephone No.: (416) 842-1751
with copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: SLM - Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7512
and:
McMillan Binch
Suite 3600, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario
M5J 2J7
Attention: Scott Horner and Jeff Rogers
Telecopier No.: (416) 865-7048;
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
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(B) If to either Borrower, at
Sport Maska Inc. & Tropsport Acquisitions Inc.
2 Place Alexis Nihon, Suite 800
3500 de Maisonneuve Blvd.
Westmount, Quebec
H3Z 3C1
Attention: Russell David
Telecopier No.: (514) 932-6020
Telephone No.: (514) 932-1118 Ext. 232
with copies to:
Wellspring Capital Management LLC
620 Fifth Avenue, Suite 216
New York, NY
10020
Attention: Greg Feldman
Telecopier No.: (212) 332-7575
Telephone No.: (212) 332-7571
and:
Goodman Phillips & Vineberg
1501 McGill College Avenue
26th Floor
Montreal, Quebec
H3A 3N9
Attention: Leon Garfinkle
Telecopier No.: (514) 841-6499
and:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York
10022-3897
Attention: Jim Douglas
Telecopier No.: (212) 735-2000
(C) Communications with each Lender (other than GE Capital Canada) shall be
addressed to the address of such Lender set forth under its name on the signing
pages of this Agreement, with a copy to Agent and each person to whom copies of
communications with Agent are to be given or served under this Annex I.
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ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
Lender(s)
General Electric Capital Canada Inc.
Revolving Loan Commitment
(including a Swing Line Commitment
of US$3,500,000): US$35,000,000
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SCHEDULE 1.1
TO
CREDIT AGREEMENT
REPRESENTATIVE OF AGENT
General Electric Capital Canada Inc.
123 Front Street
Suite 1400
Toronto, Ontario
M5J 2M2
Attention: Vice President, Commercial Finance
Telecopier No.: (416) 842-1750
Telephone No.: (416) 842-1751
with a copy to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: SLM - Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7512
1.1 - 1
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INTERCREDITOR AGREEMENT
Made as of November 19, 1998
Between
GENERAL ELECTRIC CAPITAL CORPORATION
and
GENERAL ELECTRIC CAPITAL CANADA INC.
and
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC
and
SLM INTERNATIONAL, INC., SPORTS HOLDINGS CORP.,
SPORT MASKA INC., TROPSPORT ACQUISITIONS INC.,
SHC HOCKEY INC., MASKA U.S., INC., SLM TRADEMARK,
ACQUISITION CANADA CORPORATION,
SLM TRADEMARK ACQUISITION CORP. and
WAP HOLDINGS INC.
<PAGE>
INTERCREDITOR AGREEMENT
This Intercreditor Agreement (as amended, supplemented, restated or otherwise
modified from time to time, this "AGREEMENT") is made as of November 19, 1998,
between
GENERAL ELECTRIC CAPITAL CORPORATION., a New York corporation (in its
capacity as agent for itself and the other US Lenders (as defined in
Recital A), together with its successors and assigns in such capacity,
"GECC")
and
GENERAL ELECTRIC CAPITAL CANADA INC., a Canada corporation (in its
capacity as agent for itself and the other Canadian Lenders (as defined in
Recital B), together with its successors and assigns in such capacity, "GE
CAPITAL CANADA")
and
CAISSE DE DEPOT ET PLACEMENT DU QUEBEC, a Quebec corporation (in its
capacity as agent for itself and the other Caisse Lenders (as defined in
Recital C) together with its successors and assigns, "CAISSE")
and
SLM INTERNATIONAL, INC., a Delaware corporation (together with its
successors and assigns, "SLM")
and
SPORTS HOLDINGS CORP., a Delaware corporation (together with its
successors and assigns, "SHC")
and
SLM TRADEMARK ACQUISITION CANADA CORPORATION, a New Brunswick corporation
(together with its successors and assigns, "TRADEMARK CANADA")
and
<PAGE>
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SLM TRADEMARK ACQUISITION CORP. a Delaware corporation (together with its
successors and assigns, "TRADEMARK US")
and
SHC HOCKEY, INC., a Vermont corporation and MASKA U.S., INC., a Vermont
corporation (together with their respective successors and assigns,
collectively, "US BORROWERS")
and
SPORT MASKA INC., a New Brunswick corporation, and TROPSPORT ACQUISITIONS
INC., a Canada corporation (together with their respective successors and
assigns, collectively, "CANADIAN BORROWERS")
and
WAP HOLDINGS INC., a Delaware corporation (together with its successors
and assigns, "WAP")
RECITALS
A. US Borrowers, SLM, SHC, Canadian Borrowers, Trademark US, Trademark Canada,
WAP and the other credit parties signatory thereto (collectively, the "US
Facility Credit Parties"), the lender or lenders thereunder from time to time
(the "US Lenders", and together with GECC, the "GECC Secured Parties") and GECC
are parties to a Credit Agreement made November 19, 1998 (as amended,
supplemented, restated or otherwise modified from time to time, the "US Credit
Agreement") under which GECC and the US Lenders have agreed to provide to US
Borrowers revolving credit facilities of up to the aggregate principal amount of
US$35,000,000.
B. Canadian Borrowers, SLM, SHC, US Borrowers, Trademark US, Trademark Canada,
WAP and the other credit parties signatory thereto (collectively, the "Canadian
Facility Credit Parties"), the lender or lenders thereunder from time to time
(the "Canadian Lenders", and together with GE Capital Canada, the "GE Capital
Canada Secured Parties") and GE Capital Canada are parties to a Credit Agreement
dated as of November 19, 1998 (as amended, supplemented, restated or otherwise
modified from time to time, the "Canadian Credit Agreement") under which GE
Capital Canada and
<PAGE>
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the Canadian Lenders have agreed to provide to Canadian Borrowers revolving
credit facilities of up to the aggregate principal amount of US$35,000,000.
C. SLM, Sport Maska Inc., Caisse and the lender or lenders named therein (the
"Caisse Lenders" and together with Caisse and the Trustee, the "Caisse Secured
Parties") are parties to a credit agreement made November 19, 1998 (as amended,
supplemented, restated or otherwise modified from time to time, the "Bridge Loan
Agreement") under which Caisse and the Caisse Lenders have agreed to provide SLM
and Sport Maska Inc. with a bridge loan facility in an aggregate principal
amount of $135,800,000.
D. The GECC Secured Parties, the GE Capital Canada Secured Parties and the
Caisse Secured Parties have each obtained, and may hereafter obtain,
assignments, security interests, hypothecs and other liens (collectively, the
"Liens") in certain assets of the US Facility Credit Parties and the Canadian
Facility Credit Parties (collectively the "Debtors") under the assignments,
hypothecs, security agreements and other security documents entered into now and
hereafter under, by virtue of, or otherwise in connection with, the US Credit
Agreement, the Canadian Credit Agreement and the Bridge Loan Agreement
(collectively, the "Security Documents").
E. GECC, GE Capital Canada and Caisse desire to agree on the relative priority
of the respective Liens of the GECC Secured Parties, the GE Capital Canada
Secured Parties and the Caisse Secured Parties and certain other rights,
priorities and interests.
FOR VALUE RECEIVED, the parties agree as follows:
SECTION 1 -- INTERPRETATION
1.1 DEFINITIONS. In this Agreement, including the Recitals, the following words
and phrases shall have the following meanings:
(1) ACCOUNTS shall mean:
(a) all of the Debtors' accounts and book debts and generally all debts,
dues, claims, choses in action and demands of every nature and kind
howsoever arising or secured, including letters of credit and
advices of credit, which are now due, owing or accruing or growing
due to or owned by or which may hereafter become due, owing or
accruing or growing due to or owned by the Debtors including,
without limitation, all amounts due from other Debtors and all
deposit and other accounts held in a Debtor's name or a trade or
business name of a Debtor or for the benefit of a Debtor with a
financial institution or other deposit-taking entity and all
deposits therein;
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(b) all deeds, documents, writings, papers, books of account and other
books relating to or being records of any other Accounts referred to
in this Section 1.1(1);
(c) all instruments, chattel paper, documents of title, contractual
rights and other intangibles or incorporeal property evidencing,
securing or otherwise relating to any other Accounts referred to in
this Section 1.1; and
(d) all books and records and software pertaining to any of the
foregoing,
except to the extent that the property described in paragraphs (a) through
(d) above constitutes Caisse Bank Accounts or amounts deposited therein,
or arises as a result of the disposition of Equipment, Real Property or
Caisse Intangibles, including Intellectual Property.
(2) ACCOUNTS LIQUIDATION PERIOD shall have the meaning given to it in Section
2.4(1).
(3) AGREEMENT shall have the meaning given to it in the first paragraph of this
Agreement.
(4) BRIDGE LOAN AGREEMENT shall have the meaning given to it in Recital C.
(5) CAISSE BANK ACCOUNTS means any deposit or other bank account of which Caisse
has given each of GECC and GE Canada prior written notice and into which
Proceeds of other Caisse Senior Collateral have been deposited but shall exclude
any depository or other bank accounts of the Debtors used in connection with the
cash management arrangements between the Debtors, their relationship banks or
similar entities and GECC or the Debtors, their relationship banks or similar
entities and GE Capital Canada.
(6) CAISSE CLAIM shall mean all obligations and liabilities of SLM and Sport
Maska Inc. to the Caisse Secured Parties pursuant to the Bridge Loan Agreement,
including, without limitation, all sums loaned or disbursed to or for the
benefit of SLM and Sport Maska Inc. at any time, all interest and fees with
respect thereto, and all costs of collection or enforcement, including legal
expenses and all amounts due under, and obligations owing in respect of
guarantees given by the Debtors to the Caisse Secured Parties.
(7) CAISSE COMMITMENT shall mean the commitment of the Caisse Lenders to make a
bridge loan to SLM and Sport Maska Inc. under the Bridge Loan Agreement.
(8) CAISSE INTANGIBLES shall mean all of the Debtors' now owned or hereafter
acquired (i) contract rights, choses in action, causes of action, and rights to
refunds or indemnification relating to other Caisse Senior Collateral,
including, without limitation, claims for tax or other refunds
<PAGE>
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against any city, county, province, state or federal government, or any agency
or authority or other subdivision thereof relating to other Caisse Senior
Collateral, (ii) corporate or other business records, ledgers and computer
programs relating to other Caisse Senior Collateral and (iii) all other general
intangibles and incorporeal property relating to other Caisse Senior Collateral.
(9) CAISSE LENDERS shall have the meaning given to it in Recital C.
(10) CAISSE SECURED PARTIES shall have the meaning given to it in Recital C.
(11) CAISSE SECURED PARTIES HYPOTHECS shall mean the hypothecs granted by SLM,
Sport Maska Inc., Tropsport Acquisitions Inc., and Trademark Canada in favour of
the Trustee.
(12) CAISSE SENIOR COLLATERAL shall mean the Collateral in which Caisse on
behalf of the Caisse Secured Parties, or the Caisse Secured Parties, as
applicable, have a senior Lien, as described in and provided by Section
2.1(1)(d).
(13) CANADIAN BORROWERS shall have the meaning given to in the first paragraph
of this Agreement.
(14) CANADIAN BORROWERS AND TRADEMARK CANADA ACCOUNTS shall mean all Accounts of
the Canadian Borrowers and Trademark Canada.
(15) CANADIAN BORROWERS AND TRADEMARK CANADA INVENTORY shall mean all Inventory
of the Canadian Borrowers and Trademark Canada.
(16) CANADIAN CREDIT AGREEMENT shall have the meaning given to in Recital B.
(17) CANADIAN FACILITY CREDIT PARTIES shall have the meaning given to in Recital
B.
(18) CANADIAN LENDERS shall have the meaning given to it in Recital B.
(19) COLLATERAL shall mean all the assets, rights, property or interests in
property described in Sections 1.1(1), 1.1(8), 1.1(24), 1.1(30), 1.1(37),
1.1(41), 1.1(45), 1.1(46), 1.1(52), 1.1(53) and 1.1(55) and includes the
Proceeds and products thereof, and where applicable, the Proceeds of insurance
or escrow accounts covering any such property.
(20) DEBTORS shall have the meaning given to it in Recital D.
(21) ENFORCEMENT ACTIONS shall mean, collectively or individually, after an
Event of Default under the US Credit Agreement, the Canadian Credit Agreement
and/or the Bridge Loan Agreement,
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as applicable, for all or any of GECC, GE Capital Canada and Caisse (and/or any
Receiver(s)) to take any action to repossess or realize upon any material amount
of Collateral, to exercise rights of set-off or commence the judicial or
non-judicial enforcement of any of the rights and remedies (including
hypothecary remedies under the Civil Code of Quebec) under any Security
Document, or pursuant to the Liens, including the withdrawal of an authorization
to collect claims (as contemplated by Article 2745 of the Civil Code of Quebec).
For greater certainty, applications of amounts received by GECC or GE Capital
Canada under cash management arrangements implemented in connection with the US
Credit Agreement or the Canadian Credit Agreement shall not constitute
Enforcement Actions.
(22) ENFORCEMENT NOTICE shall mean a written notice delivered by any of GECC, GE
Capital Canada or Caisse to each of the others following acceleration of the
GECC Claim, the GE Capital Canada Claim or the Caisse Claim, as applicable,
stating that immediately after the giving of such notice it will be taking one
or more Enforcement Actions and such notice shall specify the relevant Event of
Default and the current balance of the GECC Claim, the GE Capital Canada Claim
or the Caisse Claim, as applicable.
(23) ENFORCEMENT PERIOD shall mean the period of time following the date of
receipt by two of GECC, GE Capital Canada or Caisse of an Enforcement Notice
from the other until either (i) the final payment or satisfaction in full of two
of the GECC Claim, the GE Capital Canada Claim and the Caisse Claim, or (ii)
GECC, GE Capital Canada and Caisse, agree in writing to terminate the
Enforcement Period.
(24) EQUIPMENT shall mean all of the Debtors' machinery and equipment (other
than Inventory), including, without limitation, processing equipment, conveyors,
machine tools, data processing and computer equipment with software and
peripheral equipment and all engineering, processing and manufacturing
equipment, office machinery, furniture, materials handling equipment, tools,
attachments, accessories, automotive equipment, trailers, trucks, forklifts,
molds, dies, stamps, motor vehicles, rolling stock and other equipment of every
kind and nature, and fixtures, all whether now owned or hereafter acquired, and
wherever situated, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto.
(25) EVENT OF DEFAULT shall mean an "EVENT OF DEFAULT" as such term is defined
in the US Credit Agreement, the Canadian Credit Agreement and/or the Bridge Loan
Agreement.
(26) FINISHED GOODS LIQUIDATION PERIOD shall have the meaning given to it in
Section 2.4(1).
(27) GE CAPITAL Canada shall have the meaning given to it in the first paragraph
of this Agreement.
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(28) GE CAPITAL CANADA CLAIM shall mean all "Obligations" of the Debtors to the
GE Capital Canada Secured Parties as defined in the Canadian Credit Agreement,
including, without limitation, all sums loaned or advanced to or for the benefit
of the Debtors and all letter of credit obligations incurred for the account of
the Debtors at any time, all interest and fees with respect thereto, all future
advances and all costs of collection or enforcement, including legal expenses
and all amounts due under, and obligations owing in respect of, guarantees given
by the Debtors to the GE Capital Canada Secured Parties.
(29) GE CAPITAL CANADA COMMITMENT shall mean the commitment of the GE Capital
Canada Secured Parties, or any of them, to make revolving loans to the Canadian
Borrowers or to incur letter of credit obligations for the accounts of the
Canadian Borrowers under the Canadian Credit Agreement.
(30) GE CAPITAL CANADA INTANGIBLES shall mean:
(a) all of the Canadian Borrowers' and Trademark Canada's now owned or
hereafter acquired (i) contract rights (other than contractual
rights relating to Intellectual Property), choses in action, causes
of action, and rights to refunds or indemnification relating to
other GE Capital Canada Senior Collateral, including, without
limitation, claims for tax or other refunds against any city,
county, state, province or federal government, or any agency or
authority or other subdivision thereof relating to other GE Capital
Canada Senior Collateral, (ii) corporate or other business records,
ledgers and computer programs relating to other GE Capital Canada
Senior Collateral and (iii) all other general intangibles and
incorporeal property (excluding Intellectual Property) relating to
other GE Capital Canada Senior Collateral;
(b) all deeds, documents, writings, papers, books of account and other
books relating to or being records of any other GE Capital Canada
Intangibles referred to in this Section 1.1(30);
(c) all instruments, chattel paper, documents of title, contractual
rights and other intangibles or incorporeal property evidencing,
securing or otherwise relating to any other GE Capital Canada
Intangibles referred to in this Section 1.1(30); and
(d) all books and records and software pertaining to any of the foregoing.
(31) GE CAPITAL CANADA SECURED PARTIES shall have the meaning assigned to in
Recital B.
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(32) GE CAPITAL CANADA SENIOR COLLATERAL shall mean Collateral in which GE
Capital Canada on behalf of the GE Capital Canada Secured Parties, or the GE
Capital Canada Secured Parties, as applicable, have a senior Lien, as described
in and provided by Section 2.1(1)(b).
(33) GE CAPITAL CANADA SUBORDINATED COLLATERAL shall have the meaning given to
it in Section 2.1(2)(b).
(34) GECC shall have the meaning given to it in the first paragraph of this
Agreement.
(35) GECC CLAIM shall mean all "Obligations" of the Debtors to the GECC Secured
Parties as defined in the US Credit Agreement, including, without limitation,
all sums loaned or advanced to or for the benefit of the Debtors and all letter
of credit obligations incurred for the account of the Debtors at any time, all
interest and fees with respect thereto, all future advances and all costs of
collection or enforcement, including legal expenses and all amounts due under,
and obligations owing in respect of, guarantees given by the Debtors to the GECC
Secured Parties.
(36) GECC COMMITMENT shall mean the commitment of the GECC Secured Parties, or
any or them, to make revolving loans to the US Borrowers or to incur letter of
credit obligations for the accounts of the US Borrowers under the US Credit
Agreement.
(37) GECC INTANGIBLES shall mean:
(a) all of the US Borrowers' and Trademark US's now owned or hereafter
acquired (i) contract rights (other than contractual rights relating
to Intellectual Property), choses in action, causes of action, and
rights to refunds or indemnification relating to other GECC Senior
Collateral, including, without limitation, claims for tax or other
refunds against any city, county, state, province or federal
government, or any agency or authority or other subdivision thereof
relating to other GECC Senior Collateral, (ii) corporate or other
business records, ledger and computer programs relating to other
GECC Senior Collateral and (iii) all other general intangibles and
incorporeal property (other than Intellectual Property) relating to
other GECC Senior Collateral;
(b) all deeds, documents, writings, papers, books of account and other
books relating to or being records of any other GECC Intangibles
referred to in this Section 1.1(37);
(c) all instruments, chattel paper, documents of title, contractual
rights and other intangibles or incorporeal property evidencing,
securing or otherwise relating to any other GECC Intangibles
referred to in this Section 1.1(37); and
(d) all books and records and software pertaining to any of the
foregoing.
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(38) GECC SECURED PARTIES shall have the meaning assigned to in Recital A.
(39) GECC SENIOR COLLATERAL shall mean Collateral in which GECC, on behalf of
the GECC Secured Parties, or the GECC Secured Parties, as applicable, have a
senior Lien, as described in and provided by Section 2.1(1)(a).
(40) GECC SUBORDINATED COLLATERAL shall have the meaning given to it in Section
2.1(2)(a).
(41) GE JOINT INTANGIBLES shall mean:
(a) all of the SHC's, SLM's and WAP's now owned or hereafter acquired
(i) contract rights (other than contractual rights relating to
Intellectual Property), choses in action, causes of action, and
rights to refunds or indemnification relating to other GE Joint
Senior Collateral, including, without limitation, claims for tax or
other refunds against any city, county, state, province or federal
government, or any agency or authority or other subdivision thereof
relating to other GE Joint Senior Collateral, (ii) corporate or
other business records, ledgers and computer programs relating to
other GE Joint Senior Collateral and (iii) all other general
intangibles and incorpororeal property (excluding Intellectual
Property) relating to other GE Joint Senior Collateral;
(b) all deeds, documents, writings, papers, books of account and other
books relating to or being records of any other GE Joint Intangibles
referred to in this Section 1.1(41);
(c) all instruments, chattel paper, documents of title, contractual
rights and other intangibles or incorporeal property evidencing,
securing or otherwise relating to any other GE Joint Intangibles
referred to in this Section 1.1(41); and
(d) all books and records and software pertaining to any of the
foregoing.
(42) GE JOINT SENIOR COLLATERAL shall have the meaning given to it in Section
2.1 (1) (c).
(43) INSOLVENCY LAW shall mean any of the Bankruptcy and Insolvency Act
(Canada), the Companies' Creditors Arrangement Act (Canada), the Winding-Up and
Restructuring Act (Canada), and Title 11 of the United States Code entitled
"Bankruptcy", each as now and hereafter in effect, any successors to such
statutes and any other applicable insolvency or other similar law of any
jurisdiction including, without limitation, any law of any jurisdiction
permitting a debtor to obtain a stay or a compromise of the claims of its
creditors against it.
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(44) INSOLVENCY PROCEEDINGS shall mean any dissolution, bankruptcy,
receivership, winding-up, liquidation or other similar proceedings in respect of
the Debtors (whether voluntary or involuntary), any proposal or other proceeding
seeking a stay of proceedings, reorganization or compromise of the claims of
creditors made or commenced by the Debtors or others under any Insolvency Law or
any distribution of assets of the Debtors among their creditors in any manner
whatsoever.
(45) INTELLECTUAL PROPERTY shall mean all intellectual and industrial property,
including, without limitation, all patents, industrial designs, copyrights,
trademarks, trade names, trade secrets, and options and rights to use any of the
foregoing and, when the context permits, all registrations and applications that
have been made or shall be made or filed in any office in any jurisdiction in
respect of the foregoing, and all reissues, extensions and renewals thereof.
(46) INVENTORY shall mean:
(a) all inventory of whatever kind and wherever situate, whether now
owned or hereafter acquired by the Debtors, including, without
limitation, all inventory, merchandise, goods and other personal
property which are held by or on behalf of any Debtor for sale or
lease or are furnished or are to be furnished under a contract of
service, or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in such
Debtor's business or in the processing, production, packaging,
promotion, delivery or shipping of the same, including other
supplies;
(b) all deeds, documents, writings, papers, books of account and other
books relating to or being records of any other Inventory referred
to in this Section 1.1(46);
(c) all instruments, chattel paper, documents of title, contractual
rights and other intangibles or incorporeal property evidencing,
securing or otherwise relating to any other Inventory referred to in
this Section 1.1(46); and
(d) all books and records and software pertaining to any of the
foregoing.
(47) LIENS shall have the meaning given to it in Recital D.
(48) LIQUIDATION PERIODS shall have the meaning given to it in Section 2.4(1).
(49) OFFICES shall mean the offices of the Debtors where the ledgers, books,
records, computers, books of account, computer programs, disks, tape files,
printout runs, and other computer-prepared information with respect to Accounts
and Inventory, including data regarding accounts and claims and collections with
respect thereto and any other Proceeds thereof, are maintained and where mail
(including payments of any Accounts) is received.
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(50) PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, company, institution, public benefit corporation, investment
or other fund, government (whether federal, provincial, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof) or other entity of any nature.
(51) PLEDGED SHARE DOCUMENTS means all original share certificates, proxies and
powers of attorney relating to the Pledged Shares.
(52) PLEDGED SHARES means any and all shares, warrants, options, general or
limited partnership interests or other similar rights (regardless how
designated) issued by any Debtor to another Debtor and pledged or hypothecated
in favour of any of the GECC Secured Parties, the GE Capital Canada Secured
Parties or the Caisse Secured Parties, other than such property as constitutes
Proceeds of other Collateral.
(53) PROCEEDS means identifiable or traceable property in any form derived
directly or indirectly from any dealing with the Collateral or the proceeds
therefrom, including any payment or right to a payment or insurance representing
an indemnity or compensation for loss of or damage to the Collateral or any part
thereof or Proceeds therefrom.
(54) RAW/WIP LIQUIDATION PERIOD shall have the meaning given to it in Section
2.4(1).
(55) REAL PROPERTY shall mean all of the real and immoveable property now owned
or hereafter acquired by the Debtors, all leasehold interests and rights under
leases of the Debtors, and all improvements and fixtures attached thereto and
the Debtors' rights to leases, rents and profits with respect thereto.
(56) RECEIVER shall mean any receiver, manager, receiver-manager, receiver and
manager or other person exercising similar powers appointed by or at the request
of GECC, GE Capital Canada or Caisse as the context requires.
(57) SECURITY DOCUMENTS shall have the meaning given to it in Recital D.
(58) SHC shall have the meaning given to it in the first paragraph of this
Agreement.
(59) SHC, SLM AND WAP ACCOUNTS shall mean all Accounts of SHC, SLM and WAP.
(60) SHC, SLM AND WAP INVENTORY shall mean all Inventory of SHC, SLM and WAP.
(61) SLM shall have the meaning given to it in the first paragraph of this
Agreement.
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(62) TRADEMARK CANADA shall have the meaning given to it in the first paragraph
of this Agreement.
(63) TRADEMARK US shall have the meaning given to it in the first paragraph of
this Agreement.
(64) TRUSTEE shall mean Montreal Trust Company, in its capacity as trustee under
the Caisse Secured Parties hypothecs.
(65) US BORROWERS shall have the meaning given to in the first paragraph of this
Agreement.
(66) US BORROWERS AND TRADEMARK US ACCOUNTS shall mean all Accounts of the US
Borrowers and Trademark US.
(67) US BORROWERS AND TRADEMARK US INVENTORY shall mean all Inventory of the US
Borrowers and Trademark US.
(68) US CREDIT AGREEMENT shall have the meaning given to in Recital A.
(69) US FACILITY CREDIT PARTIES shall have the meaning given to in Recital A.
(70) US LENDERS shall have the meaning given to it in Recital A.
1.2 HEADINGS. The insertion of headings and the provision of a table of contents
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.3 REFERENCES. Unless otherwise specifically provided, all references to
Sections and Recitals are to Sections and Recitals of this Agreement. The words
"hereto", "herein", "hereof", "hereunder" and similar expressions refer to this
Agreement.
1.4 NUMBER AND GENDER. Unless otherwise specifically provided, words importing
the singular include the plural and vice versa and words importing gender
include all genders.
1.5 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
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SECTION 2 -- INTERCREDITOR AGREEMENT
2.1 LIEN PRIORITIES.
(1) As between the GECC Secured Parties, the GE Capital Canada Secured
Parties and the Caisse Secured Parties, the Liens of the GECC
Secured Parties, the GE Capital Canada Secured Parties and the
Caisse Secured Parties in the Collateral shall have the following
relative priorities:
(a) the GECC Secured Parties shall have a first ranking Lien in or
on all US Borrowers and Trademark US Accounts, US Borrowers
and Trademark US Inventory, GECC Intangibles and all Proceeds
of all of the foregoing in any form derived directly or
indirectly from any dealing with the foregoing or the Proceeds
therefrom, including, without limitation, insurance Proceeds,
other than, but subject to the proviso in Section 2.13,
Proceeds of the Caisse Senior Collateral,
(collectively, "GECC Senior Collateral"), and the GE Capital
Canada Secured Parties shall have a second ranking Lien in the
GECC Senior Collateral and the Caisse Secured Parties shall
have a third ranking Lien in the GECC Senior Collateral;
(b) the GE Capital Canada Secured Parties shall have a first
ranking Lien in or on all Canadian Borrowers and Trademark
Canada Accounts, Canadian Borrowers and Trademark Canada
Inventory, GE Capital Canada Intangibles and all Proceeds of
all of the foregoing in any form derived directly or
indirectly from any dealing with the foregoing or the Proceeds
therefrom, including, without limitation, insurance Proceeds,
other than, but subject to the proviso in Section 2.13,
Proceeds of the Caisse Senior Collateral,
(collectively, "GE Capital Canada Senior Collateral"), and the
GECC Secured Parties shall have a second ranking Lien in the
GE Capital Canada Senior Collateral and the Caisse Secured
Parties shall have a third ranking Lien in the GE Capital
Canada Senior Collateral;
(c) the GECC Secured Parties and the GE Capital Canada Secured
Parties shall have a first ranking pari passu Lien in or on
all SHC, SLM and WAP Accounts, SHC, SLM and WAP Inventory, GE
Joint Intangibles and all Proceeds of all of the foregoing in
any form derived directly or indirectly from any dealing with
the foregoing or the Proceeds therefrom, including,
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without limitation, insurance Proceeds other than, but subject
to the proviso in Section 2.13, Proceeds of the Caisse Senior
Collateral;
(collectively, "GE Joint Senior Collateral") and the Caisse
Secured Parties shall have a second ranking Lien in the GE
Joint Senior Collateral;
(d) the Caisse Secured Parties shall have a first ranking Lien in
or on all Real Property, Equipment, Intellectual Property and
other assets of the Debtors other than GECC Senior Collateral,
GE Capital Canada Senior Collateral and GE Joint Senior
Collateral and all Proceeds of all of such assets in any form
derived directly or indirectly from any dealing with such
assets or the Proceeds therefrom, including, without
limitation, insurance Proceeds, ("Caisse Senior Collateral"),
and the GECC Secured Parties and the GE Capital Canada Secured
Parties shall have a second or third ranking Lien therein, as
set out in subsection 2.1(2).
(2) As between the GECC Secured Parties and the GE Capital Canada
Secured Parties, the Liens of the GECC Secured Parties and the GE
Capital Canada Secured Parties in the Caisse Senior Collateral shall
have the following relative priorities:
(a) the GECC Secured Parties shall have a second ranking Lien in
or on all Caisse Senior Collateral, other than Pledged Shares
and Caisse Senior Collateral consisting of assets and property
of Canadian Borrowers, Trademark Canada, SLM, SHC and WAP (the
"GECC Subordinated Collateral"), and the GE Capital Canada
Secured Parties shall have a third ranking Lien therein; and
(b) the GE Capital Canada Secured Parties shall have a second
ranking Lien in or on all Caisse Senior Collateral, other than
the GECC Subordinated Collateral, Pledged Shares and Caisse
Senior Collateral consisting of assets and property of SLM,
SHC and WAP (the "GE Capital Canada Subordinated Collateral"),
and the GECC Secured Parties shall have a third ranking Lien
in the GE Capital Canada Subordinated Collateral;
(c) the GECC Secured Parties and the GE Capital Canada Secured
Parties shall have a second ranking pari passu Lien on the
Pledged Shares and Caisse Senior Collateral consisting of
assets and property of SLM, SHC and WAP.
(3) The priorities provided for in this Agreement shall apply
notwithstanding:
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(a) the priorities otherwise accorded to the Liens on the GECC
Senior Collateral, GE Capital Canada Senior Collateral, GE
Joint Senior Collateral and the Caisse Senior Collateral under
applicable law;
(b) the time of creation, granting, execution, delivery,
attachment, registration, publication, perfection or
enforcement of the Liens on the GECC Senior Collateral, the GE
Capital Canada Senior Collateral, the GE Joint Senior
Collateral and the Caisse Senior Collateral;
(c) that any of the Liens on the GECC Senior Collateral, the GE
Capital Canada Senior Collateral, the GE Joint Senior
Collateral and the Caisse Senior Collateral shall be
defective, unperfected, unpublished, or unenforceable for any
reason whatsoever;
(d) the time of crystallization of any floating charge or floating
hypothec in or on the GECC Senior Collateral, the GE Capital
Canada Senior Collateral, the GE Joint Senior Collateral and
the Caisse Senior Collateral;
(e) the provisions of the US Credit Agreement, the Canadian Credit
Agreement, the Bridge Loan Agreement or the Security
Documents;
(f) any forbearance whatsoever, whether as to time, performance,
or otherwise or any release, discharge, loss or alteration in
or dealing with all or any part of the Liens on the GECC
Senior Collateral, the GE Capital Canada Senior Collateral,
the GE Joint Senior Collateral and the Caisse Senior
Collateral or any part thereof;
(g) any failure or delay in giving any notice required under this
Agreement;
(h) any invalidity or unenforceability of, or any limitation on,
the liability of the Debtors;
(i) any defence, compensation, set-off or counterclaim which the
Debtors may have or assert;
(j) any Insolvency Proceedings;
(k) the date of incurrence of the GECC Claim, the GE Capital
Canada Claim or the Caisse Claim or any portion thereof;
<PAGE>
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(l) any priority granted by any principle of law or any statute;
or
(m) any other matter whatsoever.
2.2 DISTRIBUTION OF PROCEEDS OF COLLATERAL. As between the GECC Secured Parties,
the GE Capital Canada Secured Parties and the Caisse Secured Parties:
(1) All Proceeds of GECC Senior Collateral shall be paid first, to GECC
for application to the GECC Claim and, after the full and
irrevocable payment of the GECC Claim and termination of the GECC
Commitment, any residual of the GECC Senior Collateral shall be paid
second to GE Capital Canada for application to the GE Capital Canada
Claim and, after the full and irrevocable payment of the GE Capital
Canada Claim and termination of the GE Capital Canada Commitment,
any residual of the GECC Senior Collateral shall be paid third to
Caisse for application to the Caisse Claim, if any.
(2) All Proceeds of GE Capital Canada Senior Collateral shall be paid
first, to GE Capital Canada for application to the GE Capital Canada
Claim and, after the full and irrevocable payment of the GE Capital
Canada Claim and termination of the GE Capital Canada Commitment,
any residual of the GE Capital Canada Senior Collateral shall be
paid second to GECC for application to the GECC Claim and, after
full and irrevocable payment of the GECC Claim and termination of
the GECC Commitment, any residual of the GE Capital Canada Senior
Collateral, shall be paid third to Caisse for application to the
Caisse Claim, if any.
(3) All Proceeds of GE Joint Senior Collateral shall be paid first to
GECC and GE Capital Canada prorata in accordance with the GECC Claim
and GE Capital Claim for application to such claims, and after the
full and irrevocable payment of the GECC Claim and the GE Capital
Canada Claim and termination of the GECC Commitment and the GE
Capital Canada Commitment, any residual of the GE Joint Senior
Collateral shall be paid second for application to the Caisse Claim,
if any.
(4) All Proceeds of Caisse Senior Collateral shall be paid to Caisse for
application to the Caisse Claim and, after the full and irrevocable
payment of the Caisse Claim, any residual of the Caisse Senior
Collateral shall:
(i) subject to paragraph (iii) below, with respect to the GE
Capital Canada Subordinated Collateral, be paid to GE Capital
Canada for application to the GE Capital Canada Claim, if any,
and, after the full and irrevocable payment of the GE Capital
Canada Claim and termination of the GE Capital Canada
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Commitment, any residual of the GE Capital Canada Subordinated
Collateral shall be paid to GECC for application to the GECC
Claim, if any,
(ii) subject to paragraph (iii) below, with respect to the
GECC Subordinated Collateral, be paid to GECC for application
to the GECC Claim and, after the full and irrevocable payment
of the GECC Claim and termination of the GECC Commitment, any
residual of the GECC Subordinated Collateral shall be paid to
GE Capital Canada for application to the GE Capital Canada
Claim, if any, and
(iii) with respect to Pledged Shares and Caisse Senior
Collateral consisting of assets and property of SLM, SHC and
WAP, be paid to GECC and GE Capital Canada pro rata in
accordance with the GECC Claim and GE Capital Canada Claim for
application to the GECC Claim and GE Capital Canada Claim if
any.
(5) After the GECC Claim, the GE Capital Canada Claim and the Caisse
Claim have been irrevocably paid and satisfied in full and the GECC
Commitment, the GE Capital Canada Commitment and the Caisse
Commitment are terminated, the balance of Proceeds of the
Collateral, if any, shall be paid as required by applicable law.
(6) If the GECC Secured Parties, the GE Capital Canada Secured Parties
or the Caisse Secured Parties have any Lien on any of the Debtors'
Collateral as security for payment of any indebtedness of the
Debtors, or of any other party, other than indebtedness incurred
pursuant to or in connection with the US Credit Agreement, the
Canadian Credit Agreement or the Bridge Loan Agreement, then GECC,
GE Capital Canada or Caisse, as the case may be, may not apply the
Proceeds of any of the Collateral to satisfy such other indebtedness
until the GECC Claim, the GE Capital Canada Claim and the Caisse
Claim are irrevocably paid in full or otherwise satisfied.
2.3 ENFORCEMENT ACTIONS. GECC, GE Capital Canada and Caisse agree not to
commence any Enforcement Action until an Enforcement Notice has been given to
the others. During an Enforcement Period, GECC, GE Capital Canada and Caisse
agree that:
(1) GECC and its Receiver may, at GECC's option, take any action to
foreclose or realize upon or enforce any of the GECC Secured
Parties' rights and remedies with respect to the GECC Senior
Collateral without the prior written consent of GE Capital Canada or
Caisse. GECC and its Receiver shall have the sole and exclusive
right to take Enforcement Actions with respect to the GECC Senior
Collateral and,
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accordingly, GE Capital Canada, Caisse and their Receivers shall not
take any action to foreclose or realize upon or to otherwise enforce
any of the GE Capital Canada Secured Parties' or Caisse Secured
Parties' rights and remedies with respect to any GECC Senior
Collateral without GECC's prior written consent, provided, however,
that the exclusive rights of GECC and its Receiver with respect to
GECC Senior Collateral shall not extend beyond the periods provided
in Section 2.4 (1) (ii) with respect to Inventory and 2.4 (1) (iii)
with respect to Accounts unless (and only for so long as) GECC and
its Receiver are diligently proceeding beyond such periods with
Enforcement Actions with respect to the applicable Collateral.
(2) GE Capital Canada and its Receiver may, at GE Capital Canada's
option, take any action to foreclose or realize upon or enforce any
of the GE Capital Canada Secured Parties' rights and remedies with
respect to the GE Capital Canada Senior Collateral without the prior
written consent of GECC or Caisse. GE Capital Canada and its
Receiver shall have the sole and exclusive right to take Enforcement
Actions with respect to the GE Capital Canada Senior Collateral and,
accordingly, GECC, Caisse and their Receivers shall not take any
action to foreclose or realize upon or to otherwise enforce any of
the GECC Secured Parties' or Caisse Secured Parties' rights and
remedies with respect to any GE Capital Canada Senior Collateral
without GE Capital Canada's prior written consent, provided,
however, that the exclusive rights of GE Capital Canada and its
Receiver with respect to GE Capital Canada Senior Collateral shall
not extend beyond the periods provided in Section 2.4 (1) (ii) with
respect to Inventory and 2.4 (1) (iii) with respect to Accounts
unless (and only for so long as) GE Capital Canada and its Receiver
are diligently proceeding beyond such periods with Enforcement
Actions with respect to the applicable Collateral.
(3) GECC and GE Capital Canada and their Receivers may, at GECC's and GE
Capital Canada's option, take any action to foreclose or realize
upon or enforce any of the GECC Secured Parties' and GE Capital
Canada Secured Parties' rights and remedies with respect to the GE
Joint Senior Collateral without the prior written consent of Caisse.
GECC and GE Capital Canada and their Receivers shall have the sole
and exclusive right to take Enforcement Actions with respect to the
GE Joint Senior Collateral and, accordingly, Caisse and its Receiver
shall not take any action to foreclose or realize upon or to
otherwise enforce any of the Caisse Secured Parties' rights and
remedies with respect to any GE Joint Senior Collateral without
GECC's and GE Capital Canada's prior written consent, provided,
however, that the exclusive rights of GECC and GE Capital Canada and
their Receivers with respect to GE Joint Senior Collateral shall not
extend beyond the periods provided in Section 2.4 (1) (ii) with
respect to Inventory and 2.4 (1) (iii) with respect to Accounts
unless (and only for so long as) either GECC and its Receiver or GE
Capital Canada and its Receiver,
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as the case may be, are diligently proceeding beyond such periods
with Enforcement Actions with respect to the applicable Collateral.
(4) Caisse and its Receiver may, at Caisse's option, take any action to
foreclose or realize upon or otherwise enforce any of the Caisse's
rights with respect to the Caisse Senior Collateral without the
prior written consent of GECC or GE Capital Canada. For so long as
Caisse and its Receiver are diligently proceeding with an
Enforcement Action, Caisse and its Receiver shall have the sole and
exclusive right to take Enforcement Actions with respect to Caisse
Senior Collateral and, accordingly, GECC, GE Capital Canada and
their Respective Receivers shall not take any action to foreclose or
realize upon or to otherwise enforce any of the GECC Secured Parties
or GE Capital Canada Secured Parties' rights and remedies with
respect to any Caisse Senior Collateral without the prior written
consent of Caisse; provided, that until the expiration of the
relevant Liquidation Period, if Caisse receives an Enforcement
Notice from GECC or GE Capital Canada or if, upon receipt of an
Enforcement Notice from Caisse, either GECC or GE Capital Canada
informs Caisse of its intention to also take Enforcement Action,
GECC, GE Capital Canada and their respective Receivers shall have
the rights afforded by Sections 2.4, 2.5 and 2.7 and Caisse's and
its Receiver's rights and remedies in respect of the Caisse Senior
Collateral shall be subject thereto and to Caisse's obligations
under clause (ii) of Section 2.6 and under Section 2.7.
(5) If two or more of GECC, GE Capital Canada and Caisse elect to
proceed with Enforcement Actions, then each of the enforcing parties
and its Receiver shall proceed in accordance with the provisions of
this Agreement with Enforcement Actions with respect to the
Collateral in which it has a first ranking Lien under this Section
2.
(6) GECC and GE Capital Canada agree with each other that, unless they
agree otherwise after the date hereof, all decisions by GECC and GE
Capital Canada in respect of Collateral on which they have a first
or second ranking pari passu Lien shall be taken jointly, including
any decision to take any action to foreclose, realize upon or
otherwise enforce rights with respect to such Collateral, provided
that Caisse and the Debtors agree that any notice, consent or
instruction given by either GECC or GE Capital Canada to Caisse or
any Debtor in respect to such Collateral shall be sufficient and
binding upon GECC, GE Capital Canada, Caisse and such Debtor.
2.4 LIQUIDATION PERIODS.
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(1) Each of GECC and GE Capital Canada, as applicable, and its
respective Receiver may occupy and use the Caisse Senior Collateral,
for the purposes set out in Section 2.5, including Caisse Senior
Collateral consisting of or located within
(i) manufacturing facilities leased by each Debtor for up to ninety
(90) days, manufacturing facilities owned by Sport Maska Inc. in
Mount Forest, Ontario for up to ninety (90) days and all other
manufacturing facilities for up to sixty (60) days (the "Raw/WIP
Liquidation Period"),
(ii) each Debtor's warehouse and distribution facilities which are
owned by the Debtor for up to sixty (60) days, unless such Debtor's
warehouse and distribution facilities are located at premises
referred to in Section 2.4 (1) (i) or are owned by Maska US in
Bradford, Vermont, and then for up to ninety (90) days in each case,
or in all other cases for up to one hundred and fifty (150) days, if
the relevant Enforcement Notice is delivered on or after January 1
and on or before June 30 in any year, and one hundred and twenty
(120) days, if the relevant Enforcement Notice is delivered on or
after July 1 and on or before December 31 in any year (the "Finished
Goods Liquidation Period"), and
(iii) each Debtor's Offices for up to ninety (90) days in respect of
Offices located at facilities referred to in Section 2.4 (1) (i),
for up to sixty (60) days in respect of other Offices located at
facilities owned by Debtors, or in all other cases for one hundred
and eighty (180) days, which latter period may be extended by ninety
(90) days if GECC or GE Capital Canada, as applicable, is unable to
sell, liquidate or otherwise dispose of Accounts of the Debtors
during such 180-day period (the "Accounts Liquidation Period")
(collectively, the "Liquidation Periods"),
following the earlier to occur of the commencement of an Enforcement
Action by GECC in respect of the GECC Senior Collateral, by GE
Capital Canada in respect of the GE Capital Canada Senior Collateral
or by GECC and GE Capital Canada in respect of the GE Joint Senior
Collateral, as applicable, or receipt by GECC and GE Capital Canada
of an Enforcement Notice from Caisse and, in each and every case,
following the expiration of any period during which either of GECC
or GE Capital Canada or its respective Receiver is stayed or
enjoined or precluded by statute or otherwise (through no fault of
GECC or GE Capital Canada, as applicable, or its Receiver) from
taking one or more Enforcement Actions in respect of the GECC Senior
Collateral, the GE Capital Canada Senior Collateral or the GE Joint
Senior Collateral, as applicable. During the applicable Liquidation
Periods provided above, GECC and its Receiver and GE Capital Canada
and its Receiver may use and occupy the Caisse Senior Collateral, in
each case, without force or process of law and
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without any obligation to pay rents, royalties, other fees or other
amounts to Caisse, except for payment or reimbursement of direct
expenses as set forth in Section 2.8.
(2) The license or lease to use and occupy the Caisse Senior Collateral
during the applicable Liquidation Periods shall apply to and for the
benefit of GECC, GE Capital Canada and their Receivers and any
agents, brokers, appraisers, auctioneers or liquidators retained by
GECC, GE Capital Canada or their Receivers.
(3) Within a reasonable time after the expiration of the Liquidation
Periods, each of GECC or GE Capital Canada or their respective
Receivers may make copies of all books, records, books of account,
computer disks, printouts and tapes and other computer-generated
information under the control of Caisse and its Receiver and
relating to GECC Senior Collateral, the GE Capital Canada Senior
Collateral or the GE Joint Senior Collateral, as applicable,
provided that the provisions of this paragraph shall not be
construed as obliging Caisse or its Receiver to keep control of any
of the foregoing.
2.5 USE OF CAISSE SENIOR COLLATERAL. The Liquidation Periods, as they relate to
GECC or GE Capital Canada, as the case may be, shall commence on the same date
and run concurrently. During a Raw/WIP Liquidation Period, GECC or GE Capital
Canada, as applicable and its Receiver shall have access to and use and
occupancy of each Debtors' manufacturing facilities and other Caisse Senior
Collateral located therein to convert raw materials and complete the
manufacturing of work in process. At the conclusion of such Raw/WIP Liquidation
Period, Caisse shall have exclusive use and occupancy of each Debtor's
manufacturing facilities.
During a Finished Goods Liquidation Period, GECC or GE Capital Canada, as
applicable and its Receiver may use each Debtors' warehouse and distribution
facilities and other Caisse Senior Collateral located therein and in the Offices
to package, ship, sell, liquidate or otherwise dispose of Inventory. At the
conclusion of such Finished Goods Liquidation Period, Caisse shall have
exclusive use and occupancy of each Debtor's warehouse and distribution
facilities.
During an Accounts Liquidation Period, GECC or GE Capital Canada, as applicable
and its Receiver shall have access to and use and occupancy of the Offices of
each Debtor as provided in Section 2.4 (1) (iii) and the Caisse Senior
Collateral located therein, including, without limitation, computers and
computer programs and all other office equipment and supplies, to collect, sell
or otherwise dispose of Accounts. At the conclusion of such Accounts Liquidation
Period, Caisse shall have exclusive use and occupancy of each Debtor's Office.
If GECC or GE Capital Canada or its respective Receiver is unable (i) during any
Raw/WIP Liquidation Period, to substantially complete the conversion of raw
materials and the manufacturing
<PAGE>
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of work in process, or (ii) during any applicable Finished Goods Liquidation
Period, to substantially complete the packaging, shipping, sale, liquidation or
disposition of Inventory, it may continue to use and occupy the applicable
Caisse Senior Collateral for an additional period of 60 days from the end of the
applicable Liquidation Period, provided a 10-day prior notice to that effect is
given to Caisse prior to the expiry of such Liquidation Period, except with
respect to any Caisse Senior Collateral which Caisse would have undertaken to
deliver or grant access to a third party in the course of any Enforcement Action
and GECC's, GE Capital Canada's and its respective Receiver's use and occupation
of the applicable Caisse Senior Collateral would interfere in any respect
material to Caisse, acting reasonably, with Caisse's ability to fulfill such
undertaking or with such third party's access. Except for any such Caisse Senior
Collateral, each of GECC and GE Capital Canada and their respective Receivers
shall benefit from the same rights and be subject to the same obligations during
any such additional 60-day period as if such additional period were a
Liquidation Period.
2.6 CAISSE'S RIGHTS DURING LIQUIDATION PERIODS. During the Liquidation Periods
commenced by it, GECC's or GE Capital Canada's (as applicable) use and occupancy
of the Caisse Senior Collateral shall not be exclusive and, provided that none
of the following interfere in any respect material to GECC or GE Capital Canada,
as applicable, acting reasonably, in connection with the exercise by it or its
Receiver of the rights afforded by Sections 2.4 and 2.5, including the
liquidation, sale or other disposition by it of the GECC Senior Collateral, the
GE Capital Canada Senior Collateral or GE Joint Senior Collateral as applicable:
(i) Caisse shall have access to the Caisse Senior Collateral to preserve,
protect, appraise and evaluate the Caisse Senior Collateral, to show it to
potential purchasers and to offer it for sale, and (ii) Caisse may sell some or
all of the Caisse Senior Collateral, provided that each purchaser of such
Collateral shall have expressly agreed in writing to be bound by the Caisse's
obligations under this Agreement with respect to the purchased Collateral until
the expiration of the Liquidation Periods and that the items purchased shall
remain in place and shall remain subject to the rights of use and occupancy of
GECC, GE Capital Canada and their Receivers, in accordance with this Agreement.
2.7 AVAILABILITY AND DELIVERY OF BOOKS, RECORDS ETC. For the purposes of the
sale or other disposal of the GECC Senior Collateral, the GE Capital Canada
Senior Collateral, GE Joint Senior Collateral and the Caisse Senior Collateral,
GECC, GE Capital Canada and Caisse shall cooperate during the Liquidation
Periods in assembling the Debtors' assets. During the Liquidation Periods,
Caisse and the Debtors shall make available to GECC and GE Capital Canada and
their Receivers copies of all books, records, books of account, computer disks,
printouts, tapes and other computer- prepared information and other information
with respect to GECC Senior Collateral, GE Capital Canada Senior Collateral, GE
Joint Senior Collateral and the Caisse Senior Collateral and Caisse shall
deliver to GECC and GE Capital Canada copies of all ledgers and documents, if
any, held by it and related to GECC Senior Collateral, GE Capital Canada Senior
Collateral and GE Joint Senior Collateral. After the Raw/WIP Liquidation Period
and Finished Goods Liquidation Period, GE
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Capital Canada and GECC may remove from Debtors' facilities and Offices hardware
and software containing records and other information related to Accounts to
premises selected by them and use them during the Accounts Liquidation Period
for the purposes of collecting Accounts.
2.8 EXPENSES DURING LIQUIDATION PERIODS. In the event that either GECC or GE
Capital Canada or its Receiver elects to use some or all of the Debtors'
premises as set forth in this Section 2, to the extent and for so long as GECC
or GE Capital Canada, as applicable, or its Receiver occupies a manufacturing,
warehouse or distribution facility or Office owned by the Debtors, GECC or GE
Capital Canada, as applicable, agrees with Caisse that it shall be responsible
for all direct expenses related to its use and occupation, including without
limitation, costs with respect to heat, light, electricity, water and real
property taxes with respect to that portion of any building so used or occupied.
Each of GECC and GE Capital Canada agrees to hold Caisse harmless concerning any
third party liability resulting from its, or its Receiver's gross negligence or
wilful misconduct in its operation of such facilities. In the case of facilities
leased to the Debtors and used or occupied by GECC or GE Capital Canada, as
applicable, or its Receiver, GECC or GE Capital Canada, as applicable, agrees
with Caisse that it shall pay the rental and other payments required to be paid
to the lessor in accordance with the terms of such lease for the period of such
use and occupancy of the subject facility, unless the applicable lessor,
bankruptcy trustee or other representative of the applicable Debtor shall have
otherwise agreed, or such amounts are otherwise paid. GECC or GE Capital Canada,
as applicable, agrees with Caisse to promptly repair, at its own expense, any
physical damage to the Caisse Senior Collateral actually caused by it or its
Receiver or any other person acting under its direction during the use or
occupancy of the premises or the Equipment by it or on its behalf or any sale,
removal or other disposition of its Collateral (ordinary wear and tear
excluded). The Caisse Senior Collateral so used or occupied shall be left in the
same state of repair (ordinary wear and tear excluded) by GECC or GE Capital
Canada, as applicable and its Receiver, at the expiration of the applicable term
of the Liquidation Periods commenced by it as existed upon the commencement of
the Liquidation Periods. GECC and GE Capital Canada shall not be liable for any
diminution in value of the Caisse Senior Collateral caused by the absence of
GECC Senior Collateral, GE Capital Canada Senior Collateral or GE Joint Senior
Collateral, as the case may be, actually removed or by any necessity of
replacing the GECC Senior Collateral, GE Capital Canada Senior Collateral or GE
Joint Senior Collateral, as applicable, or, subject to the immediately preceding
sentence, for any other reason. To the extent that the Debtors have not
maintained liability insurance naming GECC, GE Capital Canada and Caisse as
additional insureds, so long as and to the extent that either GECC or GE Capital
Canada uses and occupies a Debtor's manufacturing, warehouse and distribution
facilities, GECC or GE Capital Canada, as applicable, agrees with Caisse that it
shall use their best efforts to maintain liability insurance with respect
thereto naming GECC or GE Capital Canada, as applicable, and Caisse (to the
extent that Caisse has an insurable interest) as additional insureds in such
amounts and with such coverages as were previously maintained by the Debtors.
<PAGE>
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2.9 RELEASE OF LIENS. Each of Caisse and GE Capital Canada shall release and
discharge, as applicable, all or a portion (as requested by GECC) of its Liens
on the GECC Senior Collateral following receipt of a request by GECC or its
Receiver, upon the sale or other disposition of such Collateral by GECC or its
Receiver. Each of Caisse and GECC shall release and discharge, as applicable,
all or a portion (as requested by GE Capital Canada) of its Liens on the GE
Capital Canada Senior Collateral following receipt of a request by GE Capital
Canada or its Receiver, upon the sale or other disposition of such Collateral by
GE Capital Canada or its Receiver. Caisse shall release and discharge all or a
portion (as requested by GECC and/or GE Capital Canada) of its Liens on the GE
Joint Senior Collateral following a request by GECC and/or GE Capital Canada or
a Receiver for either, upon the sale or other disposition of such Collateral by
GECC, GE Capital Canada and/or its respective Receiver. Each of GECC and GE
Capital Canada shall release and discharge, as applicable, all or a portion (as
requested by Caisse) of its Liens or their Liens, as applicable, on the Caisse
Senior Collateral following receipt of a request by Caisse or its Receiver, upon
the sale or other disposition of such Collateral by Caisse or its Receiver.
Upon and after the full and irrevocable payment of the GECC Claim and the
termination of the GECC Commitment, the GECC Secured Parties shall release and
discharge all of their Liens on Collateral following receipt of a request by GE
Capital Canada or Caisse or its Receiver and upon the sale or other disposition
of such Collateral by GE Capital Canada or Caisse, as applicable, or its
Receiver. Upon and after the full and irrevocable payment of the GE Capital
Canada Claim and the termination of the GE Capital Canada Commitment, the GE
Capital Canada Secured Parties shall release and discharge all of their Liens on
Collateral following receipt of a request by GECC or Caisse or its Receiver and
upon the sale or other disposition of the such Collateral by GECC or Caisse, as
applicable, or its Receiver. Upon and after the full and irrevocable payment of
the Caisse Claim and the termination of the Caisse Commitment, the Caisse
Secured Parties shall release and discharge all of their Liens on Collateral
following receipt of a request by GECC or GE Capital Canada or its Receiver and
upon the sale or other disposition of such Collateral by GECC or GE Capital
Canada, as applicable, or its Receiver.
2.10 RELEASE OF PLEDGED SHARE DOCUMENTS. Caisse shall deliver to GECC or GE
Capital Canada or if they otherwise jointly direct, then in the manner so
directed, all Pledged Share Documents held by Caisse upon payment in full of the
Caisse Claim. Caisse agrees to act as GECC's and GE Capital's mandatary for the
purpose of perfecting and publishing GECC's and GE Capital Canada's Liens in the
Pledged Shares. Caisse agrees that it will not discharge its Lien in the Pledged
Shares without providing prior written notice to each of GECC and GE Capital
Canada.
2.11 INTELLECTUAL PROPERTY LICENCE. The Debtors hereby grant to GECC, GE Capital
Canada, Caisse and any of their Receivers an irrevocable licence and right to
use, without charge, the Debtors' Intellectual Property and advertising
material, or any property of a similar nature, as it pertains to the Collateral,
in converting any raw materials, completing work in process, shipping
<PAGE>
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Collateral, packaging Collateral, advertising for sale and selling any
Collateral or collecting Accounts in connection with an enforcement of the Liens
thereon and the rights of the Debtors under all licences shall enure to the
benefit of GECC, GE Capital Canada, Caisse and their Receivers.
2.12 USE OF INTELLECTUAL PROPERTY. In addition to the rights given to GECC and
GE Capital Canada under the other provisions of Section 2, Caisse agrees that
each of GECC, GE Capital Canada and their Receivers shall have the full use of
the Caisse Senior Collateral comprising Intellectual Property, without any cost
to GECC or GE Capital Canada, as applicable, for the purposes (but only for such
purposes) of converting any raw materials, completing work in process, shipping
Collateral, packaging Collateral, advertising for sale and selling any
Collateral or collecting Accounts in connection with an enforcement of the Liens
thereon for the duration of the Liquidation Periods. Caisse may sell some or all
of such Intellectual Property, provided that each purchaser of such Collateral
shall have expressly agreed in writing to be bound by the Caisse's obligations
under this Agreement for the duration of the Liquidation Periods.
2.13 AMOUNTS TO BE RECEIVED IN TRUST. If GECC, GE Capital Canada or Caisse
accepts or receives Proceeds of Collateral contrary to the provisions of this
Agreement, it shall receive the same in trust and shall not commingle such
Proceeds with any of its own funds and shall hold such Proceeds in a separate
account as mandatary on behalf of GECC, GE Capital Canada or Caisse, as
applicable, to be applied and to be promptly paid over to the party entitled to
receive same in accordance with this Agreement; provided that, the foregoing
shall not apply to Proceeds that are received by GECC and GE Capital Canada as a
result of cash management arrangements between the US Facility Credit Parties,
their relationship banks or similar entities and GECC or Canadian Facility
Credit Parties, their relationship banks and GE Capital Canada, unless, prior to
receipt by GECC or GE Capital Canada, as applicable, GECC or GE Capital Canada,
as applicable, has received written notice from Caisse that the money to be
received by GECC or GE Capital Canada is Proceeds of Caisse Senior Collateral.
2.14 ADDITIONAL CREDIT EXTENSIONS; AMENDMENTS. Each of (i) GECC and the US
Lenders, (ii) GE Capital Canada and the Canadian Lenders and (iii) Caisse and
the Caisse Lenders, shall have the right, without the other lenders' consent, to
make amendments and modifications to, and to extend credit to the Debtors in
excess of the maximum amounts set forth in, the US Credit Agreement, the
Canadian Credit Agreement and the Bridge Loan Agreement, respectively, as of the
date of this Agreement, secured by the GECC Senior Collateral, the GE Capital
Canada Senior Collateral, the GE Joint Senior Collateral and the Caisse Senior
Collateral. Any such extensions of credit shall become part of the GECC Claim,
the GE Capital Canada Claim or the Caisse Claim, as applicable up to an amount
in each case not to exceed 10% of the maximum amount of the commitment set forth
in the applicable credit agreement on the date hereof (namely, US$35,000,000 in
the case of the US Credit Agreement, US$35,000,000 of the equivalent amount
thereof in Canadian dollars in
<PAGE>
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the case of the Canadian Credit Agreement and C$135,800,000 in the case of the
Bridge Loan Agreement), and to such extent shall be accorded their respective
priorities under this Agreement.
Each of GECC, GE Capital Canada and Caisse shall use reasonable efforts to give
to the others notice of the intent to extend additional credit or amend or
modify the US Credit Agreement, the Canadian Credit Agreement or Bridge Loan
Agreement, as applicable, including, without limitation, the amendment or
modification of the applicable financial covenants contained therein, but the
failure to do so shall not affect the validity of the extension of credit,
amendment or modification, create any claim or right on behalf of any third
party, or subject to the preceding sentence, create a cause of action against
the party failing to give such notice. GECC, GE Capital Canada and Caisse shall,
upon request of each other, provide copies of all such modifications or
amendments and copies of all other documentation relevant to the Collateral.
2.15 ACCOUNTING. After the commencement of an Enforcement Action and on a
continuing basis, as determined by GECC, GE Capital Canada or Caisse, acting
reasonably, each of GECC, GE Capital Canada and Caisse agrees to account fully
to the others as to the nature and amount of the GECC Claim, the GE Capital
Canada Claim or the Caisse Claim, as applicable, the Proceeds of any Collateral
sold or otherwise disposed of and the manner and effect of the application of
any Proceeds against the GECC Claim, the GE Capital Canada Claim or the Caisse
Claim, as applicable.
2.16 NOTICE OF DEFAULTS. GECC, GE Capital Canada and Caisse agree to use their
best efforts to give to the other copies of any notice of the occurrence or
existence of an Event of Default sent to the Debtors simultaneously with the
sending of such notice to the Debtors, provided that failure to do so shall not
affect the validity of such notice or create a cause of action against the party
failing to give such notice or create any claim or right on behalf of any third
party. Neither GECC, GE Capital Canada nor Caisse shall incur any liability nor
shall it have any obligation to cure any Event of Default as a result of receipt
of any notice required under this Section 2.16.
2.17 INSURANCE. GECC, GE Capital Canada and Caisse each agree as follows.
(1) GECC shall have the sole and exclusive right to adjust settlement of
the relevant insurance policy in the event of any loss with respect
to GECC Senior Collateral and that the Proceeds of each insurance
policy covering GECC Senior Collateral shall be paid to GECC. With
respect to any Proceeds of insurance relating to GECC Senior
Collateral after full and irrevocable payment of the GECC Claim,
including, without limitation, all collection, enforcement and legal
expenses, and termination of the GECC Commitment, any remaining
Proceeds shall be promptly paid in accordance with Section 2.2.
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(2) GE Capital Canada shall have the sole and exclusive right to adjust
settlement of the relevant insurance policy in the event of any loss
with respect to GE Capital Canada Senior Collateral and that the
Proceeds of each insurance policy covering GE Capital Canada Senior
Collateral shall be paid to GE Capital Canada. With respect to any
Proceeds of insurance relating to GE Capital Canada Senior
Collateral after full and irrevocable payment of the GE Capital
Canada Claim, including, without limitation, all collection,
enforcement and legal expenses, and termination of the GE Capital
Canada Commitment, any remaining Proceeds shall be promptly paid in
accordance with Section 2.2.
(3) GECC and GE Capital Canada jointly shall have the sole and exclusive
right to adjust settlement of the relevant insurance policy in the
event of any loss with respect to GE Joint Senior Collateral and
that the Proceeds of each insurance policy covering GE Joint Senior
Collateral shall be paid to GECC and GE Capital Canada jointly. With
respect to any Proceeds of insurance relating to GE Joint Senior
Collateral after full and irrevocable payment of the GECC Claim and
the GE Canada Claim, including, without limitation, all collection,
enforcement and legal expenses, and termination of the GECC
Commitment and the GE Canada Commitment, any remaining Proceeds
shall be promptly paid in accordance with Section 2.2.
(4) Caisse shall have the sole and exclusive right to adjust settlement
of the relevant insurance policy in the event of any loss with
respect to Caisse Senior Collateral and that the Proceeds of each
insurance policy covering Caisse Senior Collateral shall be paid to
Caisse. With respect to any Proceeds of insurance relating to Caisse
Senior Collateral after full and irrevocable payment of the Caisse
Claim, including, without limitation, all collection, enforcement
and legal expenses, and termination of the Caisse Commitment, any
remaining Proceeds shall be promptly paid in accordance with Section
2.2.
(5) From the occurrence of an Event of Default and provided that such
Event of Default is continuing, any payment received in respect of
proceeds of the Debtors' business interruption insurance shall be
applied prorata to the GECC Claim, the GE Capital Canada Claim and
the Caisse Claim as of the date of receipt of the payment (but
without taking into account the amount of same). Any payment in
respect of proceeds of the Debtors' business interruption insurance
received at a time where no Event of Default has occurred and is
continuing shall be applied as agreed on between the Debtors and
GECC and the Debtors and GE Capital Canada.
2.18 NOTICES OF SALE. In the event that the GECC Secured Parties, the GE Capital
Canada Secured Parties, the Caisse Secured Parties or any of their Receivers
shall be required by the Uniform
<PAGE>
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Commercial Code, Insolvency Law or by any other applicable law to give notice to
the other of an intended disposition of Collateral, such notice shall be give in
accordance with Section 3.1 and, subject to applicable law, fifteen (15) days or
more prior notice shall be deemed to be commercially reasonable.
2.19 TRUSTEE FOR CAISSE AND AGENTS FOR THE EACH OF THE SECURED PARTIES. For
purposes of this Agreement, GECC and GE Capital Canada shall be entitled to rely
upon any consent or agreement of Caisse, as agent acting on behalf of the Caisse
Secured Parties, and such approval and agreement shall be binding upon each
Caisse Secured Party. Caisse agrees that it shall not permit the Trustee to take
any action that is inconsistent with, and shall only direct and instruct the
Trustee in accordance with, the provisions of this Agreement. Caisse represents
and warrants that it is the sole holder of debentures issued under the Caisse
Secured Parties Hypothecs and that it shall not assign, sell or transfer such
debentures unless the assignee or purchaser has delivered to GECC and GE Capital
Canada an agreement to be bound by this Agreement in the same manner as the
Caisse Secured Parties. Each of the Debtors shall not issue any debentures to
any Person other than Caisse unless that Person has delivered to GECC and GE
Capital Canada an agreement to be bound by this Agreement in the same manner as
the Caisse Secured Parties. Caisse shall be entitled to rely upon any consent or
agreement of GECC, as agent acting on behalf of the GECC Secured Parties, and
such approval and agreement shall be binding upon each of the GECC Secured
Parties. Caisse shall be entitled to rely upon any consent or agreement of GE
Capital Canada, as agent acting on behalf of the GE Capital Canada Secured
Parties and such approval and agreement shall be binding upon each of the GE
Capital Canada Secured Parties.
SECTION 3 -- MISCELLANEOUS
3.1 NOTICES. Except as otherwise expressly provided herein, any notice required
or desired to be served, given or delivered hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered three (3) days
after deposit in the mails, with proper postage prepaid, or upon delivery by
courier or upon transmission by telecopy to the addresses set out in Schedule
3.1.
3.2 CONTESTING LIENS OR SECURITY INTERESTS. Each of GECC, GE Capital Canada and
Caisse agrees that it shall not contest the validity, perfection, publication,
priority or enforceability of any Lien in the Collateral granted to the GECC
Secured Parties, the GE Capital Canada Secured Parties and the Caisse Secured
Parties.
3.3 THE DEBTORS ACKNOWLEDGEMENT ON INSOLVENCY PROCEEDINGS. The Debtors each
acknowledge that the interests of the GECC Secured Parties, the GE Capital
Canada Secured Parties and the Caisse Secured Parties are distinct, having
regard to the nature of the obligations owed by the Debtors, the nature and
priority of their respective security and the remedies available to them. In the
event of the commencement of any Insolvency Proceedings, the Debtors each
acknowledge
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and agree that the GECC Secured Parties, the GE Capital Secured Parties and the
Caisse Secured Parties, shall be treated as unaffected creditors or,
alternatively, shall be placed in separate classes for all purposes related to
such proceedings including, without limitation, for the purposes of voting on or
approving any plan of arrangement, proposal, compromise, reorganization plan or
other agreement or document with similar effect.
3.4 NO ADDITIONAL RIGHTS FOR THE DEBTORS HEREUNDER. If the GECC Secured Parties,
the GE Capital Canada Secured Parties or the Caisse Secured Parties enforce
their rights or remedies in violation of the terms of this Agreement, the
Debtors shall not be entitled to use such violation as a defense to any
Enforcement Action under the US Credit Agreement, the Canadian Credit Agreement,
the Bridge Loan Agreement or under any Security Document, nor shall the Debtors
assert such violation as a counterclaim or basis for set-off or recoupment
against the GECC Secured Parties, the GE Capital Canada Secured Parties or the
Caisse Secured Parties. The Debtors each agree that nothing in this Agreement
shall relieve any Debtor of any of its obligations under any of the US Credit
Agreement, the Canadian Credit Agreement, the Bridge Loan Agreement, the
Security Documents or any other document, agreement or instrument that any
Debtor may be a party to with any of the GECC Secured Parties, the GE Capital
Canada Secured Parties or the Caisse Secured Parties.
3.5 INDEPENDENT CREDIT INVESTIGATIONS. Neither GECC, GE Capital Canada nor
Caisse nor any of their respective directors, officers, agents or employees
shall be responsible to each other or to any other person, firm or corporation,
for the Debtors' solvency, financial condition or ability to repay the GECC
Claim, the GE Capital Canada Claim or the Caisse Claim or for statements of the
Debtors, oral or written, or for the validity, sufficiency or enforceability of
the GECC Claim, the GE Capital Canada Claim or the Caisse Claim, the US Credit
Agreement, the Canadian Credit Agreement, the Bridge Loan Agreement or any Liens
granted by the Debtors to the GECC Secured Parties, the GE Capital Canada
Secured Parties or the Caisse Secured Parties in connection therewith. Each of
GECC, GE Capital Canada and Caisse has entered into its respective financing
agreements with the Debtors based upon its own independent investigation, and
makes no warranty or representation to the other nor does it rely upon any
representation of the other with respect to matters identified or referred to in
this Section 3.5.
3.6 LIMITATION ON LIABILITY OF AGENTS TO EACH OTHER. Except as provided in this
Agreement, GECC, GE Capital Canada and Caisse shall have no liability to each
other, except for wilful misconduct or breach of this Agreement.
3.7 AMENDMENTS TO THIS AGREEMENT. All modifications or amendments of this
Agreement must be in writing and duly executed by an authorized officer of each
of GECC, GE Capital Canada, Caisse and, to the extent that such modification or
amendment would increase the obligations of a Debtor under this Agreement, by an
authorized officer of such Debtor, to be binding and enforceable.
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3.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
negotiations, undertakings, representations and understandings with respect to
the subject matter.
3.9 FURTHER ASSURANCES. Each party hereto shall do, perform, execute and deliver
all acts, deeds and documents as may be necessary from time to time to give full
effect to the terms and intent of this Agreement including, without limitation,
such further instruments as may be necessary or advisable under any statute to
perfect, publish, record or otherwise give effect to the rights of priority, the
postponements and subordinations and rights of use and occupancy provided for in
this Agreement.
3.10 NO WAIVER. No waiver by a party or failure or delay in exercising any
right, power or remedy (whether in whole or in part) under this Agreement shall
take effect or be binding upon the party unless in writing and signed by such
party or shall limit or affect the rights of such party with respect to any
other right, power or remedy.
3.11 SEVERABILITY. If any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any jurisdiction, the illegality, invalidity or
unenforceability of that provision will not affect:
(1) the legality, validity or enforceability of the remaining
provisions of this Agreement; or
(2) the legality, validity or enforceability of that provision in
any other jurisdiction.
3.12 SUCCESSORS AND ASSIGNS; COUNTERPARTS. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns of each of the
parties hereto, but does not otherwise create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement.
This Agreement may be executed in any number of separate counterparts, each of
which shall, collectively and separately, constitute one Agreement. Delivery of
an executed signature page to this Agreement by facsimile transmission shall be
as effective as a manually signed counterpart of this Agreement.
3.13 Governing Law. This Agreement shall be governed as to validity,
interpretations, enforcement and effect by the internal laws (as opposed to
conflicts of law provisions) of the Province of Quebec; provided that to the
extent that the laws of any jurisdiction in which Collateral is located govern
the priority, attachment, perfection, and enforcement of Liens in or upon such
Collateral, the local laws of such jurisdiction shall continue to govern.
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3.14 ATTORNMENT. Each of the parties irrevocably attorns to the non-exclusive
jurisdiction of the courts of the Provinces of Quebec and Ontario.
3.15 INFORMATION. Upon the request of any of GECC, GE Capital Canada or Caisse,
GECC, GE Capital Canada and Caisse agree to use their best efforts to provide to
each other all information relating to the transactions contemplated by the US
Credit Agreement, the Canadian Credit Agreement and the Bridge Loan Agreement
and with any credit or other information with respect to any of the Collateral
or the Debtors.
3.16 TERMINATION. This Agreement shall terminate and be of no further force and
effect as to all the parties hereto at such time as the GECC Claim, the GE
Capital Canada Claim and the Caisse Claim have been irrevocably paid in full and
the GECC Commitment, the GE Capital Canada Commitment and the Caisse Commitment
have been terminated.
3.17 AGREEMENT DOES NOT APPLY TO LEASED PROPERTY. Notwithstanding any other
provision of this Agreement, none of the provisions of this Agreement shall
apply to or affect in any manner whatsoever under any circumstances (1) any
interest and rights of GECC or GE Capital Canada or any of their respective
affiliates in respect of any equipment or other personal or movable property
(whether or not such property becomes attached to any real or immoveable
property) or any real or immoveable property that GECC or GE Capital Canada, as
applicable, or any of their respective affiliates may lease or sell from time to
time to the Debtors, and such property shall in all cases be subject to the
terms of the lease(s) or sale agreement(s) relating thereto or (2) the
indebtedness and other obligations of the Debtors to GECC or GE Capital Canada
or any of its affiliates under each such lease or sale agreement, as applicable.
<PAGE>
-32-
The parties have executed this Agreement.
GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT FOR THE US LENDERS
By:
-----------------------------------------
Name:
Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL CANADA
INC., AS AGENT FOR THE CANADIAN LENDERS
By:
-----------------------------------------
Name:
Duly Authorized Signatory
CAISSE DE DEPOT ET PLACEMENT DU
QUEBEC, AS AGENT FOR THE CAISSE LENDERS
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
SPORT MASKA INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE>
TROPSPORT ACQUISITIONS INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
MASKA U.S., INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
SHC HOCKEY, INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
SLM INTERNATIONAL, INC.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE>
SPORTS HOLDING CORPORATION
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
SLM TRADEMARK ACQUISITION CANADA
CORPORATION
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
SLM TRADEMARK ACQUISITION CORP.
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
<PAGE>
-35-
ACKNOWLEDGEMENT
Montreal Trust Company as Trustee, hereby acknowledges the provisions of
this Intercreditor Agreement made as of November 19, 1998 between GECC, GE
Capital Canada, Caisse, US Borrowers, Canadian Borrowers, SLM, SHC, Trademark
Canada and Trademark US and agrees to not certify any debenture in contravention
of the fourth sentence of Section 2.19 without the prior written consent of both
GECC and GE Capital Canada.
MONTREAL TRUST COMPANY, AS TRUSTEE
UNDER THE CAISSE SECURED PARTIES
HYPOTHECS
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE>
SCHEDULE 3.1 - NOTICE ADDRESSES
(1) If to GECC, at
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut
06927-5100
Attention: SLM International Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7512
with a copy to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut
06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7784
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York,
10153
Attention: Ted Waksman
Telecopier No.: (212) 310-8677
Telephone No.: (212) 310-8362
(2) If to GE Capital Canada, at
General Electric Capital Canada Inc.
123 Front Street West, Suite 1400
Toronto, Ontario
M5J 2M2
Attention: Senior Vice-President, Commercial Finance
Telecopier No.: (416) 842-1750
Telephone No.: (416) 842-1751
<PAGE>
with a copy to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut
06927-5100
Attention: SLM International Account Manager
Telecopier No.: (203) 316-7893
Telephone No.: (203) 316-7512
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut
06927-5100
Attention: Corporate Counsel - Commercial Finance
Telecopier No.: (203) 316-7889
Telephone No.: (203) 316-7784
and:
McMillan Binch
Suite 3600, South Tower
Royal Bank Plaza
200 Bay Street
Toronto, Ontario
M5J 2J7
Attention: Scott Horner
Telecopier No.: (416) 865-7048
Telephone No.: (416) 865-7149
(3) If to Caisse, at:
Caisse de depot et de placement du Quebec
1981 McGill College Avenue
Montreal, Quebec
H3A 3C7
Attention: Diane Favreau
Telecopier No.: (514) 847-5488
Telephone No.: (514) 847-2493
<PAGE>
with a copy to:
McCarthy Tetrault
1170 Peel
Montreal, Quebec
H3B 4S8
Attention: Robert P. Metcalfe
Telecopier No. (514) 397-4190
Telephone No. (514) 397-4164
(4) if to SLM International, Inc., at
SLM International, Inc.
139 Harvest Lane
P.O. Box 1200
Williston, Vermont
05495, U.S.A.
Attention: President
Telecopier No.: (802) 872-4226
Telephone No.: (802) 872-4256
(5) if to Sports Holding Corporation, at
139 Harvest Lane
P.O. Box 1200
Williston, Vermont
05495, U.S.A.
Attention: President
Telecopier No.: (802) 872-4226
Telephone No.: (802) 872-4256
(6) if to Sport Maska Inc., at
3500 De Maisonneuve Blvd. West
Suite 800
Westmount, Quebec
H3Z 3C1
Attention: President
Telecopier No.: (514) 932-1118
<PAGE>
Telephone No.: (514) 932-6020
(7) if to Tropsport Acquisitions Inc., at
3500 De Maisonneuve Blvd. West
Suite 800
Westmount, Quebec
H3Z 3C1
Attention: President
Telecopier No.: (514) 932-1118
Telephone No.: (514) 932-6020
(8) if to SHC Hockey, Inc., at
139 Harvest Lane
P.O. Box 1200
Williston, Vermont
05495, U.S.A.
Attention: President
Telecopier No.: (802) 872-4226
Telephone No.: (802) 872-4256
(9) if to Maska U.S., Inc., at
139 Harvest Lane
P.O. Box 1200
Williston, Vermont
05495, U.S.A.
Attention: President
Telecopier No.: (802) 872-4226
Telephone No.: (802) 872-4256
(10) if to Trademark Canada, at
3500 De Maisonneuve Blvd. West
Suite 800
Westmount, Quebec
H3Z 3C1
Attention: President
Telecopier No.: (514) 932-1118
Telephone No.: (514) 932-6020
<PAGE>
(11) if to Trademark US, at
139 Harvest Lane
P.O. Box 1200
Williston, Vermont
05495, U.S.A.
Attention: President
Telecopier No.: (802) 872-4226
Telephone No.: (802) 872-4256
or to such other address as each party designates to the other in the manner
herein prescribed.
<PAGE>
TABLE OF CONTENTS
RECITALS
SECTION 1 -- INTERPRETATION
1.1 DEFINITIONS......................................................3
(1) ACCOUNTS...................................................3
(2) ACCOUNTS LIQUIDATION PERIOD................................4
(3) AGREEMENT..................................................4
(4) BRIDGE LOAN AGREEMENT .....................................4
(5) CAISSE BANK ACCOUNTS ......................................4
(6) CAISSE CLAIM ..............................................4
(7) CAISSE COMMITMENT .........................................4
(8) CAISSE INTANGIBLES ........................................4
(9) CAISSE LENDERS.............................................5
(10) CAISSE SECURED PARTIES.....................................5
(11) CAISSE SECURED PARTIES HYPOTHECS...........................5
(12) CAISSE SENIOR COLLATERAL...................................5
(13) CANADIAN BORROWERS.........................................5
(14) CANADIAN BORROWERS AND TRADEMARK CANADA ACCOUNTS ..........5
(15) CANADIAN BORROWERS AND TRADEMARK CANADA INVENTORY .........5
(16) CANADIAN CREDIT AGREEMENT..................................5
(17) CANADIAN FACILITY CREDIT PARTIES ..........................5
(18) CANADIAN LENDERS ..........................................5
(19) COLLATERAL.................................................5
(20) DEBTORS ...................................................5
(21) ENFORCEMENT ACTIONS........................................5
(22) ENFORCEMENT NOTICE.........................................6
(23) ENFORCEMENT PERIOD.........................................6
(24) EQUIPMENT .................................................6
(25) EVENT OF DEFAULT...........................................6
(26) FINISHED GOODS LIQUIDATION PERIOD..........................6
(27) GE CAPITAL CANADA..........................................6
(28) GE CAPITAL CANADA CLAIM....................................6
(29) GE CAPITAL CANADA COMMITMENT...............................7
(30) GE CAPITAL CANADA INTANGIBLES .............................7
(31) GE CAPITAL CANADA SECURED PARTIES..........................7
(32) GE CAPITAL CANADA SENIOR COLLATERAL........................7
(33) GE CAPITAL CANADA SUBORDINATED COLLATERAL..................7
(34) GECC.......................................................7
(35) GECC CLAIM.................................................7
(36) GECC COMMITMENT............................................8
(37) GECC INTANGIBLES ..........................................8
<PAGE>
(38) GECC SECURED PARTIES.......................................8
(39) GECC SENIOR COLLATERAL.....................................8
(40) GECC SUBORDINATED COLLATERAL...............................8
(41) GE JOINT INTANGIBLES.......................................8
(42) GE JOINT SENIOR COLLATERAL.................................9
(43) INSOLVENCY LAW.............................................9
(44) INSOLVENCY PROCEEDINGS.....................................9
(45) INTELLECTUAL PROPERTY......................................9
(46) INVENTORY.................................................10
(47) LIENS ....................................................10
(48) LIQUIDATION PERIODS.......................................10
(49) OFFICES...................................................10
(50) PERSON....................................................10
(51) PLEDGED SHARE DOCUMENTS...................................10
(52) PLEDGED SHARES............................................10
(53) PROCEEDS..................................................11
(54) RAW/WIP LIQUIDATION PERIOD................................11
(55) REAL PROPERTY ............................................11
(56) RECEIVER..................................................11
(57) SECURITY DOCUMENTS........................................11
(58) SHC.......................................................11
(59) SHC, SLM AND WAP ACCOUNTS.................................11
(60) SHC, SLM AND WAP INVENTORY................................11
(61) SLM.......................................................11
(62) TRADEMARK CANADA..........................................11
(63) TRADEMARK US .............................................11
(64) TRUSTEE...................................................11
(65) US BORROWERS..............................................11
(66) US BORROWERS AND TRADEMARK US ACCOUNTS....................11
(67) US BORROWERS AND TRADEMARK US INVENTORY...................12
(68) US CREDIT AGREEMENT.......................................12
(69) US FACILITY CREDIT PARTIES................................12
(70) US LENDERS................................................12
1.2 HEADINGS........................................................12
1.3 REFERENCES......................................................12
1.4 NUMBER AND GENDER...............................................12
1.5 TIME OF THE ESSENCE.............................................12
SECTION 2 -- INTERCREDITOR AGREEMENT
2.1 LIEN PRIORITIES.................................................12
2.2 DISTRIBUTION OF PROCEEDS OF COLLATERAL..........................15
2.3 ENFORCEMENT ACTIONS.............................................17
2.4 LIQUIDATION PERIODS.............................................19
<PAGE>
2.5 USE OF CAISSE SENIOR COLLATERAL.................................20
2.6 CAISSE'S RIGHTS DURING LIQUIDATION PERIODS......................21
2.7 AVAILABILITY AND DELIVERY OF BOOKS, RECORDS ETC.................21
2.8 EXPENSES DURING LIQUIDATION PERIODS.............................22
2.9 RELEASE OF LIENS................................................23
2.10 RELEASE OF PLEDGED SHARE DOCUMENTS..............................23
2.11 INTELLECTUAL PROPERTY LICENCE...................................23
2.12 USE OF INTELLECTUAL PROPERTY....................................24
2.13 AMOUNTS TO BE RECEIVED IN TRUST.................................24
2.14 ADDITIONAL CREDIT EXTENSIONS; AMENDMENTS........................24
2.15 ACCOUNTING......................................................25
2.16 NOTICE OF DEFAULTS..............................................25
2.17 INSURANCE.......................................................25
2.18 NOTICES OF SALE.................................................26
2.19 TRUSTEE FOR CAISSE AND AGENTS FOR THE EACH OF THE SECURED
PARTIES ........................................................27
SECTION 3 -- MISCELLANEOUS
3.1 NOTICES.........................................................27
3.2 CONTESTING LIENS OR SECURITY INTERESTS..........................27
3.3 THE DEBTORS ACKNOWLEDGEMENT ON INSOLVENCY PROCEEDINGS...........27
3.4 NO ADDITIONAL RIGHTS FOR THE DEBTORS HEREUNDER..................28
3.5 INDEPENDENT CREDIT INVESTIGATIONS...............................28
3.6 LIMITATION ON LIABILITY OF AGENTS TO EACH OTHER.................28
3.7 AMENDMENTS TO THIS AGREEMENT....................................28
3.8 ENTIRE AGREEMENT................................................28
3.9 FURTHER ASSURANCES..............................................28
3.10 NO WAIVER.......................................................29
3.11 SEVERABILITY....................................................29
3.12 SUCCESSORS AND ASSIGNS; COUNTERPARTS............................29
3.13 GOVERNING LAW...................................................29
3.14 ATTORNMENT......................................................29
3.15 INFORMATION.....................................................29
3.16 TERMINATION.....................................................30
3.17 AGREEMENT DOES NOT APPLY TO LEASED PROPERTY.....................30
